LAKE PLACID - Local municipalities have agreed to repay $1.35 million worth of taxes to settle a dispute regarding the property assessment of the Whiteface Lodge.
Essex County, the Town of North Elba, and the Lake Placid Central School District have all approved a settlement agreement that will reimburse the 94-unit condominium timeshare property for taxes its owners claimed have been too heavily assessed.
As a result of the settlement, the town and county will each have to pay $245,000 to the lodge's current and former owners. That amounts to nearly 6 percent of North Elba's $3.8 million 2010 budget.
"I'm not happy with it, but I've got to live with it," said North Elba Supervisor Roby Politi, noting the town will either borrow the money through a bond, or use any leftover fund balance from this year's budget.
Politi explained that the dispute can largely be attributed to New York State property tax law 339Y.
"It's a discriminitory law that allows condiminium and fractional interest properties to be assessed at a value less than market value," he said. "It's a New York City law that was unfortunately allowed into the whole state. It needs to be changed."
Assessing such properties requires a complicated appraisal process, Politi said, and few assessors in the state are qualified to accurately assess their value.
"The cost to the town just to do an appraisal of this property was $40,000," he said, adding that to hire an experienced appraiser for all the condominium properties in Lake Placid would be cost-prohibitive for the town.
Whiteface Lodge was constructed in 2005 and sold soon after for $62.2 million. During that year, the property was assessed at $74 million. In 2007, the property sold for $60 million and the new owners added more units. Since then, its assessment has risen to nearly $112 million.
Part of the settlement states that the property will be valued at $40 million for tax purposes, and will remain as such for the next three years unless it is sold for a larger sum.
"This outcome was the right settlement," said Politi. "It could have cost us a heck of a lot more."
Politi said that he has been working with local representatives in state government to get law 339Y changed, but that their efforts have not been well-received by downstate senators and assemblymen, some of whom own their own condiminiums that benefit from the law.
"You don't understand the concept until you are faced with the financial ramifications of it," said Politi, adding that the town may be resistant to allowing for the development of new condiminiums in the future.
Lake Placid Central School district will have to pay $860,000; about five percent of the district's $15.7 million budget for the 2009-2010 school year.
Interim school superintendent Ernie Witkowski said the settlement definitely represents a very large sum for the school, but that it could have turned out much worse.
For instance, he said, the owners of Whiteface Lodge agreed to forego their claim to reimbursement for 2005 and 2006. They also agreed to waive interest on the money owed to them.
"That in itself represents a $216,000 savings to the school district," said Witkowski.
Witkowski said the school has $240,000 set aside in a reserve fund specifically meant for disputes such as this one. The remaining $460,000 will likely be borrowed through issuance of a bond, he said.
The interest rate for such a bond will have to be determined at the time it is issued, said Witkowski, but is likely to be somewhere between one and two percent.
"I've been told by experts it shouldn't be any higher than 2.5 percent," he said.
As part of the settlement, the town, county and school each have six months to repay their part of the settlement.
"So we will probably wait until late in that time period before we borrow the money," said Witkowski.
The settlement has since prompted the district to enact a spending freeze, effective Dec. 11.
"It's a reaction to the settlement agreement, but it is also a reaction to the things that are going on in Albany," said Witkowski, noting Governor David Paterson's announcement Dec. 13 to cut 10 percent of state school aid for the current school year.
Paterson's proposed cuts would trim $234,000 from the $2.3 million in school aid slated for the Lake Placid district in 2009-2010. Witkowski said the school is also likely to lose $88,000 from a 19 percent cut in its STAR rebate allotment.
The spending freeze will mean that the district will continue to pay for its operating expenses and any other necessities that may arise, but Witkowski said the administration will think twice about new requisitions.
"What I'm thinking is let's build up our resources so we will be able to roll more over into next year," Witkowski said.