Friday, August 14, 2020
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Larchmont
Home Towns Larchmont Letter: Tax Larchmont Store Owners that Stay Empty

Letter: Tax Larchmont Store Owners that Stay Empty

Former book store on Palmer Avenue

 

San Francisco is preparing to put to public vote next week a new law that would put a new tax on property owners or leaseholders whose storefronts stay vacant for six months or more.   If approved, this would be a first for a big city in the US. 

I have long thought this is an approach that the Village of Larchmont should or could take in dealing with the many instances the last ten years where storefronts have stayed empty for prolonged periods.   Palmer Avenue in particular has at times appeared pretty bleak in the last ten years, defying the logic that a walkable commercial area close to a train station should have viable businesses.

But I believe that while a penalizing tax could be one approach, there could be an alternative approach which would hopefully unleash a bit more creativity and life on our commercial streets.    

Larchmont should contemplate requiring owners or long-term leaseholders of storefronts that are empty for more than, for example, 4 months to offer month-to-month leases for basically no cost to arts groups to display/ sell art; or to non-profit thrift shops that support area community charities; or to non-profit education groups to offer classes of some kind; or to musicians to give occasional performances.   The law might also provide that landlords could aim to generate some actual rent by offering low-cost month-to-month rentals to pop-up stores, food shops, or restaurants. 

I suspect there are plenty of small business owners/managers out there who would be happy to have an opportunity to test out their offerings in a wealthy community like Larchmont for a short time at relatively low financial cost and without the risk of having to commit to long leases.     

Downtown Larchmont- Chatsworth Ave

 

 The Village council could even stay involved by establishing an application process or even opening up to public hearings some of the discussions relating to what groups or promoters might be given month-to-month arrangements, since this would in effect be a form of forced subsidy.  

Christopher Bourdain
Larchmont

 

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christine manzi
christine manzi
5 months ago

Bravo Mayor Walsh! This action has been a long time coming!! Perhaps this will help poor Palmer Avenue to regain its vibrancy! How will the collected fees be utilized by the village?

Jonathan D Sacks
Jonathan D Sacks
5 months ago

A more comprehensive plan really is in order. The proposal on the table does not generate any revenue for the village as it says the fee would be to offset the cost of monitoring, it’s just a tax to pay for salaries.

What is unfair to a landlord is that it should be his right to “Warehouse” the space if market conditions are not favorable or seasonality is affecting the rate. How can you force a landlord to enter into a long term lease in a downturn, when she may decide that in 6 months to a year things may pick up.

If you want a landlord to give away space for free, it’s not actually free. You have utilities, insurance, maintenance, etc. You most likely also have a capital investment after a tenant vacates to get it into decent enough condition. If the landlords choice is pay a small fee to the Village vs. a larger investment, what is her incentive to do that?

I don’t think anyone either mentioned the hit on property values. If I want to buy a commercial space, but in Larchmont I’m subject to a vacancy tax, I’m taking on greater risk. Not only if I can’t rent the space am I loosing income, I’m also being taxed. As a potential buyer/investor, I may choose to look elsewhere since I would not have this vacancy tax risk.

If anything this should be a carrot, not a stick. If Landlords were given a tax credit to make their space available to NFP’s or to rent at sub-market rates for short term, then you would have the opposite effect.

Government has the responsibility to promote business and has the ability to incentivise. If you increase revenue flowing into the village you increase your tax base. If you fill stores your improve on your community in turn raising residential property values and increase your tax base. This policy should be about investing forward, not taxing back, it just increases your downward spiral.

Amy Levine-Kennedy
Amy Levine-Kennedy
5 months ago

I’ve written to Mayor Walsh asking what she plans to do about these ongoing vacancies, when Rye and Bronxville are bustling, as she prepares for re-election. I sent one message to the Village’s “contact us” portal (that promises a quick reply) and one directly to her Facebook messenger. Still waiting for a response.

Jane Goodrich
5 months ago

From the Mayor’s FB page:

“A timely letter in today’s Loop, since last night I introduced legislation to institute a vacancy fee on commercial spaces that are vacant for 90+ days. The public hearing has been set for April 20. You can read the draft local law here https://villageoflarchmont.org/wp-content/uploads/2020/02/Draft-PLL-for-Reg-Maint.-of-Vacant-Commercial-Property-2-21-2020.pdf

SD
SD
5 months ago
Reply to  Jane Goodrich

This is honestly absurd. Tax the hell out of commercial spaces, create multiple governmental roadblocks for prospective new tenants (permits c\o etc) and then when the store stays empty fine the landlord.

You know what would fill up stores pretty quick? Get red of all the red tape the government creates. Don’t forget we live in a village that requires us to get a permit and pay a fee to have a garage sale…

SD
SD
5 months ago

I thought I would clear up some misconceptions….

1. There is no tax break or write off for holding a store empty. None. However, in some municipalities taxes are loosely based on an income and expense report that you file with the local government. In NYC for example property taxes are based on this income and expense report. So a building with an empty store front has less revenue and therefore lower taxes. In NYC you can expect property taxes to be 30% to 35% of the revenue a building produces. Once again that’s 30% to 35% of revenue not income.

2. A retail store takes a lot of initial investment from the store owner/operator. Due to this initial investment most store owners do not want to take a risk and only have a month to month lease. This leads to most store owners wanting between a 5 to 10 year lease. On the flip-side, being tied up for 10 years with pre-determined rents is not always ideal for the landlord. If rents fall over the 10 year period and the shopkeepers lease is overpriced, then in most cases they will ask or for a reduction or just leave (many retail leases have something called a good guy clause by which the tenant can leave as long as rent is paid up to date and they forfeit their security). If the market rents rise significantly, faster then the lease, as you can imagine the shopkeeper would not pay more rent then the lease states. This leads to landlords holding spaces so they can get what they feel is a justified year 1 rent that with increases stays as close to market as possible. As you can imagine this is not a simple negotiation
A bit more on upfront costs for retail stores:
1. In many of the villages and towns in Westchester before a lease in finalized the lease must be presented to the town in order to be “approved”. Municipalities issue a Certificate of Occupancy for each store allowing the store to conduct their business. This can be a costly upfront. For instance, in Sleepy hollow, you need to have an architect submit drawings for any changes you might make or even if NO changes are to be made. As you can imagine hiring an architect to file this can be expensive for a store owner. To open a store think about the amount of investment required to review leases obtain a C\O and then actually renovate or furnish your store. As a shop owner the last thing you want is to pour $50,000 into a storefront and only have a short lease.
Another example of upfront costs is signs. In Yonkers for example, you must apply for a sign permit which costs about $300 to apply for. You also cannot apply yourself, you need a Yonkers approved sign vendor to apply. The current wait runs about 4 months, and just as example a simple awning sign can run $1500 to $2000 dollars.

In the original letter you speak of giving the space free to arts groups or non-profits. My question is who will pay for heat, electric, water usage and other services that tenants use? Larchmont also has very high property taxes, would a landlord be fined for an empty storefront if the only prospective tenants can’t pay a rent that covers the property tax? For instance, a picture in the letter shows the former Food basket store. The property taxes on this building are roughly $50,000 (reduced from close to $70,000 a few years ago). Should the landlord be forced to rent the store for less than $4200/month?

Also, there is also a huge change going on in retail right now that I did not mention. With such a huge shift to amazon, brick and mortar stores are increasingly becoming reliant on being filled with restaurants and services oriented businesses. This has led to a decrease in demand and excess supply.

I guess my point of all this was an attempt to show that the issue is a lot more complicated than it seems on the surface.

Toby Shea
Toby Shea
5 months ago
Reply to  SD

Really appreciate your input. This kind of explanation makes a lot of sense.

Luis Gomez
Luis Gomez
5 months ago

I couldn’t disagree with you more. We are a nation built on respect of property rights. If a landlord wants to keep his store empty, it’s his right to do so. Period. Eventually, either the landlord adjusts the price downward to the market clearing price, or the market recovers and the landlord can again rent it at the desired price point.

Steve Morris
Steve Morris
5 months ago
Reply to  Luis Gomez

I agree with property owner rights but I also believe the village and towns have the right to regulate property use and upkeep of the downtown. If these property owners insist on blighting our downtown for tax advantages the village/town should do everything within the law to fight back! I fully support penalties equal to or greater than the financial advantage of remaining vacant. It is time to stop coddling these property owners who have no care or interest in the well being of Larchmont.

SD
SD
5 months ago
Reply to  Steve Morris

What tax benefits do owners get for keeping a store front vacant?

Bill
Bill
5 months ago
Reply to  Steve Morris

No property owner wants to have vacancies so what’s the point of this? Vacancies mean loses and no property owner tries to lose money.

Why punish the property owner for the sagging retail market that brings vacant store fronts?

If you need to increase tax receipts, raise the property taxes accordingly but dont go after the owner when he’s down already.

Will Larchmont permit other uses for these properties? Apartment conversion might be a great option for some of these locations.

J model
J model
5 months ago
Reply to  Bill

Some of the absentee landlords purposely keep their buildings vacant as a tax write off. The building on Palmer that has blighted the whole strip has had MANY interested renters but there is something shady going on there which is why that landlord doesn’t rent it. It’s been 10 years!!!! MANY MANY MANY interested retailers have inquired. It’s a tax write off for them.

Bill
Bill
5 months ago
Reply to  J model

There’s little benefit to losing thousands and thousands of dollars maintaining a vacant storefront and no owner purposefully does that as its far better to have the income and reap the rewards of the investment.

Anne Mari Moorad
Anne Mari Moorad
5 months ago
Reply to  Luis Gomez

Agree! One issue nobody seems to raise is the municipalities themselves. All the B.S. and red tape you have to go through just to get a store open is ridiculous. We are all guilty of online shopping, that is the biggest reason, but I bet many people with small business ideas would be more willing to give their concept a try if it wasn’t so damn difficult to get permitted to open. Unless your taking over an existing business you cannot get permitted to open for at least 4-6 months, because of special permit requirements, zoning, planning and architectural review boards, not to mention building permits to outfit the space. These boards meet once a month, so if your required to go through them all it could take 6-8 months if not longer. Many landlords might extend a 2 or even 3 month grace period so you can get going, but no more than that. Imagine having to pay rent through these months of approvals, many times it’s just not worth it.

SD
SD
5 months ago

100% true! I agree with everything above.

Gina Gelardo
Gina Gelardo
5 months ago

I also agree with your points esp about the tax write-off a bit of a selfish move I’d say. I visit the little town of Rye and it is flourishing with stores and restaurants that Larchmont was once recognized for.
I don’t agree with thrift shops and random shops coming in. It destroys the elegance of the town. I have seen this on the streets of fifth ave in NY and it looks like bargain basement city. I also think that building owners could be a little less greedy in their rent so small business owners can make it here.
You must ask as yourself why the business owners that are here a long time have survived and made it and take notes from them.

MJW
MJW
5 months ago
Reply to  Gina Gelardo

Agree–that’s all we need is a constant cycling in and out of different stores. And thrift shops–I can imagine bags of clothing and other items being left outside the doors regularly. I have heard there is a (no or reduced) tax for the landlords that are “unable” to rent their spaces. I really don’t know if this is true, but if so if this really good incentive for an empty storefront?
This all seemed to begin 12+ years ago when the rent on the block at Larchmont Ave just off BPR was doubled. Several shops closed, and yet new businesses have moved in and seem to be doing well. Around the same time Active Sports closed on Palmer and from then on it was like a domino effect. I really miss the Food Horizon!!

TJ
TJ
5 months ago

I just recently moved to Larchmont. I agree completely with your points. My understanding is that the buildings get a nice tax write-off despite the space being empty. I know this is a big problem in NYC.

Bill
Bill
5 months ago
Reply to  TJ

A tax write off is a loss and no property owner looks to lose money.

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