A mixed retail and affordable housing development proposed by Adam Potter, the founder of the Friends of Bay Street, for the office district in Sag Harbor Village hit a speedbump recently, as news got out that the developer he was working with, Conifer, had dropped out of the project. The Smith & Henzy Advisory Group, a real estate development firm brought in by Conifer and specializing in funding large-scale housing developments through tax credits, also departed.
“There are a number of unforeseen challenges that were not originally anticipated that delayed the timeline to move the development forward,” Kate Griffin, Conifer’s director of brand and communications, said by email.
LeChase Construction, which partners with Conifer to build housing projects, may still build the units, even if Conifer is no longer the developer. “Conifer LeChase welcomes the opportunity to submit a bid to build the development,” Ms. Griffin said.
Since Mr. Potter lost two-thirds of his team, however, it is possible he will find a new developer with a construction arm, with LeChase ultimately getting the boot.
While on the face of it the news could appear bad, it is likely only a pause for Mr. Potter. “We hope to announce a new partner shortly,” he said in a recent phone call.
For Sean McLean of Mpact Collective, who was hired by the village to help engage and educate the public about the project, the extra time is a boon.
In October, the Sag Harbor Village Board voted to give the project a positive declaration, which means the developer would be required to provide a full environmental review, known as an environmental impact statement. The first step for Mr. Potter’s team was to provide the board with a “scope” for what would become their draft statement.
According to the State Environmental Quality Review Act, “scoping is the process by which the issues to be addressed . . . are identified.” Once the scope is provided, according to the law, the village would have only 60 days to review it, hold a public hearing, and work with Mr. Potter’s team to develop a final scope.
“Sixty days goes by pretty quickly, particularly for public engagement,” said Mr. McLean. “Whatever time we have now to help people understand how they can become involved and help the scoping become reflective of the community is helpful.”
The $70 million development would add 79 housing units and 34,000 square feet of retail space in a heretofore sleepy area of the village, next to the municipal parking lot behind downtown, which has been known, since the waterfront overlay district legislation passed in January, as the office district.
The planned complex spurred a lawsuit, filed in October by Save Sag Harbor and a group of village residents, against the village’s legislation that allowed mixed-use developments, such as Mr. Potter’s, in that area of the village.
“Given all the controversy in the community, it’s not bad to have this pause,” Mr. McLean said.
Because of the affordable housing aspect of the development, Mr. Potter is eligible to receive both federal and New York State tax credits. The main holdup at this point is the loss of Smith & Henzy, which specializes in gathering those credits and selling them. The sale of the credits would provide the money necessary not only to build the project, but also pay for everything that comes up during the application process, such as all the work required for an environmental impact statement.
Reached by text, Timothy Henzy, Smith & Henzy’s principal and owner, had no comment about why the company chose to leave the project.
“The current economic environment affects the feasibility of 100-percent affordable developments,” Ms. Griffin said. Because of rising construction costs and interest rates, the tax credits aren’t going as far as they were a few years ago.
One possible reason Smith & Henzy could have stepped away is if it became known new credits wouldn’t be coming from the state.
“The state spreads the credits around,” Mr. McLean said. “Google, Amazon, and Microsoft buy these things and use them as a hedge against corporate taxes.”
For example, Google might be able to pay 82 cents to remove a dollar of its tax burden. For a company like that, it’s a bargain. For Mr. Potter, it’s an incentive to build affordable housing.
The New York State Homes and Community Renewal Agency is responsible for doling out the tax credits. According to the agency, it has invested more than $400 million on Long Island since 2017, but an application from Smith & Henzy for Mr. Potter’s project was never received.
“It’s just as much work and risk to do these 79 units in Sag Harbor as it might be to do 400 units in Middletown, N.Y.,” Mr. McLean said. “What Potter needs now is a developer to go through the approval process that has a track record of obtaining an allocation of tax credits from the state. There are a lot of groups who do that. There are a lot of developers who specialize in affordable housing, not just Conifer.”
“I’m continuing with my process,” he said. “As far as the village is concerned, it’s still an active application. We’re here to help the public understand how they can be involved in the process with the expectation that it will start up again. The village wants the best public outreach they can get, even if other things are unclear.”
Despite the Save Sag Harbor lawsuit against the village legislation, the environmental review, and the loss of his original partners, Mr. Potter appears undeterred. “We are moving forward with the affordable housing project because it’s much needed in Sag Harbor,” he said.
