ALBANY — Albany officials confirmed Friday that the city assessor will retire at the end of the month after he admitted he mistakenly granted tax exemptions to a number of residential units that weren't qualified to receive them.

How much the error cost in lost tax revenues was being calculated Friday evening, although city officials maintained the figure was in the hundreds of thousands, not millions, of dollars.

Assessor Keith McDonald submitted his retirement paperwork on Friday, Mayor Kathy Sheehan's office said. McDonald's retirement is effective June 30, and he will remain at work until then.

McDonald told the Albany Business Review on Thursday that he made a mistake handing out generous tax reductions on condominium and apartment complexes throughout the city over the years.

"It was my mistake," McDonald told the Business Review. "We're in the process of doing some corrections."

McDonald couldn't be reached by the Times Union when called at his office Friday.

Section 485-a of the state's real property tax law allows for a special tax exemption for certain commercial properties such as warehouses that are converted to mixed-use buildings with both commercial and residential areas.

The tax exemptions are generous under the law, the Business Review reported. For instance, a condo owner might have a $980 annual tax bill instead of a tax bill of $10,300.

That would save $74,560 over the first eight years of the exemption. For 24 units, that saving would have been nearly $1.79 million.

Brian Shea, a spokesman for the mayor, argued that the conversion projects "wouldn't have moved forward without this" tax break. He called an estimate of millions of dollars in lost revenue "grossly inaccurate."

According to the Business Review, the city of Albany has been handing out the exemptions to developers converting commercial properties to just residential use instead of commercial and residential use as the law requires. McDonald told the Business Review that his office had believed it could be converted to either commercial or residential to be eligible for the tax breaks.

The law says commercial and residential use is required.

Sheehan called the exemption error "a serious issue that dates back to at least 2011," before she took office.

She noted that there are 51 units in the city built with 485-a tax abatements, 24 of them at 17 Chapel. Of the remainder, there are eight additional units that city officials have questions about, but the other units have "clearly commercial" uses attached and thus the exemption was appropriately applied.

And if the developers hadn't known about the 485-a tax break, they could have gone to the city's Industrial Development Agency and would have received an exemption through another means, the mayor said.

"This is unacceptable. I'm not defending the assessor, who has resigned, or the independent consultant who works with him. But it's premature to draw any conclusions," Sheehan said.

Even if all the units paid taxes at a rate without the abatement, the city would have gained an additional $185,000 to $242,000 in revenue, the mayor said. "That supposition that it was millions of dollars is just wholly incorrect."

"I'm not minimizing this – government has to get it right, and this isn't right – but I don't know that there's anything other than a mistake here," she said.

Sheehan noted that the assessor operates independently under the city charter, and that she has never spoken to him about assessments.

Matthew Hamilton contributed.