palisades center

Palisades Center Loses Federal Claims; Will Center Take Fight To State Court?

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Will This Issue Be Settled In Court, In A Negotiation, Or By Clarkstown Voters?

By Tina Traster

The owners of the Palisades Center have lost their claims based on federal law to lift restrictions that prevent the mall from expanding but have options moving forward including appealing the district court decision to the Second Circuit Court of Appeals and/or they can also take their state law claims to Rockland County Court.

EklecCo NewCo, the Delaware-based LLC that owns Palisades Center, is fighting Clarkstown over a town-imposed restriction limiting its right to build out and lease an existing but unused 250,000-square-foot section on the mall’s fourth floor. The 1.85 million square foot mall needs town and voter approval in order to expand.

The complaint stated that a restrictive covenant forbidding expansion of the mall without a public referendum violated the owner’s 1st and 14th amendment rights.

The federal claims in the suit were determined to be “time-barred” or too late for the court to tackle on their merits because the case was filed after the statutes of limitations had expired. Although the center’s owners may have known their claims were too late, it’s possible they’d hoped to use the pending lawsuit as leverage to negotiate a settlement with the town during the litigation.

What the court rejected was the center’s attempt in June 2018 to show that other developments in town that were built in the three years prior to the August 2016 suit was filed were not subject to similar restrictions. The court rejected those claims.

In its decision, U.S. District Judge Nelson Roman, said now that the federal claims have been dismissed, the remaining state law claims would need to be heard in state court. The center is challenging the legality of the original agreement that abrogates the town’s statutory obligation to make land-use decisions by shifting the responsibility to voters. Even if the referendum passes legal muster, the center may also challenge the process based on its inability to call for one, and its dependence on the town council to call for one.

Land use and occupancy decisions are typically made by town boards, not voters.

“Given the negative effects of the restrictive covenant upon our business and our ability to compete in a challenging retail market, the Palisades Center intends to pursue all available legal avenues at the state and federal level,” said Stephen J. Congel, CEO of mall manager Pyramid Management Group LLC.

Back in 2002, voters overwhelmingly said no to the mall’s expansion after the town held a referendum to release the mall from the “restrictive covenant,” that prohibits expansion.

Councilman Donald Franchino, whose ward includes the Palisades Center, says the mall should be allowed to expand into its empty space without a “permissive referendum”, or voter approval.

“I believe the survival of this mall is critical to Clarkstown and Rockland County,” said Franchino. “Pyramid must use every square foot and diversify. This is not 20 years ago. It’s long overdue. The mall should be allowed to expand. Sales from the mall represent the lion’s share of the town’s tax revenue.”

Based on sources close to the matter, there are divided opinions over whether or not to call for a referendum. There are indications that the town council might be inclined to waive the referendum requirement, which is legal, if the Palisades Center owners agree to negotiate over future tax assessment challenges. In 2013, the Palisades Center won a $20 million tax appeal, which cost the Clarkstown school district $13 million, the town $5 million, and the county $2 million. The tax settlement covered tax years 2009/2010 through 2013/2014. A provision in the agreement prevents the mall from challenging its assessment through 2020.

With the agreement sun-setting, the taxing authorities may feel this is the right time to negotiate with the center.

The center paid $23.5 million in annual sales tax and $21.4 million in property taxes in 2018.

This year the Palisades Center is celebrating its 20th anniversary. The mall has become an integral part of Clarkstown, and Rockland, both as a destination for dining, shopping and entertainment, and as a partner to myriad nonprofits and their causes. Center officials say the mall is the 3rd largest shopping, dining and entertainment destination in New York, and the 12th largest in the country. Recent studies show 98% of mall visitors come from outside Clarkstown and 76% visit from outside the county.

But the challenge going forward is to keep the center fresh, dynamic and up to date with offerings beyond shopping and dining. In 2018 more than 146 million square feet of retail space disappeared from malls and shopping malls. Amazon and e-commerce have taken a tremendous bite out of retail sales across the board. J.C. Penney recently closed its mall store. Many chain stores are closing stores in rapid succession. Lord & Taylor, one of the mall’s anchors, is also closing multiple stores.