State officials are preparing to strip Medley Centre of its Empire Zone status and the tax credits that go with the designation.
On June 6, Empire State Development sent a notice of the action to Bersin Properties, the idle mall's owner. In the letter, an Empire State Development official says Bersin Properties is being decertified as an Empire Zone business for "making material misrepresentations of fact as to total existing jobs" in its 2011 and 2012 annual reports.
The letter says Bersin Properties has the right to request a hearing on the matter. If the company doesn't respond within 30 days, the state will automatically revoke the company's Empire Zone certification.
"We acknowledge that we have received a notice from the State regarding the possible termination of our Empire Zone certification," Scott Congel, managing partner of Bersin Properties, said in a statement this afternoon. "The notice provides a 30-day period to appeal the pending decision, which we intend to do. We have had employees working at the site from 2007 into 2013 before we were forced to temporarily mothball the project. We believe we are in compliance."
Empire State Development's action follows an investigation initiated at the request of Assembly Majority Leader Joe Morelle, whose legislature district includes Irondequoit. In a press release, Morelle says that the agency's move to decertify Bersin Properties could lead to a State Department of Tax and Finance review of the project. The department could review whether the company met Empire Zone requirements in previous years. And if it hadn't, the state may be able recover tax dollars the company received.
Morelle has previously said that Bersin Properties had to employ only two people in Monroe County to get the credits. The Empire Zone was itself a flawed program that handed out incentives too freely and required little job creation in return. The state ended the program in 2010, though projects enrolled before then are still able to collect incentives.
The Medley Centre project was first enrolled in the Empire Zone program in 2004, under a previous owner. Developer Scott Congel purchased the mall a few years later, along with the company that held it, and it remained in the Empire Zone program.
During a February press conference, Morelle said that Bersin Properties received $4 million worth of Empire Zone tax credits since 2004. The yearly amount of the credits is determined by a formula, and the amounts were supposed to start gradually decreasing beginning this year. Decertification aside, the project was scheduled to receive its last Empire Zone tax credit in 2017.
Congel said that Morelle is misleading the public by using the $4 million figure, which includes tax credits received by the mall's prior owner. Congel says the company has received $1.5 million in credits since "we stepped in and acquired this failing project." Congel's entire statement is available here.
Bersin Properties had a PILOT incentives agreement - making payments in lieu of taxes - with the Monroe County Industrial Development Agency, the Town of Irondequoit, and the East Irondequoit School District. Under the agreement, the company made a yearly payment that was far below what it would have paid in property taxes. Essentially, the Empire Zone credits covered the cost of those annual payments.
Last month, the Monroe County Industrial Development Agency initiated a process to terminate that tax agreement. The company had failed to make its $392,381 annual payment for 2014 as well as $3.5 million in penalty payments for failing to meet previously agreed upon investment milestones. The local governments were also unhappy with the company's failure to keep up maintenance and security at the mall property.
Ultimately, the company paid the $392,381 amount, but not the penalty payments. Bersin Properties is now suing COMIDA, the county, the town, and the school district over the penalty payments, which the company says are outside of COMIDA's authority and therefore unenforceable.
"Local, county, and state taxpayers have placed their trust in Bersin Properties by investing a great deal in the redevelopment of the Medley Centre site," Morelle said in his press release. "Unfortunately, Bersin Properties has betrayed the community's trust at every turn by failing to follow through on numerous promises."
Bersin officials say the mall project hasn't progressed because its former lender, Nomura Credit & Capital, inappropriately withdrew promised financing. Bersin Properties is suing Nomura for backing out of a loan agreement.