At the meeting, the council passed two long-term Payments in Lieu of Taxes (PILOT) agreements with large-scale developers. One 30-year PILOT for two 22-story towers on North Street near the 8th Street light rail station and another 25-year PILOT for a five-story residential building at 175 West 7th Street. PILOT agreements allow real estate developers to make payments directly to the city instead of paying property taxes, which shields investors from uncertain fluctuations in property taxes, ostensibly making financing debt obligations simpler.
The discussion at the meeting was not solely focused on whether the city should employ PILOTs, but what new real estate development will mean for current residents. With an astronomical rise in property values in recent years, property owners who can afford to pay rising property taxes can benefit from the sale of their property, and the financial security that results. On the other side are those who do not own property and want to stay in their communities.
Real estate values are at an all-time high, as the median Bayonne house sells for $390,000 in 2018, up by more than 60 percent from three years ago when the median price was $240,000, according to Zillow. Rents are also at an all-time high at a median $1,700, up 20 percent from $1,200 in 2012.
That means people in Bayonne need higher incomes to afford to live here. The problem, though, is that wages have remained mostly stagnant relative to inflation, not only in Bayonne, but across the country, according to the U.S. Census data.
According to United Way’s annual ALICE (Asset-Limited, Income-Constrained, Employed) Report, which draws on census data, half of Bayonne homeowners are housing burdened, meaning they spend more than 30 percent of income on housing. The data shows that residents, despite being employed, are increasingly struggling to make ends meet while the cost of housing increases.
“I don’t know what your plans are long-term, but I want to be able to live in my hometown until retirement.” – Peter Franco
Meanwhile, new housing spurred by PILOT agreements is mostly rental apartments that are expected to charge at least median rent and to attract new residents. An impending citywide property revaluation also has many residents on edge about the possibility of an increase in their home’s assessed value and therefore their property tax bill and cost of living.
“Don’t say [new real estate development] is not giving any value to the community. It is,” said Council President Sharon Ashe-Nadrowski at the meeting. “I know my [home] value has gone up, so people are getting benefits from these developments.”
“I don’t know what your plans are long-term, but I want to be able to live in my hometown until retirement,” Bayonne resident Peter Franco said in response. “But I don’t know if I’ll be able to afford it with the massive tax increases that continue to go on.”
“Our taxes are raised constantly. We’re struggling to stay in this town,” said Kathleen Hendrickson. “People are leaving. Yet, we’re subsidizing these abatements.”
Bayonne’s real estate market is blowing up for various reasons. One reason is that housing in walkable communities like Bayonne near public transit and centers of commerce is in short supply relative to demand. That’s why Bayonne is concentrating its high-density development near light rail stations.
Part of the solution to the housing problem, experts say, is to build more housing and invest in public transit. In the NY-NJ region, neither housing nor public transit has kept pace with demand. If enough housing was being constructed throughout the region and the country to meet demand, Bayonne may not be in a catch-22. If the city does not offer the kind of PILOT agreements that neighboring cities do, large-scale developers will look elsewhere. It may keep property values lower, but that could hurt the city’s ability to collect enough property taxes to fund its school system and municipal government, which is in a structural deficit that the council hopes to fix with PILOT payments. Or the city can choose to develop and raise property values, which can shut many out of the housing market and force out longtime residents.
Just say no
Because the Bayonne City Council has no power to affect the regional and national housing market, to set financial regulations that would expand ownership of property, or raise wages, it is left with little choice but to pass PILOT agreements.
Bayonne Tax Assessor Joe Nichols said that it is not true that PILOT developments are paying less than developments without PILOTS, adding that real estate development had been stagnating for more than 30 years until now. “I would be very happy if people wanted to build without PILOTS. That would be great for the town. But it’s not going to happen. It’s not happening anywhere else. So, your choice is develop it or don’t develop it.”
Third Ward Councilman Gary La Pelusa was the lone “no” vote on the council. “I want Bayonne to be unique,” he said of the development plans. “But I think it’s too much of an incentive over 30 years. I was told we would shoot for 20-year maximums, and this is 30.”
Rory Pasquariello can be reached at email@example.com.