A housing development in the Town of Bethlehem is seeking permission to revert from the project’s approved townhomes to condominiums to entice potential buyers with lower taxes.
Steve Bolduc of Keystone Builders, Inc. went before the Bethlehem Town Board on Wednesday, July 9, to seek a possible exemption to the town law that does not allow existing developments to convert to condominiums. This was done to prevent developments from seeking tax relief by converting existing apartments into condos.
The project had originally been approved as 40 condominiums, but was later changed to 25 townhomes. The change was sought so Keystone could more quickly reach a build-out rate of 51 percent for bank financing of potential purchasers. This was done instead of abandoning the project.
“This drove the lot/property cost up higher as a result, which created higher unit costs. We thought we could absorb this, but the recession dramatically slowed our ability to sell higher-end units. No one anticipated, Keystone included, the extent that the economy was going to be affected,” said Bolduc.
Bolduc said he was seeking the change due to unexpectedly low sales of townhomes at The Gables. In a letter to the town board, he explained only 14 townhomes have sold in nearly three years, and there are 12 lots remaining. Most of the remaining locations are less desirable and are directly on Delaware Avenue, so they are harder to sell.
“We are not asking for a repeal of the town law preventing conversions to condominium status, but simply to permit a reversion of a project that is still in development to the original, town-approved condominium status,” Boldac wrote.
Unit sales are now beyond 51 percent, so banks will now provide mortgage financing to potential buyers if the conversion can be done.
The president of Keystone builders said the conversion makes the difference between the project “dragging on for years” or never being completed.
Supervisor John Clarkson said at the meeting he wanted to make clear that Keystone Builders could change the project themselves, but in order for it to work from a tax perspective, the town would need to change a local law passed in 2008. Clarkson said it can’t prevent the conversion, but rules out tax breaks. The difference is because when a property is taxed as a condo instead of a single-family home, it’s taxed as a single property instead of in pieces.
“It equates it to sort of an apartment building or complex and its value,” said Clarkson. “The rule of thumb is that’s around 80 percent of what the value would be, but that’s a rough rule.”
Clarkson said there are already 200 existing condos in town as a result of conversions. There are also several developments that have either already been approved or have been proposed, including Wemple Corners and the Vista development master plan.
Bolduc told the board that basically nothing would change for purchasers. The design would stay the same, and they would still own their unit, but instead of insuring their home individually, all the units would be insured together.
Councilwoman Julie Sasso questioned if there were purchasers willing to spend money on The Gables, but then weren’t willing to pay the taxes and insurance.
“We’ve lost so many sales because of taxes,” said Bolduc. “The units start at $400,000 and go up from there. A lot of these people are retired and once taxes are added on, they don’t think it makes sense to go up in taxes from their existing homes.”
Bolduc said he expects the change of taxes would be an incentive, and then the project could finish being built out.
Planning Director Rob Leslie said he looked into the situation, and because the project is in a multi-family district, possibly the law could be amended to allow for these unique situations.
Councilwoman Joann Dawson said that although she sympathizes with the situation, she’s afraid there are other townhouse developments with taxpayers that could be in the same situation. She wanted to make sure if the law was amended, the other developments couldn’t come back and claim the same thing.
“I think the fact that this project isn’t yet complete is important,” she said.
Clarkson said if the project was completed as townhomes, there would be more taxable value. However, if the project is never completed, it might be better for the town to do the conversion.
If the amendment isn’t made, the existing units could be taxed as townhomes, while newly sold units could be changed and taxed as condos. Clarkson said he has heard from residents in a similar situation in another development who are unhappy with that makeup.
Councilman Jeffrey Kuhn said he wanted to know the impact on the town if the conversion were allow to go through. Bolduc said he believed the town would likely receive about 40 percent less in taxes.
The Town Board opted to look at the issue further, and possibly amend the law to help with the situation.