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Housing developers proceeding with caution after news of troop reduction

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Proceed with caution.

That was the message sent to housing developers Tuesday by the Army, which announced 1,500 soldiers at Fort Drum will be slashed by 2017. The news has not yet daunted two out-of-state developers planning complexes in LeRay, however, which would add a combined 573 units outside the post.

But economic development officials said Wednesday that developers eyeing the region now will find it more challenging to build housing here. The Army’s news has arrived at a time when previously cited demand for housing has begun to stabilize. In April, the Times reported that the Army’s established 2011 goal of building 1,035 market-rate apartments and houses to address the acute shortage in the region had been met, thanks to a handful of projects that broke ground in the past year. That news spurred the Jefferson County Industrial Development Agency to vow it would stop offering residential tax breaks in the future.

James W. Wright, CEO of the Development Authority of the North Country, said the Army’s announcement likely won’t affect plans for housing complexes now under construction. But he said it should cause some apprehension among developers planning projects that depend largely on the military population.

“It may have some impact on future projects that are on the drawing boards, depending on the nature of the project,” he said. “Obviously, the loss of 1,500 purchasers in the community will have an adverse impact.”

Developers from California and Michigan are planning housing projects outside the gate of Fort Drum off Route 11 in the town of LeRay, both targeting military families. California developer Fidelity Holdings Corp. plans to build 213 multifamily town house rental units off Route 11 on a parcel north of Eagle Ridge Village. The second project, planned by Michigan developer Management Resources Development, calls for a 360-unit apartment complex, a half-mile south of Route 342 on the west side of Route 11.

Linda W. Luther, principal for Fidelity, held a meeting Wednesday morning in California to discuss the impact of troop cuts at Fort Drum on the project. The developer wasn’t vexed by the news.

“We are not reducing our plans, and we’re actually moving forward as quickly as we can on the project,” Ms. Luther said. “We always had been anticipating in our plans deployment schedules and swings in rental vacancy, and our view is that 1,500 troops is a lot less than what they expected. It indicates the base is going to stay.”

But Fidelity’s plan to secure a 10-year tax break for the project could be hard to swallow for municipalities that would vote to approve it. Tax breaks negotiated in the past by JCIDA with housing developers were often a source of controversy among municipalities that voted on them, board President David J. Converse said. And because of the troop reduction, he said, investors that finance housing projects will be even more cautious than they were. That will make it even more challenging for developers such as Fidelity to secure financing.

Because of the troop cuts, “I firmly believe that financial people are going to sit back and start recrunching the numbers to see what housing the community really needs right now,” Mr. Converse said. “It might not be a bad thing, because you don’t want to overbuild housing and hurt the entire market.”

Carl A. McLaughlin, executive director of the Fort Drum Regional Liaison Organization, said he was still trying to evaluate the full impact of the cuts locally. Losing 1,500 of the 19,024 soldiers at the post would amount to a reduction of about 8 percent.

“Businesses will see change, but I don’t think it will be a very big one,” Mr. McLaughlin said.

Though Fort Drum will have a reduction in overall numbers, Mr. McLaughlin said, the area will have a large contingent of soldiers coinciding with the end of large-scale military operations in Afghanistan toward the end of 2014. He said the post also will have thousands of more soldiers at the end of the reduction period than when military operations started to ramp up in 2003.

The bigger question, Mr. McLaughlin said, is whether Congress can find a way to end sequestration for future fiscal year budgets. Military and congressional leaders have said over the past few months that if sequestration continues, the military as a whole will face deeper cuts on top of the announced reductions.

A phone call to Management Resources Development seeking comment was not returned Wednesday.

Times staff writer Gordon Block contributed to this report.

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