Legoland Building Case for Incentives for $500M Resort in Orange County

John Jordan | July 2016

More than 3,000 people attended LEGOLAND New York's Open House event.

GOSHEN—Will the Mid-Hudson Valley region in the next few years be home to not only a $1-billion casino resort in Sullivan County, but a $500-million LEGOLAND New York theme park and resort in Orange County? The approval process that will play itself out over the next six months or so will determine whether the Town of Goshen will be a future tourist destination for Lego enthusiasts young and old.

Merlin staged the Open House for its LEGOLAND New York theme park and resort at the Palacio Catering & Conference Center in the Town of Goshen.
Merlin staged the Open House for its LEGOLAND New York theme park and resort at the Palacio Catering & Conference Center in the Town of Goshen.

Officials with Merlin Entertainments plc spoke before the Orange County Industrial Development Agency and to more than 3,000 residents of Goshen and surrounding communities at an Open House earlier this month to lay out their plans for a $500-million theme park and resort to be built here.

Representatives of Merlin appeared before the Orange County Industrial Development Agency on July 6th to apply for county sales tax incentives in connection with the project. The next day, Merlin staged an Open House for its LEGOLAND New York theme park and resort at the Palacio Catering & Conference Center in the Town of Goshen.

The project was well received by the scores of adults and children who packed the conference center during the Open House program. Merlin’s John Ussher, senior divisional director, Legoland Development, and John Jakobsen, chief new openings officer, made multiple presentations to inform attendees of the specific details of the project and how Merlin was to mitigate some of the concerns the Town of Goshen and its residents might have concerning the development.

The third Legoland park in North America in Goshen would mirror the successful concept of the six operating resorts in Florida, California, the United Kingdom, Germany, Malaysia and Denmark. The proposal for the LEGOLAND New York Resort includes a theme park with more than 50 rides, shows and attractions and a 250-room LEGOLAND Hotel. The theme park will be geared toward families with children ages 2 to 12.

Merlin's John Ussher explains the fine points of the $500-million project.
Merlin’s John Ussher explains the fine points of the $500-million project.

Merlin Entertainments, the developer and operator of the proposed park, filed plans with the Town of Goshen last month and is hopeful that it can secure all necessary approvals by January 2017 and open the theme park in early 2019. Merlin will seek a zone change from the Town of Goshen on 153 acres of 523 acres it controls on a parcel that abuts Route 17 along Harriman Road between exits 124 and 125. Merlin had considered sites all along the East Coast for the project. Merlin was also mulling properties in New Jersey and Virginia before deciding on pursuing the property off Harriman Road.

The developer will initially invest $350 million in the development of the park and a total of more than $500 million over the first five years of the theme park and resort. Ussher told Real Estate In-Depth that Merlin would be looking to secure a total of $10 million in incentives from the State of New York. A spokesperson for Empire State Development said that $4.1 million in state funding has been committed thus far to the Legoland project, none of which has been disbursed to the company because ESD funds are performance-based. It is believed that Legoland has applied for additional state funding this year through the state’s Consolidated Funding Application (CFA) process.

In addition, Ussher said that Merlin has met with officials with the New York State Department of Transportation to discuss how best to make improvements to Exits 124 and 125 off of Route 17 to direct traffic most efficiently to the project site. He added that Merlin expects the New York State DOT to fund the necessary road and bridge upgrades adjacent to its property.

The LEGOLAND New York project will require considerable local and state financial incentives to move forward.
The LEGOLAND New York project will require considerable local and state financial incentives to move forward.

Merlin representatives filed an application on June 29th that calls for $13.5 million in incentives from the Orange County IDA. Merlin has requested $10 million in sales tax exemptions for the construction of the project and another $3.5 million in sales tax exemptions for fixtures and equipment in connection with the project. Merlin is also requesting a 30-year Payment in Lieu of Taxes (PILOT) agreement. Laurie Villasuso, chief operating officer of the Orange County IDA, stressed that the Merlin application includes preliminary estimates of incentives as well as ticket revenues and tax benefits from the development.

The proposed PILOT would begin upon the first year of operation of the theme park and resort and would total approximately $1.4 million in payments from Merlin, that would be split between the Town of Goshen (approximately $210,000), Goshen School District (approximately $1 million) and Orange County (approximately $168,000). Over the duration of the 30-year PILOT, the payments would increase by 1.5% per year.

Villasuso said that while the proposed PILOT is different than most agreements the IDA has entered to in the past, Merlin is proposing a significant increase in taxes from the onset. The current property taxes paid by the various owners of the Legoland parcels total $91,185.05, according to Merlin’s IDA application.

She added that Merlin officials also discussed with the IDA a proposed Host community agreement between Merlin and the Town of Goshen whereby the town would receive each year 65 cents per visitor to Legoland up to 2 million visitors and 20 cents per visitor after the 2-million visitor threshold was hit, with no cap.

Merlin Entertainment's John Ussher and Orange County Executive Steve Neuhaus
Merlin Entertainment’s John Ussher and Orange County Executive Steve Neuhaus

Merlin officials estimate the project will generate a total of $3 million in local taxes and fees each year: $1 million to the Goshen School district, $1.5 million to the Town of Goshen and $500,000 to the county, including other local service fees.

Including annual increases, the taxes and fees will generate approximately $108 million over 30 years of which $38.4 million will go to the Goshen Central School District. Over the course of 30 years, LEGOLAND New York will pay $52.6 million in PILOT payments alone, of which $38.4 million will go to the Goshen Central School District. LEGOLAND New York would also pay Orange County’s hotel tax, generating approximately an additional $850,000 annually to the county. Sales tax receipts at LEGOLAND New York would generate approximately an additional $6 million annually, Merlin officials note.

The Goshen project is expected to create approximately 800 construction jobs. In a presentation in June before Goshen Town Board members and Orange County officials, Merlin officials stated that the theme park and resort would be built as a prevailing wage project under a Project Labor Agreement with the local building trades. During peak season, the park when operational will create 500 full-time jobs and 300 part-time jobs. The total project would involve approximately 750,000 square feet of construction and will take two years to construct.

Merlin officials have stated that they plan to donate well water on the project to the adjoining Acadia Hills development and plan to purchase water from Goshen.

 

 

John Jordan
Editor, Real Estate In-Depth