Tax abatements are special deals granted to developers by the City Council in order to exempt their project from regular, fluctuating property taxes. The deals are supposed to be an incentive to help a developers build in a blighted area, but some believe that the city has been giving out too many. Critics worry that other taxpayers have to chip in more money because abatement funds go directly to the city budget, but don't help pay for the county or school budgets.
Wednesday's council meeting saw three abatements introduced for a first reading. They are subject to adoption by the council at the next meeting scheduled for April 11.
Much of the discussion was about two of the proposed abatements - a 40-year abatement for a senior citizen affordable housing on Storms Avenue that will undergo renovation, and a 25-year abatement for a condo project on Montgomery Street at the site of the old Jersey City Municipal Court.
Also discussed was a five-year abatement for a mixed-use project on Newark Avenue.
Usually, with abatements, a developer gets a separate deal to make Payments in Lieu of Taxes (PILOTs) to the city over 20 or 30 years.Why such a long time?
The 40-year abatement is sought by the future owner of 111 Storms Ave., an 11-story, 79-unit building for low-income senior citizens previously owned by the YWCA and Imperative Housing Partnership.
The abatement, according to the future owner, Storms Avenue Elderly Apartments, L.P. would facilitate the renovation of the building and preserve it for low-income residents.
It would also call for terminating the 30-year abatement that currently governs the building.
But several council members were opposed.
City Councilwoman Viola Richardson voiced her distrust of the potential new owner Wallace Scruggs' motive for seeking the abatement. She pointed out that he is one of the principals in the conversion project of the old Whitlock Cordage factory complex in the Bergen-Lafayette section of the city. That project, which would see the creation of over 300 townhouses, has been mired in delays that led to a number of people not being able to move in, she said.
"Whitlock [Cordage] has been a nightmare for me and my constituents," Richardson said. "Now we are talking about a 40-year tax abatement for another site, and the previous project is not finished."
Scruggs defended the abatement, saying it would help in the maintenance of the building.
He also agreed with Richardson about the problems with Whitlock Mills, and blamed them on a previous contractor performing allegedly shoddy work. He said that the situation is being remedied by a new contractor.
City Councilman Michael Sottolano questioned which improvements were needed that warranted the abatement.
Scruggs pointed out the building has been "very well maintained" but there would have to be improvements such as new windows and appliances, which he said do not "last 40 years." Giving away too much?
The old Jersey City Municipal Court building at Montgomery Street was at one time a three-story criminal justice complex that also included a police station with jail and an attached one-story garage building.
The Imperial Construction Group, based in Elizabeth, will be converting the circa-1925 building into a residential complex with two floors added to the main building and one floor on the garage building.
This will form a 38-unit building with 5,178 square feet of retail space and 31 parking spaces.
Council members took issue with the 25-year abatement for this project.
City Councilman Steven Fulop objected to the abatement since it would allow the developer to pay 14 percent rather the usual 16 percent of the annual gross revenue each year (with revenue derived from mortgage payments for the condos).
Fulop also took issue with how abatements are being used by city government as a revenue source and not as an incentive for development.
"We are moving in the wrong direction....the 25 years is a marketing tool when [the developer] can do 10 years," Fulop said.
Sottolano agreed that the 25-year term was too long but pointed out to Fulop that without the revenues from the abatements, there would be a substantial shortage in plugging gaps in the city budget. Here's something different - a five-year abatement
It's not often that five-year abatements are discussed by the City Council, but at Monday's caucus, there was one presented.
The one in question was for a newly constructed building at 825 Newark Ave. where there would be three residential units, one retail space, and one office space. All will be built by Chosen Investment, LLC based in Short Hills.
The city's business administrator, Brian O' Reilly, explained that five-year abatements are "for smaller developments" such as one and two-family houses and for rehab projects to reduce their tax liability.
In most of these abatements, the owner of the building pays 30 percent of the newly assessed tax on the property each year for a five-year period. They apply to a building undergoing "substantial renovation".
O'Reilly explained that small construction projects qualify for what he called "a five-year phase-in" where the owner pays 20 percent of the new assessed value in addition to the city taxes that were already assessed on the property before the new assessment. Ricardo Kaulessar can be reached at firstname.lastname@example.org