An Ulster County developer owes more than $400,000 in property taxes on affordable-housing projects and has been accused by contractors of failing to pay his bills.
Kingston-based Birchez Associates and its president, Steven Aaron, owe taxes on three of four Ulster County senior and work force housing developments. Aaron is in court with three municipalities over unpaid taxes, and recently the Ulster County Industrial Development Agency voted to strip his tax break in four months unless he pays Kingston some $330,000.
Over the last five years, Aaron or his companies have been named in dozens of lawsuits, judgments or liens after contractors said they weren’t paid, according to Ulster County court records. Yet last month, he won a state economic development grant for a new project in Fishkill.
“Those grants are made to boost the economy,” said Herman Wagschal, vice president of New York Pro Drywall Company in Monroe, who has a lawsuit against Aaron for $110,000 worth of work he said he did on a project in Esopus. “But everybody has to sue him,” Wagschal said. “Otherwise, they’re not getting paid.”
Aaron disputed claims against him point by point in an interview just before Christmas. He specifically criticized Wagschal’s work but also said that he is a simply a demanding businessman when it comes to quality, timeliness and coming in on budget. “We’ve had our share of disputes, but we’re responsible in the way we’re dealing with them,” Aaron said, adding that none of the liens or judgments are outstanding.
Overall, Aaron said, his “eccentric way of dealing with things” is for the greater good of senior citizens. He also said his arguments for lower taxes and all that surrounds his unpaid bills are in the interest of keeping apartment rents down.
A tour of the Birches at Chambers last week showed seniors enjoying an exercise room, a craft room full of ribbons and ornaments for the holidays, and a generally clean, well-appointed building.
“If we’re going to be able to have affordable housing in our communities, the community leaders need to step up and recognize that there are certain key ingredients not only to getting it built but in order to maintain it and maintain it affordably,” Aaron said.
Many contractors have gone to the courts to get paid by Aaron. In the last five years, Aaron or his companies were subject to at least a dozen judgments ordering him to pay engineers, attorneys, a software company and more. He’s also the subject of numerous mechanics’ liens, a first step for a contractor who has not received payment.
In that time, three employees also went to the state commissioner of labor to be awarded $22,000 after the office found Aaron had violated state labor laws.
Aaron also almost left some senior citizens in the dark this fall by failing to pay bills to Central Hudson Gas Electric. Three notices sent to residents of the Birches at Chambers during September and acquired by the Times Herald-Record said service was slated to be shut off because the landlord owed $3,060.
Aaron has also been subject to two federal tax liens totaling more than $90,000.
The liens and many of his other judgments were all eventually paid.
Aaron provided half a dozen recommendation letters from contractors with whom he has worked. He also said his companies are financially in good standing, and noted that he cannot close a mortgage with liens or judgments on the books.
Aaron is working on two new projects. One, The Birches at Fishkill, was awarded a $1.8 million grant last month from the state Region Economic Development awards process.
Some have alleged that Aaron’s success is, in part, due to his political connections, an assertion he also disputed.
Austin Shafran, spokesman for Empire State Development, said funding awards were based on the endorsement of the local regional council and the technical scoring of various state funding agencies. Before a grant contract is executed, state agencies do a legal review, he said.
Aaron’s companies donated almost $116,000 to elected officials in 2010 and 2011. The biggest recipient was Gov. Andrew Cuomo, at $87,800, followed by the chairmen of legislative housing committees. Assemblyman Vito Lopez, D-Brooklyn, received $9,000 and Sen. John Bonacic, R-C-Mount Hope, got $5,000.
Rep. Maurice Hinchey, D-Hurley, has appeared at ribbon- cuttings for Aaron’s projects. His spokesman said Hinchey supports affordable-housing projects but has secured no direct funding for Aaron.
“It’s not uncommon for people in our business to support people who have the same interests that we do,” Aaron said of his donations to politicians who work on affordable-housing issues.
Town of Ulster Supervisor James Quigley III describes his relationship with Aaron as adversarial. Before taking public office, Quigley sued the town and Aaron over a renegotiated tax deal that means Aaron pays only $100 a month per unit on Chambers. Quigley believes that amount should be three to four times higher. His assertions were never heard by a judge, because the case was dismissed on the basis that Quigley didn’t have standing to sue.
Ulster is the only town in which an Aaron project is current on taxes, but Quigley says that’s because he sends bills directly to the mortgage escrow.
Aaron successfully renegotiated larger tax breaks than the initial payment in lieu of taxes agreements on the projects in Ulster and Esopus after they opened. “He’s paying very little taxes on a very big project,” said Esopus Assessor Dan Terpening.
Aaron now wants a lower assessment on vacant parcels in Esopus and has a tax action against the town. Terpening said the town has made settlement offers but hasn’t received a response.
In Kingston and Saugerties, where Aaron has not paid his current bills, he says he needs lower taxes as well. His disputes revolve around how the property is assessed.
After Aaron made PILOT tax-break agreements with the municipalities, the state passed the 581-a law, which allows affordable-housing projects to have their assessments calculated according to net operating income.
Aaron wants to combine the two tax breaks, but the City of Kingston said no. He’s suing in Kingston over that issue, asserting that instead of some $250,000 billed under the PILOT, he should pay just under $66,000 under the new state law.
Aaron also tried unsuccessfully to renegotiate about $57,000 in taxes he owes to Saugerties.
“We were running into an issue where unless we substantially raised the tenants’ rent, we would have not had sufficient resource to continue to pay the PILOT,” Aaron said.
But the town supervisor said that negotiations fell through. “We were willing to work something out with him, but his requests become preposterous,” Saugerties Supervisor Greg Helsmoortel said. “We feel that he should pay a fair share.”
Aaron said he was surprised by Helsmoortel’s comments, stating he is close to an agreement with both the town and the city. In Saugerties, he said, withholding the taxes was a legal tactic that his attorney advised. “The lawyer said ” there’s language in here that says if you don’t get paid, then the PILOT gets revoked. So, maybe we’ll just not pay you, and it was a litigation strategy,” Aaron said. He said in absence of the PILOT, the project would be eligible for the 581-a tax break.
David O’Halloran, chairman of the Ulster County Industrial Development Agency, said Aaron was notified in June that the body would review his agreement, but never came before the board.
When the IDA took action toward revoking Aaron’s PILOT agreement, he told a Kingston Daily Freeman reporter that the actions were rooted in racial or religious prejudice. He apologized in a written statement days later and said that he regretted the comment, which, he said, was not meant literally.
O’Halloran said the IDA’s job is to balance the success of businesses with the taxpayers. Without the money Aaron owes, the school district and city will have large holes in their 2012 budgets, he said. “The tax incentives we give come on the backs of each and every taxpayer in tough economic times,” O’Halloran said.
Aaron already sued the city once over the assessment and lost. He launched a new claim in 2011, on the same basis but with an attorney who he believes has more expertise.
Aaron is also planning a new project in the City of Kingston, the Cooperage at Kingston.
The IDA won’t consider a tax break this time until the developer is current on his taxes, O’Halloran said. “If you can’t meet your old obligations, what makes you think you’re going to meet new ones?”
mmurphy@th-record.com
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