A lthough the Jersey City City Council introduced an ordinance Wednesday to grant long-term property tax abatements to two companies wishing to erect housing complexes, some council members expressed reluctance at granting the tax breaks because they said the housing developments didn't pose a clear benefit to the city in terms of affordability to residents.
The abatements will go to a final vote at a future council meeting.
MLK Drive Urban Renewal, LLC, a company formed to build affordable housing as a result of an agreement between the city and investment giant Goldman Sachs, received initial approval for a 30-year tax exemption to build a two-story, 15-unit condominium building for moderate-income families at 412-420 Martin Luther King Drive.
The other initial approval was given to Greene Street Urban Renewal, LLC, to build a 40-unit, market-rate condominium building at 59-75 Grand Street in Paulus Hook, located on the edge of Jersey City's towering financial district.
First authorized by the state of New Jersey in 1947, tax abatements are commonly used by municipalities to lure potential developers to their towns. When a city agrees to grant an abatement to a developer, a complex mathematical equation is employed to determine how much the company pays annually in Payments in Lieu of Taxes [PILOTs]. Those PILOTs are often less than what would be paid in conventional property taxes, but on the other hand, they can benefit the individual city more because they go straight to the city rather than being shared with the county or the local Board of Education.
In Jersey City, companies getting tax abatements are also asked for givebacks, like hiring Jersey City residents.
But abatements are controversial. Some say that if developers don't have to pay school and county taxes, other residents shoulder more of the burden. And certain Jersey City officials are now saying that companies that have gotten abatements in the past aren't currently giving back enough to the community.
Tuesday's vote to introduce the ordinance was not unanimous. Although he ultimately voted to grant the tax breaks, Ward D Councilman William Gaughan said he didn't feel $128,000 for a three-bedroom condo on MLK Drive was necessarily affordable housing. Councilman-at-Large Jerramiah Healy voted no to granting the tax break on the Grand Street project because of the $380,000 projected cost of some of the proposed units.
Such a lack of consensus on granting tax breaks reflects an ever-increasing hesitance on the part of various government officials to continue issuing them because of what Councilman-at-large Mariano Vega characterized as worries that it will open a "Pandora's box."
"It looks good on paper, but the city is getting screwed," complained York Street resident Yvonne Balcer at Wednesday's council meeting.
Holding up the bargain
One of the issues currently on the table is whether or not companies who receive tax abatements follow through on the agreements they made with the city in exchange for the tax break.
One of the main benefits championed by proponents of tax abatement policy was that companies promised to both make contributions to the city's affordable housing trust fund and hire Jersey City residents as employees, but city officials and city residents alike are saying companies aren't honoring their commitments.
One example of this was when Jersey City-based attorney Rev. Francis Schiller came before the City Council Monday to ask that the council consider extending a tax abatement to PHM Urban Renewal Associates, the company who owns an office building at 2 Journal Square. Headed by local developer Joseph Panepinto, the building currently houses the large data-processing firm ADP.
In addition to describing the extension application as demonstrative of ADP's attempt at prolonging their commitment to Journal Square, Schiller said the property owners would make an affordable housing contribution and that ADP pledges to hire more Jersey City natives as employment increases.
Schiller said out of a total of 1,279 employees affiliated with the applicant, 193 are from Jersey City.
Despite Schiller's presentation and endorsements from city Tax Assessor Ed Toloza and Tax Abatement Manager Steve Skrocki, the ordinance authorizing the extension did not make it onto Wednesday's regular meeting agenda.
"The builder got a tax break at the city's expense, but they only hired less than 6.5 percent of their work force from Jersey City," Vega said Monday. "I don't buy it."
City officials have designated Sonia Hernandez Schulman, director of the division of economic opportunity since April 9, to investigate whether companies who have received tax abatements are hiring Jersey City residents. Schulman said Friday, however, that such agreements are somewhat difficult to enforce.
"If they prove to us that they've made a good-faith effort, then there's nothing we can do," Schulman said. "But if we find that they haven't filed required [personnel] reports like Manning reports, then we can fine them."
Schulman said her office, through a partnership with Allen Oliver of the city's Information Technology division, has begun work on implementing what she calls the Automatic Compliance Tracking System. The system will compile and analyze data on tax-abated projects going back to 2000.
"We can hopefully have preliminary figures by September which will tell us how many Jersey City residents have been hired," Schulman said Friday. "We just want to test it first to make sure it works. And from then, we'll have to make some policy decisions as to how to proceed if we find that companies haven't [kept their promise to hire locally]."
And while work continues to ensure a system that will check to see if companies are playing by the rules, a philosophical battle rages between those who argue on both sides of the abatement coin.
A tool for growth?
The city's director of economic development, Charles Catrillo, said that the city needs to award some tax abatements because otherwise, competing cities will get the corporate development.
"We're in competition with everyone else [in getting companies to set up shop]," Catrillo said. "If tax abatements weren't allowed to anyone, then we wouldn't necessarily give them out. But once you have that law written, you have no choice but to play that game. Because if you don't play, you're going to lose."
One resident said she wasn't so sure of the benefits.
"As a taxpayer, I have to pay the county, the Board of Education and the city," Balcer said. "And the county tax is going up. One of the things an abatement does is shelter the developer from tax increases, and community residents are left to shoulder the burden. It's just not fair."
Balcer added, "And it's not solving the problem the city is facing. The real issue is that the richest property owners and the richest developers are getting the greatest tax breaks. It's not based upon need at all. If I don't pay my taxes, they'll have a sale for the tax lien on my house. It is highly discriminatory against long-term residents."
A new amendment to the state's long-term tax exemption law - added at the end of the legislative session last month - includes a provision for 5 percent of an annual PILOT to go to the county.
Therefore, payments made by properties with newly-granted abatements will now be shared with the county, but the school board still gets nothing.
Hudson County government, however, is still concerned by Jersey City's abatement policy. It thinks the way Jersey City directs its abatement policy goes against the grain of why they were created in the first place.
"What concerns [County executive Tom De Gise] about [Jersey City's] current abatement policy is that it is not true to spirit of abatements that he supported [back when he was president of the Jersey City City Council]," county spokesman Jim Kennelly said. "And now the owners come back and want renewals of abatements? The county executive opposes renewals because they violate the spirit of abatements."
But those directing abatement policy in Jersey City are defending their decisions with the assertion that there are complexities involved and that policy is made with the city's best interests at heart.
"It's not as cut-and-dried as the critics make it out to be," economic development director Catrillo said. "Without tax abatements, you wouldn't have any big projects built in Jersey City. It comes down to you having two options: no project or a tax-abated project. It's a tool to build the city. In two years, we've put through... if it's a dozen, it's a lot. And this year we did three or four others."
"And we should still be thankful that developers are looking for them," Catrillo added. "Other towns don't have anyone asking for abatements."
Despite the persuasiveness of arguments favoring the granting of abatements, concerned residents still don't think the long-term benefits outweigh the short-term stress.
"Developers don't need it," Balcer said. "They just ask for it because they know they'll get it. If it's such a hot property, why are we giving it away? We have all this infrastructure with airports and roads and other amenities, and we still have to entice businesses to come here?"