TAX ABATEMENTS
Last Revisions 9/29/01- ADD'L EXAMPLES
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"Judge Kuskin who is presiding over the (Secaucus lawsuit against Jersey City giving out excessive tax abatements to their detrement) cases remarked, that tax "exemptions are to be granted sparingly and only those who comply strictly with the applicable requirements for granting the exemption." He also quoted another ruling that said, "an exemption from taxation is a departure from the equitable principle that everyone should bear his just and equal share of the public tax burden. Taxation is the rule, and the exemption is the exception to the rule."
On October 22, 1999, former Governor Whitman's Director of Communications Peter McDonough said, "In the middle of this boom (Jersey City), this mayor still hands out tax abatement and then complains about the stress his property taxpayers are enduring; I hate to say it, but it sounds like a kid who kills his parents and then throws himself on the mercy of the court because he's an orphan."
Please see the MARCH 2001's issue of....... NEW JERSEY MONTHLY magazine and their cover story BATTLE ACROSS THE HUDSON, which supports what we, the JC citizen activists, have been saying all along, they'd build here anyway even without the tax abatements.
The tax breaks -- championed by Schundler -- have angered neighboring towns and some city residents who say they are being forced to subsidize luxury housing, office towers and hotels along the booming Hudson County waterfront. Andersen, the Big 5 CPA firm, noted that Jersey City has increasingly awarded the tax breaks in recent years, at a time in which high rents in New York City may make them unnecessary. The report also said the city is severely underestimating the burdens new commercial development puts on city services. Star Ledger, Report faults Jersey City management, 4/24/01.
" There were 4,023 units of luxury housing and more
than 11 million square feet of commercial office space either constructed or approved for
construction ( with 20 & 30 year tax abatements) during Schundler's tenure. City
officials could not immediately provide the number of market-rate units created.
' The problem is that this housing is not affordable to Jersey City's working and other
low- and moderate-income families,' the Jersey City Affordable Housing Coalition reported
in a recent
position paper.... The coalition noted that
the production of publicly subsidized housing declined to 46 units last year, while the
previous annual average was 200. These figures, the Housing Coalition maintains, means the
city will lose longtime residents." (Campaign
Guide: Housing, By Alberto Canal, Journal staff writer, 4/26/2001)
As the law is currently written, the City politicians have way too much latitude in the process. If you take a look at the campaign finance reports listing contributors to Schundler's last race for Mayor, many are developers. Abatements have become an "insurance policy" for the rich. They're insured against the escalating cost of government corruption and mismanagement. The major, tax abated properties are primarily on the waterfront, the "Gold Coast" with direct access to the PATH system and phenomenal views of the NYC skyline and Statue of Liberty. They don't get the annual tax increases, while the inner city 1 to 4 family homeowners and small business owners do. What tax equity is that? The waterfront gets tax abatements while the city can't pay it's bills without an annual layoff, more tax, water and sewer increases!
I've noticed that new construction sprinkled in old neighborhoods pay an exorbitant amount of taxation and the politicians say the waterfront wouldn't get built if they didn't give out tax abatements! It's more like Schundler wouldn't get their millions in contributions if they didn't give the abatements. Schundler, as the incumbent in 1997, spent close to $2 Million on his mayoral race! Who pays the price? Under the Schundler administration, we have fewer police, fewer firemen, more crime, an overly aggressive Parking Authority harassing city's residents, pothole riddled and filthy streets, and we're on the first step to State takeover, a "Distressed City". What a great job you've done Bret!
In Jersey City, the waterfront gets 20 to 30 years tax abatements while the inner city's new market rate housing qualifies for a 5 year abatement of up to a 30% discount but from my research it doesn't seem to be applied evenly! As a matter of fact the assessments on new construction seem to be a mess! The builder/developer must apply for the abatement within 30 days of receiving his Certificate of Occupancy on the building. Otherwise the new buyer pays full taxes. At times the paperwork wasn't completed on time, as you'll see in the Greico Drive example below.
The Sugar House, luxury condos on the waterfront, originally had a 5 year tax abatement but several months later, through a new ordinance, 99-082, it was changed to 20 years. I'm using them, as an example since they're condominiums whereas the other luxury housing built on the waterfront is rentals. The Sugar House is in construction so sales information is readily available.
Let's compare the Sugar House waterfront condos to new construction in the inner city.
| The Sugar House is located in the hub of "The New Wall Street". Downtown Jersey City, NJ is quickly emerging as the financial capital of the tri-state area. Just minutes away from The World Trade Center, The Sugar House boasts such neighbors as Goldman Sachs, Merrill Lynch, & DLJ. |
Source: website
The Sugar House has 70 units with 67 interior parking spaces and commercial
/retail on street level. As of February 24, 2001 the prices for the 35 UNSOLD apartments
ranged from $520,500 for a "large Master w/large study, waterfront" 1 bedroom to
$1,576,000 for a prime NYC views, 2 bedroom, 2 bath with a 436' terrace penthouse.
The
taxes for the next 20 years for the $520,500 apartment are $7,774 annually for
the first 6 years then their taxes may go up if their market value skyrockets or it'll
stay the same until year 9 when taxes will increase to 40% of
full taxes. The step ups are a 20% increase in year 13th to 60%
of full taxes, then the final step in year 16th to 80% of full taxes.
The condo pays full taxes beginning in year 21! If the condo
was located in the inner city and is only eligible for a 5-year tax abatement with
the max 30% reduction, the taxes today would be $12,096. They're paying 64% of the
5-year tax abated amount and that's fixed for 6 years, PROBABLY 9! Schundler has run out
of property to sell, bonding capacity, and now there's a rumor that the state will not be
giving us another $16 million in "Distressed Cities" monies this year. So
we're looking at another tax increase after the election when they approve the budget!
That's over and above the 6% we got in August and the annual 8% increase in
the water & sewer rates in 2000. The budget hasn't been approved yet and it ends June
30th, a few months away!
The Council members who VOTED YES for the 20 year Sugar House tax abatement are: Donnelly, Bettinger, Gaughan, Vega, Colon, Smith and of course DeGise, the Council President. Cavanaugh and Holloway voted NO. (ordinance 99-82.)
The scene directly across from the Sugar House.... Portside hi-rise luxury rentals in the background and new, low-rise rentals across the street. >>>>>>>>>
The $1,576,000 penthouse pays $18,551 annually for the first 6 years then the steps as noted above. (20 year tax abatement)
Now compare that to a new house at Franklin Park on Greico Drive in the
Greenville section that sold for $287,500 in November 1998. (SEE BELOW)
Their current taxes are $9,551 annually. For some reason the builder, didn't apply
for the 5-year abatement. Even so the taxes would be approximately $7,322.
When the new owners appealed their taxes the following year, they lost! Their immediate neighbors built by another developer a few years earlier have the abatement but they begin expiring in 2001 and 2002 so their taxes will jump 30% plus the new tax increase! The Grieco Drive current taxes of $9,551 annually in 20 years assuming 3% tax increases, if we're lucky, their taxes will be $17,250. Compare that to the $520,500 Sugar House condo at $7,318 which in 21 years will be paying full taxes.
Which neighborhood will be hurt by the taxation level? See an actual example- Cator Avenue below.
Interesting but only after the election, the Jersey Journal, who had endorsed former City Council President Tom DeGise, wouldn't even mention the Sugar House. They printed my "Letter to the Editor" on the Sugar House, grossly & inaccurately shortened it, the day after the election, Wed June 6th! I had emailed & faxed it in twice since April, when I wrote it.
On Saturday, June 9th the JJ did a splash article on the upcoming July opening of the Sugar House, "Posh digs to open at Sugar House" .. (photos not included on-line) No mention of the 20 year tax abatement... Remember that the Jersey Journal's building at 30 Journal Square saw their property taxes reduced by a million dollars after the last property reval in 1987.
Here's another EXAMPLE…
Inner city, new construction is all fairly standard, 2 families, detached, with vinyl siding/ brick combos and a 1 or 2 car garage at street level. They need the rental income to pay the taxes and qualify for the mortgage. These 2 houses are on Bowers Street in the Heights section, Councilmen Tom DeGise and Bill Gaughan's ward. The Heights section is primarily a blue collar, working class neighborhood.
One of the houses sold for $237,500 in January 2001 and has a 5 year tax abatement and pays $6,949.35 but when the tax abatement expires in 2005 the future tax bill will be $9,550.80 plus all future tax increases and you know there'll be plenty! The house next to it sold 12/11/97 but must have been a foreclosure according to the tax records. There were hundreds of them in 1997, 1996 etc.... It's assessed at $180,000 even though it sold for $105,000. Their taxes are $8,186 or so. They appealed in 1998 and 2000 but were denied twice due to the foreclosure status.
The photo below is of homes on the same Bowers Street block. As you can see it's hardly a wealthy neighborhood but pay taxes as if they were….
Below…. Here's the view across the street, on Bowers Street….They don't have waterfront views of the Statute of Liberty, or World Trade Center nor have direct access to the PATH but pay more in taxes in their valuations….
Another example below….
These 3 sister homes to the right are on Milton Street also in the Heights. The 2 shown sold for $270,000 in November and December 1999. Again they're 2 families with a garage. They have a 5-year tax abatement and their current taxes are $7,035.75 but will jump 1/1/05 to $8,387 plus all the tax increases in between, that 5 year abatement did not decrease the taxes by 30%. These homes were more expensive than the Bowers Street ones but pay less in taxes? You figure… They all pay too much in taxes. From my observations, the tax situation for new construction, is a real mess, which is the responsibility of the tax assessor!
BELOW IS AN EXAMPLE OF A WORKING/ MIDDLE CLASS NEIGHBORHOOD THAT IS OVERTAXED SO CONSEQUENTLY HOUSING PRICES HAVE BEEN DECLINING.
The house to the right is fairly standard on Cator Avenue in the Greenville section of the city, just a few blocks away from the other example on Greico Drive in the Franklin Park development. They're 2 families with brick/ vinyl siding and some have garages. In June 2000, one of the houses above sold for $133,000 and its 14-year-old assessment is $125,000! The houses are assessed in the $148,000 to $155,000 range and pay about $6800 in taxes. In the mid 80s' these homes sold for about $200,000 to $225,000. House on the block sold for $200,000 in 1997 then $175,000 in 1999 etc. Even after the real estate boom we've experienced, which will end soon, this neighborhood hasn't recouped the loss in values from the late 80s'. In real estate there's a saying, as taxes go up, values go down and this well kept, working class/ middle class family neighborhood is a perfect example! ... SO MUCH FOR SCHUNDLER'S BOOSTERISM OF INCREASING VALUES FOR ALL... Greenville isn't a PATH stop away from NYC so hasn't seen the flood of New Yorkers come into the area as the downtown area. LOCATION, LOCATION, LOCATION.... not Schundler....
Higher taxes drive out families and the working, struggling middle class. Jersey City can not sustain itself without a thriving middle class and the inequity in taxation will continue to drive out middle class/working class families. Do you know that 34% of the children in JC live in poverty?
Compare the prices above to the Sugar House examples. In the Sugar House abatement application, filed in July 1999, the developer projected that the 48-- 2 bedrooms/2 baths condos would have an average sales price of $375,000. As of February 2001 with 60% of the 2 bedrooms unsold, as listed on their web site, the cheapest 2 bedroom/2bath is $540,000 and they go as high as $1,576,000!
Was it that the market on the waterfront exploded that the developer's projections of sales prices are so way off base or would the truth have had some impact in the tax abatement negotiations? Section 2.7 of the tax abatement agreement reads "Schedule of Projected Sales Prices: the entity represents that its good faith projection of the initial sales prices is set forth in Exhibit 7, attached hereto."
OR were these low projections of sales prices to make it more palpable for the elected Council members to vote on its passage? Otherwise the city may have negotiated for more dollars?
Or was Schundler concerned that this may scream in the papers that a working class city laying off its personnel, raising taxes for working class people is now subsidizing millionaire residents?
OR maybe it was the fact that they hired Brian Doherty, Newport's Sam Lefrak and all the other waterfront developers attorney. If you want to do business on the waterfront seems like Doherty's your man. Brian Doherty is also Council President Tom DeGise's campaign fundraiser/manager.
As the saying goes, the rich get richer and the poor get poorer .... 34% of the children in JC live in poverty.
Schundler has so bastardized the tax abatement process that it's now turned into highway robbery. The State, who had allowed Schundler free reign on all the bonding, must do a review of all the 64 tax abatements given out during his administration. The list is endless and there's plenty of examples of other give-aways, like Lefrak's 30 year tax abatements for luxury rental buildings 20 and 30 River Court, the Goldman Sachs tax abatement etc..., but they will come later. I need to get this site up now… Bear in mind that another revaluation is just around the corner and the city is up to its ears in debt and in worse shape now than in the late 80s'! (see CITY FINANCES). The City's assessment ratio is at 73% and once it falls below 70% that triggers a reval and it won't be good news for homeowners unless you live on the tax abated "Gold Coast" where your taxes remain unchanged!!! Thank-you Bret Schundler!
Democracy and good government only work when everyone pays their fair share.
For an interesting web site that talks about the Hudson River waterfront, check out Carol Van Houten's "On the Waterfront". It discusses the Public Trust Doctrine and that the waterfront is PUBLIC LAND but you'd never know it with the limited access to the water's edge!
SECAUCUS FILES SUIT
The Star Ledger's April 4, 2001 article "Schundler supporter pays city legal bills" describes how the Lefrak Organization has taken over the City's defense against the Secaucus suit. The Lefrak organization is the biggest developer in Jersey City.
Now another wrinkle, beginning in 1998 neighboring towns led by Secaucus began challenging some of Jersey City's abatements. In May 2000, the Town of Secaucus filed suit against JC challenging the tax appeal exemption from local property taxation for tax years 1998 & 1999 for TPI Urban Renewal Corp. in Greenville Yards. Other suits have been filed against 16 of JC's tax abatements including 4 owned by Lefrak. In February 2001, TPI (Tropicana) agreed to pay $90,000 to Secaucus and the other three towns who have joined in the suit. The City must amend the balance of the tax abatement and take a loss in local taxes of $224,000 over the balance of the abatement term. Peter Zipp, special legal counsel for Secaucus "reported that that still leaves 15 other cases to be litigated through the tax court. Jersey City has pledged to fight each case." (JJ 2/2/01) This will have major ramifications for the taxpayers of Jersey City.
Judge Kuskin who is presiding over the cases remarked, that tax "exemptions are to be granted sparingly and only those who comply strictly with the applicable requirements for granting the exemption." He also quoted another ruling that said, "an exemption from taxation is a departure from the equitable principle that everyone should bear his just and equal share of the public tax burden. Taxation is the rule, and the exemption is the exception to the rule."
"Michael Pane, an attorney who has published several books on New Jersey municipal law, said, "It seems to me that if you're not responsible for paying, you're not really the client. I would think it puts you at the mercy of the people who are paying the bills." Schundler supporter pays city legal bills, SL 4/4/01. He was referring to the Lefrak Organization taking control of the City's defense of the lawsuits. Michael Pane represented the activists against the Millennium Towers LLC's 43 story luxury apartment building which the community opposed and won their suit. See the Millennium Towers section.
COMMERCIAL TAX APPEALS
How can it be that commercial properties won tens of millions of dollars of tax appeals in State Tax Court when Jersey City's "Gold Coast" real estate values were escalating?
The stats for tax appeals:
TAX YEAR @ JUNE |
Number of Appeals |
Total $$ of All Appeals |
Average Appeal Amount |
1993 |
4,958 |
$ 1,740,444,264 |
$ 351,038 |
1994 |
4,432 |
$ 991,239,441 |
$ 223,655 |
1995 |
1,088 |
$ 920,285,620 |
$ 845,851 |
1996 |
1,323 |
$ 1,583,688,547 |
$ 1,197,044 |
1997 |
900 |
$1,063,208,000 |
$ 1,181,342 |
1998 |
745 |
$ 805,047,083 |
$ 1,180,600 |
From the size of these appeals, you can deduce that these weren't homeowners but commercial properties and most from the "Gold Coast". I think there should be an investigation of Schundler's inept defense against the commercial tax appeals or is this a "quid pro quo" for political contributions? (see CITY FINANCES- DEBT STATEMENTS)
In June 1998 alone, the City floated $13,650,000 of notes to pay for property tax appeal refunds. Under the Florio administration, the City, to pay off tax appeals, would float 1-year notes and keep rolling them over but had to pay them off by year five. Under Whitman and Schundler, the City bonds for tax appeals for 10 years! As a matter of fact, Schundler lobbied the change soon after he got into office.
In 1997 alone, almost 1,000 homes were foreclosed on in Jersey City. Most were modest 1 to 4 family homes paying exorbitant taxes for their respective neighborhoods.
"Last June Jersey City offered Chase Manhattan a $100 million tax abatement to occupy two office buildings encompassing 1.1 million square feet.... Critics consider the subsidy nothing less than corporate welfare." New Jersey Monthly March 2001 issue...
A NEW TWIST TO TAX ABATEMENTS
"At a caucus held before the regular public meeting, the council heard details about a tax abated project in the works for 50 Dey Street. Developers plan to convert the American Can Company building into a cyber hotel that will house computer related equipment, evicting a variety of businesses and about 500 employees to make room for the new tenants.
In a typical understatement of the inconvenience of forced relocation, Housing & Economic Development Corporation Director Annemarie Uebbing explained that "their leases are expired anyway." Brian Doherty, attorney for the developers, (City Councilman Tom DeGise's Campaign Manager/Big Time Fundraiser) added that " the speculation was that there are very few employees there who are Jersey City residents", tipping off the council that since these are not Jersey City voters there will be no political fallout from the lost jobs and businesses.
The cyber hotel project will create 20 permanent building related maintenance jobs, plus some jobs in other businesses in the building. Uebbing said that a program will be set up on site to "insure that Jersey City residents get the jobs in the cyber hotel", prompting an incredulous Councilman Harvey Smith to point out that such a program has been in place since 1996, but has never been used. " (Urban News, Greg Brickey, 2/01)
Does this make sense? I've always commented at City Council meetings when abatements were up for a vote, that the city gets parking lot attendants and cleaning lady jobs in return for giving away hundreds of millions of dollars in full taxes. The reported 16% rise in reverse commute PATH ridership, just in 2000, supports that argument. Waterfront jobs are a transfer of white-collar jobs from Manhattan. The people move with the jobs. Our mostly blue-collar city is subsidizing the transfer of those white-collar jobs.
It's so extreme that we now have the Council evicting badly needed blue-collar jobs from the city so they can give tax abatements! Anything for more political contributions!
Note….. Tax appeals is a huge area and it's public policy impact should be seriously reviewed by the State....
OR MAIN SECTIONS BELOW:
