A valuable incentive for mixed-use development in downtown Rochester has been extended. The City of Rochester has reauthorized an exemption from real property taxation and special ad valorem levies for the conversion of property within the Rochester Center City Zoning District from non-residential to a mix of residential and commercial uses.

Smart growth for mixed-use development downtown

Initially enacted in 2003, the Residential-Commercial Urban Exemption (CUE) program has been extended through 2021 to incentivize the conversion of underutilized office, retail, manufacturing, and warehouse buildings, promoting development of mixed-use residential space in downtown Rochester.

On December 4, 2018, Mayor Lovely A. Warren submitted legislation to City Council reauthorizing the CUE program until the 2021 assessment rolls. The legislation was approved by City Council after a public hearing held on January 3, 2019. The Monroe County Legislature is also likely to re-authorize the extension of its CUE program until the 2021 assessment rolls.

According to the City of Rochester, 23 property owners have qualified for the CUE program, resulting in approximately $69 million of investment into the Center City Zoning District since 2003.

Municipalities and properties eligible for CUE program

The CUE program under New York Real Property Tax Law Section 485-a authorizes municipalities with less than 1,000,000 inhabitants, like the City of Rochester, to adopt local laws exempting up to 100% of the increase in assessed value attributable to the conversion of non-residential property to mixed-use. The county in which the municipality is located may follow suit by adopting local laws exempting that property from county taxes in the same manner and to the same extent as the municipality. Check with the municipality where your target property is located, or with our firm, to see whether this exemption applies.

In order to be eligible under the CUE program, the real property must be originally non-residential and located within the City of Rochester’s Center City Zoning District. This area comprises parts of High Falls, Midtown, East End and Washington Square. The property must be converted from non-residential to mixed-use with a total conversion greater than or equal to $250,000. Lastly, at least 25 percent of the total developed floor space after conversion must be for residential purposes. In order to take advantage of this incentive, the applicant must file with the City of Rochester tax assessor prior to the taxable status date: February 1 in the City of Rochester.

12-year exemption schedule for increase in assessed property value

If the assessor finds that the applicant is entitled to an exemption under the CUE program, the increase in assessed value of the property after its conversion will be partially exempt from real property taxation and special ad valorem levies assessed by the City of Rochester and/or Monroe County for up to twelve years based on a declining exemption schedule. A developer with eligible property located in the Center City Zoning District and whose timely-filed application is approved by the City of Rochester tax assessor will receive an exemption based on the following table:

Exemption Year                                                      Percentage of Exemption

1 through 8                                                              100% of Exemption Base*

9                                                                                  80% of Exemption Base*

10                                                                                60% of Exemption Base*

11                                                                                40% of Exemption Base*

12                                                                                20% of Exemption Base*

*The exemption base is the increase in assessed value attributable to the conversion.

For more information, please contact F.L. Gorman , the co-leader of Harris Beach’s Real Estate Developers industry team at (585) 419-8628 / flgorman@harrisbeach.com; or Nick Mastrosimone, an attorney on the industry team, at (585) 419-8680 / nmastrosimone@harrisbeach.com.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Melville, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.