Judge dismisses 4 school districts' lawsuit over tax-break extension at Green Acres Mall, adjacent shopping center

A state Supreme Court justice has dismissed a lawsuit filed by four Valley Stream school districts  challenging five-year tax break extensions at Green Acres Mall and an adjacent shopping center.

On April 2, Justice Christopher T. McGrath ruled that the Hempstead Town Industrial Development Agency's extension of the tax breaks and lease agreements last spring was legal. 

McGrath also ruled that the school districts lacked standing to challenge the tax breaks because they are not taxpayers. In addition, the districts lacked standing to claim that the IDA failed to conduct environmental impact studies before extending the payment-in-lieu-of-taxes agreements, or PILOTs, he ruled.

"We’re very pleased that the court agreed with our arguments. This is a total victory confirming that the IDA has done everything legally in its work to encourage economic development in the Town of Hempstead. We hope this ends the long-running controversy involving Green Acres," Fred Parola, CEO of the IDA, said in a statement Monday.

Valley Stream Central High School District and Valley Stream school districts 30, 24 and 13 filed the lawsuit in August in state Supreme Court in Nassau County against the IDA and the owners of the retail properties, as Newsday previously reported.

John Maier was also a plaintiff as an individual and as the president of the board of education for the Valley Stream Central High School District.

Santa Monica, California-based Macerich Co. owns the mall and shopping center through two subsidiaries, Valley Stream Green Acres LLC and Green Acres Adjacent LLC, both of which were named as defendants in the lawsuit.

The lawsuit alleged that the IDA board's votes last spring to extend the PILOTs on Green Acres Mall and Green Acres Commons were illegal because of the properties' failure to meet job commitments that were tied to tax breaks initially approved in 2014 and 2015.

In 2023, the mall had 2,537 full-time equivalent jobs, which was 237 fewer than Macerich committed to maintain under a 2015 lease agreement, and the shopping center had 480, which was 90 fewer than the commitment, the lawsuit stated.

The tax-break extension, which Macerich sought to support a new redevelopment project planned for the mall, will save the company an additional $174.1 million over five years, according to the lawsuit.

Without court intervention, the Valley Stream community would be subsidizing the tax breaks without the economic development the incentives were intended to create, attorney Christopher W. Shishko, a partner in Farmingdale law firm Guercio & Guercio LLP, which is representing the school boards, told Newsday in October.

He declined to comment Monday.

Macerich did not respond to a request for comment.

Disputing the agreement

In 2014, the IDA approved a 10-year PILOT on the mall — with the option to extend the deal by five years — because Macerich was planning a $79 million renovation of the property. The IDA approved another PILOT in 2015 because Macerich was planning the $83.7 million construction of the shopping center.

The PILOTs called for Macerich to make annual payments to the IDA totaling $141 million for the mall and $14.9 million for the shopping center over 10 years, until Dec. 31, 2026.

The IDA divvies up the annual payments among the school districts, the Town of Hempstead and other entities.

Macerich has saved more than $142 million, mostly in property taxes, since 2015 under the PILOTs, according to annual reports the IDA submitted to the New York State Authorities Budget Office. (The latest report available on the budget office's website shows 2023 data.)

Macerich announced in January 2024 that it was planning a redevelopment at Green Acres Mall that is expected to cost $100 million to $115 million.

To support the project, Macerich asked the IDA to extend the PILOT for the mall by five years and lower the employment commitment from 2,774 to 2,400 full-time equivalent jobs at the property. Macerich also requested a PILOT extension for the shopping center and that its employment requirement be lowered from 570 to 496 full-time equivalent jobs.

The IDA approved Macerich’s request for a PILOT extension and job requirement changes for the mall in April and for the shopping center in May.

The school districts' lawsuit states that the 2014 and 2015 PILOTs on the mall and shopping center, respectively, contain a “recapture clause” that stipulates that a default on the agreements, including Macerich not meeting job requirements, means that the IDA should have required the company to repay the tax dollars it saved, or increase the PILOT payments by the same percentage of full-time equivalent jobs that are below the required level for the tax year.

The school districts asked the court to declare the IDA’s extension of the PILOTs and lease agreements illegal, and they were seeking a judgment declaring that the IDA recapture Green Acres’ benefits or force Macerich to pay increased PILOT payments to be distributed among the plaintiffs.

The IDA and Macerich's subsidiaries argued in their responses to the lawsuit that the PILOTs' terms stated that the agency may recapture tax breaks in cases when the job commitments aren't met when that failure is not reflective of the company's business conditions.

The lease agreements allow the IDA to make modifications on a case-by-case basis, particularly in cases of extraordinary events, the defendants argued.

"Certainly, the COVID-19 pandemic, which was the main reason for adjusting the FTE [full-time equivalent] job requirements, can be classified as such an event," the IDA stated in a court filing.

By Tory N. Parrish

tory.parrish@newsday.comToryParrish1

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.