The Town of Secaucus has asked the state Department of Community Affairs (DCA) and the Office of the New Jersey Attorney General to review the tax abatement deal Jersey City approved for Goya Foods Inc. in 2011.
According to a memo filed by Secaucus’ town attorney with the DCA, the 20-year tax abatement offered to Goya has allowed Jersey City to keep more than $1.1 million annually from a regional tax sharing pool, a pool to which Secaucus contributes more than $2.8 million annually.
Secaucus is arguing that had Goya Foods been forced to pay conventional taxes, Jersey City would have had to forfeit most of this $1.1 million payment and its own $2.8 million contribution to the tax sharing pool would have been reduced.
In a memo to the DCA dated March 12, Secaucus Town Attorney Anthony D’Elia wrote that, “Jersey City made a conscious decision to grant a 20-year tax exemption to Goya based upon the understanding that, to do otherwise, would jeopardize a significant portion of the payments due to Jersey City under the…[Inter-Municipal Tax Sharing Plan]. In doing so, Jersey City, in essence, required the district’s paying municipalities to underwrite Jersey City’s generous tax exemption provided to Goya. Jersey City…recognized that it could utilize the payments received from the [Inter-Municipal Tax Sharing Plan] to provide the tax exemption.”
Secaucus argues that had Goya Foods been forced to pay conventional taxes, Jersey City would have had to forfeit most of its $1.1 million to regional tax-sharing.
Secaucus mayor: ‘It’s not fair’
The tax abatement package Jersey City gave to Goya Foods has been controversial since it was approved in November 2011.
Developers often enter into a tax abatement agreement, or payment in lieu of taxes (PILOT), to pay a separate fee to the city instead of paying fluctuating property taxes. This keeps their tax rate stable over a number of years. The amount they pay is sometimes equal to regular taxes, and can be based on a percentage of their profits. The money goes directly into the city budget and does not support local schools, although developers pay a nominal fee for county taxes.
The original intent of such deals was to draw developers to blighted areas.
The controversial tax abatement deal offered to Goya was approved by a divided Jersey City Council, and was approved shortly after the state Economic Development Authority had given Goya a separate $81.9 million tax deal under the Urban Transit Hub Tax Credit program.
The abatement, however, has seen renewed attention recently since Jersey City Mayor Jerramiah T. Healy has listed Goya’s move to Jersey City among the accomplishments of his administration.
Healy is facing a stiff reelection bid in May.
Goya – which is currently headquartered in Secaucus, with another facility on Long Island – is currently building a new 615,000-square-foot headquarters at 360 County Rd. in Jersey City. The new facility will include 577,000 square feet of warehouse space and 38,000 square feet of office space.
The 20-year tax abatement Jersey City approved for Goya will require the company to pay $806,400 annually for the first six years the company is in Jersey City. In years seven through 12 the company will pay $892,950 each year. In years 13 through 20, Goya will pay $979,500 each year.
Under the company’s agreement with the city, Goya will pay an annual service charge that will be passed along to Hudson County for county taxes and will have to pay an annual administrative fee. Both of these fees will increase incrementally over the duration of the 20-year agreement with the city. Goya’s annual county tax fee will start out at $40,320, and the annual administrative fee will start out at $16,128.
Goya will not contribute to the local school system.
When the company broke ground on its new facility last September, Secaucus Mayor Michael Gonnelli hailed it as a win-win for Jersey City, Secaucus, and the New Jersey Meadowlands region.
At the time, Gonnelli assumed the new facility would impact the Inter-Municipal Tax Sharing Plan and decrease the amount of money Secaucus taxpayers have to contribute to it. As that has not happened, thanks to the approved abatement, Gonnelli and Secaucus are asking the state Attorney General to investigate.
A portion of Jersey City’s ordinance granting the abatement to Goya Foods reads: “By the city’s analysis, the benefits of the [development] project outweigh the costs to Jersey City insofar as the project adds no additional burdens on schools and because the city will retain most of the payment due it from the [New Jersey Meadowlands Commission] under the Inter-Municipal Tax Sharing Plan.”
“We didn’t see the ordinance that was passed [by Jersey City] until a few weeks ago,” said Gonnelli. “When we saw it, it was pretty blatant what had been done…The way tax-sharing is formulated, development is supposed to take place in towns that can support it, and towns that can’t are supposed to receive the [regional] benefits of development that occurs in other municipalities. By doing what Jersey City did, they’re not sharing that benefit with anybody, and it’s not fair.”
Gonnelli believes that Kearny, which currently has a large-scale development in the works, will use the Jersey City example to similarly circumvent having its regional tax-sharing payment reduced.
D’Elia has sent a copy of the ordinance approving the abatement to the DCA.
“Please accept this correspondence as a formal request that the Attorney General review the attached Jersey City ordinance and…advise whether Jersey City’s actions in granting Goya a 20-year tax exemption violate the intent and purpose of the Inter-Municipal Tax-Sharing Plan,” D’Elia wrote.
“The city measured the impact of the tax abatement on its entitlement to a payment from the Meadowlands as part of its tax abatement approval,” said Jersey City Corporation Counsel William Matsikoudis. “While the project had many positives (job retention and creation being foremost), the city wouldn’t have approved it if it would have resulted in a net loss of revenue…Secaucus certainly knew about, and initially applauded, this highly publicized transaction, and we had no information indicating that Secaucus was unaware of the project’s impact on its own tax base. Jersey City is always a good neighbor, but its foremost obligation is to its own taxpayers.”
E-mail E. Assata Wright at email@example.com.