4 school districts sue over Green Acres Mall, shopping center's extended tax breaks
Owners of Green Acres Mall in Valley Stream, shown in 2023, announced in January a redevelopment of up to $115 million of the mall. Credit: Debbie Egan-Chin
Four Valley Stream school districts have sued the Hempstead Town Industrial Development Agency, and the owner of Green Acres Mall and an adjacent shopping center over five-year extensions of tax breaks on the properties.
The IDA board’s vote last spring to extend the payment-in-lieu-of-taxes agreements, or PILOTs, on Green Acres Mall and Green Acres Commons, which will save the properties' owner an additional $174.1 million over five years, was illegal because of the properties' failure to meet job commitments that were tied to the tax breaks approved in 2014 and 2015, the lawsuit alleges.
“Absent court intervention to reverse the actions taken by the IDA, the Valley Stream community will continue to subsidize the tax breaks granted to the mall without accountability for the economic development the tax breaks were intended to create,” attorney Christopher W. Shishko, a partner in Farmingdale law firm Guercio & Guercio LLP, which is representing the school boards, said in a statement last week on behalf of the districts.
In 2023, the mall had 2,537 full-time equivalent jobs, which was 237 fewer than the mall's owner, Macerich Co., committed to maintain under a 2015 lease agreement, and the shopping center had 480, which was 90 fewer than the commitment, the lawsuit states.
The plaintiffs include the Valley Stream Central High School District and Valley Stream school districts 30, 24 and 13. John Maier is also a plaintiff as an individual and as the president of the board of education for the Valley Stream Central High School District, according to the lawsuit filed Aug. 15 in state Supreme Court in Nassau County.
In a filing Monday in response to the lawsuit, the IDA asked the court to dismiss the case for several reasons. It said the school districts failed to provide any legal facts proving that the agency acted illegally in extending the tax breaks.
The IDA's attorney, John E. Ryan, a partner in Floral Park law firm Ryan, Brennan & Donnelly LLP, wrote in the court filing that the school districts "lack standing to challenge" the extension.
The IDA does not comment on pending litigation, a spokesman said in response to Newsday's request for comment.
Macerich owns the mall and shopping center through two subsidiaries, Valley Stream Green Acres LLC and Green Acres Adjacent LLC, both of which are named as defendants in the lawsuit. On Monday, Macerich filed a court response that listed reasons similar to the IDA’s for why it believed the lawsuit should be dismissed.
Macerich, based in Santa Monica, California, declined Newsday’s request for comment.
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.
Macerich announced in January 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.
In a letter to the IDA in January, Macerich’s attorney, Daniel J. Baker in the Garden City office of law firm Greenberg Traurig LLP, said that the mall meeting the original employment requirement was an “unrealistic benchmark” because of the closings of stores, such as Kohl’s in 2019 and Sears in 2021, which accounted for 131 FTE jobs, and the lingering effects of the COVID-19 pandemic, including higher interest rates and construction costs.
But Macerich is projecting that the new redevelopment at the mall will add 464 FTE jobs, Baker's letter said.
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.
But the 2015 PILOTs 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 lawsuit alleges.
The PILOT specifies that if a recapture-qualifying event were to occur on or after Jan. 1, 2023, but before Dec. 31, 2024, Macerich was to pay to the IDA or the state 50% of the tax savings it accrued from the PILOT, according to the complaint.
The school boards are asking the court to declare the IDA’s extension of the PILOTs and lease agreements illegal, and they are 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, according to the complaint.
In its court filing in response to the lawsuit, the IDA argues that the PILOT says the agency may recapture tax breaks in cases when the FTE 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 agency's filing says.
"Certainly, the COVID-19 pandemic, which was the main reason for adjusting the FTE job requirements, can be classified as such an event," the filing states.
Further, the school boards lack standing to sue because, since they aren't taxpayers, they cannot assert any claim that the extended PILOT is depriving them of tax revenues, the IDA argues.
The lawsuit filed in August was not the first time Green Acres was the subject of a lawsuit related to PILOTs.
In April 2017, the IDA board voted to revoke tax breaks for the mall and shopping center, alleging that Macerich had “grossly misstated” its job creation.
Macerich sued the IDA in June 2017, claiming that the revocation of the tax breaks was politically motivated and “a blatant violation” of the company’s rights. The company alleged that the vote was politically motivated after outcry from Valley Stream taxpayers and elected officials who criticized the IDA for the deal and blamed the PILOTs for hikes in their 2016 school taxes.
A state comptroller’s office audit released in December 2017 found that the school tax increases were mostly the fault of budgeting practices by District 30, and it vindicated the IDA.
A letter the IDA’s staff sent in November 2017 in response to the audit contradicted the IDA board’s vote by saying that Macerich had met its job goals.
A Nassau County judge ruled in favor of Macerich in 2018, saying that the IDA unlawfully revoked the mall’s tax breaks in 2017.
Four Valley Stream school districts have sued the Hempstead Town Industrial Development Agency, and the owner of Green Acres Mall and an adjacent shopping center over five-year extensions of tax breaks on the properties.
The IDA board’s vote last spring to extend the payment-in-lieu-of-taxes agreements, or PILOTs, on Green Acres Mall and Green Acres Commons, which will save the properties' owner an additional $174.1 million over five years, was illegal because of the properties' failure to meet job commitments that were tied to the tax breaks approved in 2014 and 2015, the lawsuit alleges.
“Absent court intervention to reverse the actions taken by the IDA, the Valley Stream community will continue to subsidize the tax breaks granted to the mall without accountability for the economic development the tax breaks were intended to create,” attorney Christopher W. Shishko, a partner in Farmingdale law firm Guercio & Guercio LLP, which is representing the school boards, said in a statement last week on behalf of the districts.
In 2023, the mall had 2,537 full-time equivalent jobs, which was 237 fewer than the mall's owner, Macerich Co., committed to maintain under a 2015 lease agreement, and the shopping center had 480, which was 90 fewer than the commitment, the lawsuit states.
WHAT NEWSDAY FOUND
- Four Valley Stream school districts have sued the Hempstead Town Industrial Development Agency and the owner of Green Acres Mall and an adjacent shopping center over five-year extensions of tax breaks on the properties.
- The IDA's extension of the tax breaks last spring was illegal because of the properties' failure to meet job commitments that were tied to deals approved in 2014 and 2015, the lawsuit alleges.
- The IDA has asked the court to dismiss the case for several reasons, including the school districts allegedly failing to provide any legal facts proving that the agency acted illegally.
The plaintiffs include the Valley Stream Central High School District and Valley Stream school districts 30, 24 and 13. John Maier is also a plaintiff as an individual and as the president of the board of education for the Valley Stream Central High School District, according to the lawsuit filed Aug. 15 in state Supreme Court in Nassau County.
In a filing Monday in response to the lawsuit, the IDA asked the court to dismiss the case for several reasons. It said the school districts failed to provide any legal facts proving that the agency acted illegally in extending the tax breaks.
The IDA's attorney, John E. Ryan, a partner in Floral Park law firm Ryan, Brennan & Donnelly LLP, wrote in the court filing that the school districts "lack standing to challenge" the extension.
The IDA does not comment on pending litigation, a spokesman said in response to Newsday's request for comment.
Macerich owns the mall and shopping center through two subsidiaries, Valley Stream Green Acres LLC and Green Acres Adjacent LLC, both of which are named as defendants in the lawsuit. On Monday, Macerich filed a court response that listed reasons similar to the IDA’s for why it believed the lawsuit should be dismissed.
Macerich, based in Santa Monica, California, declined Newsday’s request for comment.
'Unrealistic benchmark'
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.
Macerich announced in January 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.
In a letter to the IDA in January, Macerich’s attorney, Daniel J. Baker in the Garden City office of law firm Greenberg Traurig LLP, said that the mall meeting the original employment requirement was an “unrealistic benchmark” because of the closings of stores, such as Kohl’s in 2019 and Sears in 2021, which accounted for 131 FTE jobs, and the lingering effects of the COVID-19 pandemic, including higher interest rates and construction costs.
But Macerich is projecting that the new redevelopment at the mall will add 464 FTE jobs, Baker's letter said.
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.
But the 2015 PILOTs 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 lawsuit alleges.
The PILOT specifies that if a recapture-qualifying event were to occur on or after Jan. 1, 2023, but before Dec. 31, 2024, Macerich was to pay to the IDA or the state 50% of the tax savings it accrued from the PILOT, according to the complaint.
The school boards are asking the court to declare the IDA’s extension of the PILOTs and lease agreements illegal, and they are 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, according to the complaint.
In its court filing in response to the lawsuit, the IDA argues that the PILOT says the agency may recapture tax breaks in cases when the FTE 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 agency's filing says.
"Certainly, the COVID-19 pandemic, which was the main reason for adjusting the FTE job requirements, can be classified as such an event," the filing states.
Further, the school boards lack standing to sue because, since they aren't taxpayers, they cannot assert any claim that the extended PILOT is depriving them of tax revenues, the IDA argues.
The lawsuit filed in August was not the first time Green Acres was the subject of a lawsuit related to PILOTs.
In April 2017, the IDA board voted to revoke tax breaks for the mall and shopping center, alleging that Macerich had “grossly misstated” its job creation.
Macerich sued the IDA in June 2017, claiming that the revocation of the tax breaks was politically motivated and “a blatant violation” of the company’s rights. The company alleged that the vote was politically motivated after outcry from Valley Stream taxpayers and elected officials who criticized the IDA for the deal and blamed the PILOTs for hikes in their 2016 school taxes.
A state comptroller’s office audit released in December 2017 found that the school tax increases were mostly the fault of budgeting practices by District 30, and it vindicated the IDA.
A letter the IDA’s staff sent in November 2017 in response to the audit contradicted the IDA board’s vote by saying that Macerich had met its job goals.
A Nassau County judge ruled in favor of Macerich in 2018, saying that the IDA unlawfully revoked the mall’s tax breaks in 2017.
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.
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