The office of state Attorney General Jeffrey S. Chiesa has upheld Jersey City’s 20-year tax-abatement agreement with Goya Foods Inc. The attorney general’s office made its decision after considering a request by the Town of Secaucus to review the controversial deal that was approved in 2011.
In March, Secaucus asked the attorney general’s office and the state Department of Community Affairs (DCA) to determine whether Jersey City’s tax deal with Goya unfairly allowed the city to keep a $1.1 million payment from a Meadowlands regional tax sharing pool paid into by municipalities in the region, whose largest contributor is Secaucus.
Now that the attorney general has ruled in Jersey City’s favor, Secaucus has retained a law firm to advise the town about its options. While these options are still under review, Secaucus has not ruled out the possibility of challenging the Goya tax deal in court.
“We got the response from the state Attorney General’s Office that we expected to get, which is that [tax abatements] are legal under state law,” said Secaucus Mayor Michael Gonnelli. “So, we’ve now hired the law firm of Robinson and Cole from Connecticut. They are looking into the matter and will issue a report next month. When we get that report, we’ll see what our options are.”
AG’s Office: No violation of law
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 officials believe 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 the Secaucus $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.”
Regional tax-sharing among 14 New Jersey Meadowlands towns was established in the 1970s to compensate the municipalities that were barred by the state from developing environmentally sensitive parts of the area. District towns like Secaucus that were allowed to develop were required to contribute to a fund to compensate municipalities that were prohibited from development and thus deprived of potential tax ratables.
Secaucus has not ruled out the possibility of challenging the Goya tax deal in court.
“The [tax-sharing] law does not appear to have been violated by [Jersey City’s ordinance approving the Goya PILOT],” attorney Maurice Griffin, who works in the attorney general’s office, wrote to D’Elia on April 1. “The use of PILOTS in the context of long-term tax exemption in urban renewal projects has long been established.”
Controversial from Day One
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 but 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 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.
Goya – which is currently headquartered in Secaucus, with another facility on Long Island – is building a new 615,000-square-foot headquarters at 350 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 Jersey 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 tax support to the local school system.
When the company broke ground on its new facility last September, Gonnelli hailed it as a win-win for Jersey City, Secaucus, and the 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. Because that has not happened, thanks to the approved abatement, Gonnelli and Secaucus asked 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.”
Secaucus officials said they only learned of this tax abatement this year and asked the DCA and attorney general’s office to investigate the fairness of the approved PILOT.
“Our hope is that the report that we get from Robinson and Cole will have enough meat in it that we can justify withholding our Meadowlands payment or maybe take this thing to court,” Gonnelli said.
E-mail E. Assata Wright at email@example.com.