Proposed Hillside Community SouthWorks Looking for PILOT Agreement and Potential Tenants

Jamie Cone Hughes | July 24, 2024 | Tompkinsweekly.com

*Preliminary rendering- subject to change

SouthWorks, Ithaca's would-be new neighborhood that would transform an 850,000 square-foot former industrial facility on South Hill, is anything but a typical construction project. As multiple complicated factors come together in the developers' push toward their target of first occupancy in 2025, they are currently looking to the Tompkins County Industrial Development Agency (IDA) to offer a payment in lieu of taxes (PILOT).

“We're in a weird financing environment right now. It's really hard to finance basically anything, much less something as complicated, big, weird and difficult as this site,” said Robert Lewis, SouthWorks Development project manager at SHIFT Capital, the real estate development company that owns the site.

Originally built in phases from 1906 to 1971, the old factory would be rehabilitated, and plans include the construction of new residential buildings to create a 1.7 million square-foot mixed-use neighborhood comprising 28 adjacent buildings on 95 acres.

The developers are asking for a 20-year PILOT wherein the new taxes associated with the new investment would be phased in over those 20 years. The developers will still be required to pay taxes on the original assessed value of the property, which is currently $3,506,000. The increase in tax payments would be phased in gradually over time until, after 20 years, the owners would pay the full amount.

About $44 million in new tax revenue would be generated as a result of the new development during the term of the incentive, according to Heather McDaniel, administrative director of the Tompkins County IDA.

“Having a negotiated tax agreement with municipalities gives us a level of certainty on a key operating expense that, if we can pin that down, helps make things a little bit easier for a lender to understand,” Lewis said. “And so that certainty is a big part of why we need that to come together."

The IDA has been in discussions with the developers since they purchased the site in December 2022, McDaniel said.

“It's likely the biggest project that the community is going to see in this lifetime,” McDaniel said.

There is a need for deviation from the standard IDA policies when it comes to SouthWorks, McDaniel explained. “The IDA delivers 10-year incentives based on financial need. … This project doesn't really fit that,” she said.

SHIFT is anticipating an answer from the IDA this fall regarding the PILOT, and the IDA has commissioned an objective reasonableness assessment, to be conducted by an independent company, to help inform the IDA's decision.

Sarah Barden, community outreach and leasing coordinator for SouthWorks (left) and Robert Lewis, SouthWorks Development project manager, at the SouthWorks site on South Hill in Ithaca.

Photo Credit: Jamie Cone Hughes

This summer, Sarah Barden, community outreach and leasing coordinator for SouthWorks, has given many tours of the site, helping potential stakeholders, tenants, community members and anyone else interested in the project envision the potential in the vast expanse of interior space that is the historic facility. For those interested, there will be tours of the site at 640 S. Aurora St. available to the public every half hour on July 31 from 3 to 7 p.m.

“I think the interesting thing is that with adaptive reuse, it's definitely less straightforward than just a rebuild, but you are able to capture the history of the area,” Barden said while walking through the factory on a recent sunny morning.

“It's also more sustainable to approach a project that way,” Barden added. “The development team, that's something that's really important to them: not just doing the easiest thing, but doing the thing that has the most character — that has the most impact — and that's what we're able to do here.”

In one space designated to become an open courtyard area, some of the roofing would be removed, but certain original elements like the cranes on the ceiling would likely remain to add character, “sort of like a historic homage,” Barden said.

A retaining wall could become the backdrop for an amphitheater.

“We could have outdoor music here,” Barden said, gesturing to the area that would open up once the wall comes down. “You could bring food trucks in here.”

Three stories of the old building are technically at “ground level” because the factory was built into the hill. This makes renovating the site both easier and harder, Barden said.

Being on a hill creates different stormwater management challenges than the team would be facing with a building on a flat area, “but all of that ground-level access means that multiple spaces have loading access, which, when you're trying to do industry or you're trying to have a variety of uses, can be really valuable, especially since there aren't a ton of spaces in Ithaca that have loading access,” Barden said. “And so we have a sort of a critical mass of them here.”

One section of the facility has seven loading docks and a drive-in dock. “So, this is a really great central loading option,” Barden said. The idea would be to lease the space as an amenity for multiple tenants. “So, there'd probably be shipping and receiving happening here for several different businesses,” they said.

The facility was left empty in 2011 when Emerson Power Company scaled back its operations.

“They used to have a whole division here, and they pulled that back,” Barden said. Eventually, it didn't make sense for the company to have a site in Ithaca.

“So, they decided that they wanted to sell the property,” Barden explained. “Something they considered was even razing the building down the ground and just selling the land because that's more straightforward. But it was important to them also to preserve the history.”

In 2011, Emerson brought on David Lubin of L Enterprises, who has been shepherding the process for the past decade. The original New York State Department of Environmental Conservation decision indicated that the space needed to be cleaned up to industrial standards. “But since he had the vision of a mixed-use community, he pushed for it to be investigated more thoroughly and cleaned up to residential standards,” Barden said.