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Knights Of Columbus To Become Town Of Haverstraw’s Landlord, Lease Income May Be Subject To Income Tax
By Tina Traster
In another grab at retaining power over the Knights of Columbus building in the Village of Haverstraw, Haverstraw Town Supervisor Howard Phillips has come up with a plan to lease the building for 25 years, rather than take title through a donation.
The proposed leasing arrangement, which the Town of Haverstraw is set to vote on Tuesday evening, includes a one-time payment to the Knights of $20,000, $500 in monthly rental payments, and the absorption of the fraternal order’s expenses, including the Knights’ real estate taxes, insurance premiums, and utilities.
The Town will also assume the cost of maintenance of the entire building, including plumbing, heating, electric service, HVAC and the building’s roof. Under the lease, the Knights will have continued use its office, the rec room and meeting room, and a storage closet.
The annual property taxes on the building at 56 West Broad Street in the Village of Haverstraw are more than $30,000. By many accounts, taxpayer support of a Catholic fraternal organization raises questions about the use of taxpayer funds and the separation of church and state.
The lease says that the Town will use the Knight’s facility for the Haverstraw Senior Citizens Recreation Program.
Over the past year the Town has paid the Knights taxpayer money totaling more than $120,000 while the Knights purportedly attempted to go through the process of donating its building to the Town. However, a key step in the donation had been to secure permission from the Charities Bureau of the Attorney General’s Office by filing a petition, but the Knights never filed the petition, according to the Attorney General’s Office.
Several complaints had been filed with Charities Bureau objecting to the donation plan. In a surprise turnaround, on Feb. 13, Grand Knight Joe Vargas told the Knights’ council the “the deal was off.” He offered no explanation and made vague statements about the town continuing to work with the Knights for their “mutual interests.”
Phillips, who is a Fourth Degree Knight, but never attends Knights’ meetings, according to sources, has publicly maintained the building was needed for senior activities. Every Town of Haverstraw councilman is a Knight, though not active in the council, according to sources who regularly attend meetings.
Now, the Town is set to sign a long-term lease, but the new deal will also require Attorney General approval. The Town has also agreed to pay the legal fees and expenses for the Knights to secure approval from the Attorney General. During the previous donation effort, the Town paid the Albany-based firm of Girvin & Ferlazzo about $5,000 to prepare the petition that was never filed.
Leasing Deal Could Jeopardize Knights’ Tax-Exempt Status
The lease arrangement effectively turns the Knights into the Town’s landlord, and the income earned from the lease may affect the Knights’ income tax obligations. Even though an organization is recognized as tax-exempt, it still may be liable for tax on its unrelated business taxable income, such as rent, or rent-in-kind.
Phillips and the Town Board had hoped that the Knights would donate its building but the deal fell apart at the end of 2024. For more than a year, the Knights were negotiating with an affordable housing developer to sell their building for $2.4 million. Kings Katherine LLC planned to build 100 affordable housing units, a parking deck, and allocate space in the building for the Knights in perpetuity. Phillips, along with a quorum of town officials, held a private meeting at the 11th hour with a new Grand Knight where the parties hatched a deal for the Knights to forego the sale and donate the building to the Town of Haverstraw instead. The Knights, saying their Catholic Fraternal organization was on life support, latched onto a deal that would make them flush — at least in the short term. Phillips in June 2024 offered them $7,000 monthly until the donation deal was completed, plus the town inexplicably paid the Knights’ “back rent” of $56,000 for the first six months of 2024. The temporary deal also included taxpayer money to install a $14,000 fire alarm, as well as paid the Knights’ attorneys’ fees.
The proposed donation of the building angered the developer, tax watchers, defenders of the Constitution’s separation of church and state, Village of Haverstraw officials who have been champions for affordable housing, and the former Grand Knight who had shepherded the original sale.
In the new lease arrangement, the $500 monthly rent increases in year six to $550 per month, $605 per month in years 10-15, and increases 10% every five years thereafter. The lease renews automatically every five years, unless the Town terminates it with six months’ notice. The Knights have no ability to opt out of the lease.
