Quote:

They actually can't make the agreements without including a cancellation option. The agreements are very strictly limited by the State Enabling Legislation (Fox-Lance) which permits them. There are a couple of reasons for this - one having to do with compliance with Federal Tax law and deductibility of real estate taxes, the other having to do with the NJ State Constitution's tax equitability rules. I'm not going to get into this in great detail - if you really need to know all about it, go to law school!

Quote:

Really neither. It's just that the spread between the City's required overpayment in exchange for the certainty and the regular tax payment has widened much too far. Also the City imposes the Political cost on the builder even though the City is the financial beneficiary, by requiring the builder to make all sorts of donations to various groups around town, etc. which the builder has to factor in as part of his total cost of buying the tax certainty. If the City lowered the cost of the tax certainty to something approximating a 10% overpayment (all-in including political costs) builders would probably take the deal. At the current metrics, the overpayment is between 30-100% more than regular taxes. This spread is so great that a builder is willing to take the risk. Unfortunately the city loses out because not only does the builder pay less than it would under a PILOT, the City only keeps 40% of what is paid.

Quote:

The fraction would be so comparatively small it would be negligible. Remember, the current 'abatements' already pay a 5% surcharge to the county. For every dollar that the city currently gets in PILOT form now, without the PILOT the property owner will pay about 75% of the amount he was paying, of which the county will keep about 60% (instead of the current $0). What that means is that of $80 Million in annual PILOT payments direct to Jersey City, the County would instead get a windfall of $36 million for use in its cities other than Jersey City. Hudson County's total tax haul is more than $800 million. So if they were actually able to use the extra $36 million to cut taxes (rather than just spend it) all residents of the County would get a County tax cut of less than 5% Compared to the Jersey City tax increase needed to fill its budget hole - 37% (yes 37% tax increase on regular taxes to replace lost PILOTs), this 5% decrease doesn't add up to much. So yes, the municipal tax increase would be mitigated from 37% down to 32%. Not a very helpful scenario.

Quote:

Obviously you only read about the ones that seek a PILOT, since the ones that don't are not reported in the Jokey Journal and I'm hardly a compendium of every construction site in the City. I can tell you that the buzz around City Hall is that quite a few projects, most of them more mid-sized than the mega projects on the waterfront, have been going ahead with no request for a Payment In Lieu of Taxes deal or with only the 5-year short term 'abatement'. At a certain point I risk crossing disclosure lines which are would be professionally unethical and would not to mention get me in some very serious legal trouble, so you'll just have to take my word for it.

Hope that helps explain things a bit.

Quote:

Good question. Actually GREAT question. The answer is, they are willing to pay a tax premium in exchange for certainty. Jersey City has a long history of playing rope-a-dope and double dealing businesses who invest or develop here. A history that began with the Hague adminstration and has been practiced by nearly every mayor since up to and including the current one. Its one of the primary reasons that Jersey City has bounced from one economic crisis to another - they can't resist raping local businesses for short term solutions to their problems long enough for the business community to thrive and take root. One could write a whole book about these civic shenanigans, and in fact, the late Mayor Smith did just that! Businesses who choose to locate here, invest here, create jobs, tax ratables, commerce, etc. here are willing to pay a little more than regular taxes in exchange for knowing what they will have to pay in advance and knowing that the City can't invent capricious valuations or new and special surcharges on them. Of course, if the overpayment imposed by the City (PILOT) in exchange for the certainty of payments is enormous, the developer/investor will not accept the deal.

Have to get back to work now but if this doesn't satisfy your curiousity I can answer in more detail after 7PM.

Quote:

This is simply not true, but then again, this reporter does extremely sloppy research. The nearby Columbus Plaza development by Panepinto Properties did exactly the same thing. Moreover several office buildings in Jersey City have simply terminated their PILOT agreements outright.

The City Council Members are beginning to get worried that their lies about 'abatements' (that they benefit anyone other than the City's budget) are no longer politically tenable and that they will have to find another scapegoat besides the {devil horn} greedy developers {devil horn} to keep their chairs and continue to mismanage the City's budget.

If all PILOT's were terminated suddenly (as they will no doubt be over time) the City would have to fill a $40 million dollar budget hole. To fill it, they would have to raise ordinary property taxes by $110 million or $1,600 per household on average. Since the average home is worth $275,000 in Jersey City, if your house is worth 3 times this amount, you can expect to pay an extra $4,800 to make up the shortfall caused by the cancellation of all the PILOT agreements.

What's worse is that the City isn't even trying to replace the PILOT agreements which are expiring or about to be terminated. The PILOT economics and politics are so bad for the builders that almost none of them are even applying for them anymore (other than perhaps the brief 5-year abatements). This will only exacerbate the pain to high-value historic or vintage home owners that will be caused by the impending revaluation.

JSQ:

ROFLMAO

I hope even though you're an immigrant you know what that means. Great post.

I think I can help enlighten some of you folks on this as this is a subject I know something about (based on some litigation work I once did).

The waterfront sewer system (both mains and narrow lines) was all actually built by and as part of the Newport Redevelopment back in the mid-80's. Rather than try and manage the project themselves, the City just placed the burden on the Development Plan/Developer and hoped for the best. In that case it did seem to work as the waterfront never seems to flood in a heavy rain and there is now a modern sewer system down there.

More recently, the City has decided that rather than burden developers in redevelopment areas, it would charge an extremely high sewage hookup charge which is supposed to cover the cost of making improvements to the system in the areas in which building is taking place. The hookup charges add up to approximately $2,000 per apartment unit but prior to Healy were only $400 per apartment unit. So for a 100-unit apartment building, rather than make sewer improvements in the street, the developer now has to write a $200,000 check to United Water (which is the City's designated sewer manager) to make street improvements.

If I were an 'activist' I would want to know:

1) What improvements has the City or its contractor made with all the sewage hookup charges?
2) How did UW get the contract to manage this system and why?
3) Why did they suddenly raise the fees from $400/new-apartment to $2,000/new-apartment just after Healy took office and why, and what does this have to do with UW, and why have they just used the $1,600/apartment to pay themselves rather than improve the sewer system.

I think you know where this is headed.

By the way, new buildings have basically very little to do with the backing up of sewers in older neighborhoods. The mains aren't big enough to handle the rainwater that comes into the street grates. The relatively small amount of extra water from flushing toilets and showers barely contributes to the problem.

Finally, the concept of putting a drain in your basement to solve the problem will not work. If the water backs up, so does the drain. You would need a drain AND a heavy-duty sealed electric Sump Pump to keep the water out.

"billionaire owner Lloyd Goldman"

not to be picayune, but i think you should replace that "b" with an "m"

"and one abstinence (Vega)"

guess who's running for mayor

I'm stunned the man was sober enough to stay awake during his own pointless speech. If the boss comes to work at 10am and leaves at 3pm, its easy to imagine what all the employees would be doing during the 1/3 of the working day that they are unsupervised.

This "Mayor" should retire after this term to a nice job as the taster in the Schlitz brewery over on Route 3.

Waterfront abatements pay the city 300-400% what the city would have received in ordinary taxes over the life of the abatement. In a condo developers pay the city approximately 120% what they would have paid under ordinary taxes. In a rental, they pay closer to 200%.

Before you jump DanL, I have been working on an explanation to you about why $1 sent directly to the city benefits you the taxpayer A LOT more than $1 sent to the county and shared with the other cities. Yes, I confess to being an utter nerd on this subject, but I've been actually putting together an excel spreadsheet on this (for the benefit of explaining to some New York City based clients as to why the PILOT program isn't worth the application) and eventually I will have time to redact the confidential information and also put this part on there. Paid work comes first, arguing on a website later.

In the meanwhile, trust me, the city NEEDS the PILOT $, which is why they always grant the PILOT deal.

Incidentally, the NY based developers who have been carpetbagging in JC lately all apply for the abatement program because the NYC abatement is very generous and is granted as-of-right. There, you just file the paperwork and get the abatement - no council approval, no politics, no donations to charities, no BS. The typical NYC abatement consists of 10 years of NO taxes followed by 10 years scaling gradually up to full taxes. When I show my NYC clients the math on the JC abatements, they are usually shocked that people even call it an abatement here.

There is no such clause in the PILOT agreements. If ordinary taxes are higher than the PILOT payment, the owner's only recourse is to terminate the agreement and go on regular taxes, which can be done anytime from 1-year after the date the apartment has its certificate of occupancy.

EFFECTIVE Ordinary JC taxes keep dropping because the local politicos have resisted a revaluation for so long (because they don't want their own well appreciated town houses revalued!). As a result, 2007 taxes in JC are 1.3% on a newly built condo or building under ordinary taxation. This is based on the current rate of .522% and the 2007 equilation ratio of 25%.

.522% x 25% = 1.3%

"Does anyone know when the last time the city performed a city-wide property assessment?

I know there is an effort underway in Hoboken to have one done. The theory there is that the politicians that are against it are dependent upon the "old school" Hoboken vote, and that demographic would likely be forced out of Hoboken if their taxes went up. On the upside, the reassessment keeps the total tax level the same, but redistributes the tax burden across the city based on current values. While I don't want to see people kicked out on the street because they can't afford the taxes, I also don't like the idea of property owners getting a free ride on the increased valuations of their property."


The last time the city performed a city-wide re-evaluation was just before the Schundler administration, and it is what contributed to his election. YES, the current valuations, which are older than 10-years old, create a tax situation where the "old school" vote pays less than its fair share and the lions share of the tax burden is carried by principally the PILOT payers and secondly by the newer buildings which had a PILOT that expired during the last 10 years. The current government will do ANYTHING to prevent a re-evaluation, including as many new PILOT deals as it can make, wild hotel taxes, transfer taxes, giant increases in municipal fees for water, utility hookups, fines, literally anything they can get their hands on to prevent a re-evaluation. This is because they view it as political suicide, given their past experience where a re-val of the "old school" voters' properties actually prompted them to dump the entire HCDO political monopoly in favor of a Conservative Republican (In Jersey City?! - Heaven Forbid!!!).

The typical JC old-timer's property is currently paying between .66%-1.0% of its true current market value. A huge discount to new taxes (1.46%) and PILOT taxes (1.66%). A re-evaluation could cause their taxes to actually double. The city should have managed this better by increasing the tax rate annually to keep up with the improvement in values, but then of course the Old-Timers would have been angry about their annual increases.

"I keep hearing different things about what happens at the end of that 20 year period.

Right now, my new property was purchased at about $400,000. Abated taxes come to 1.75% of purchase price. After 20 years, i've heard some say it'll go to 2 % some say more.. and i don't know what to believe... it would really make a difference in how long i keep this property.. so if you can clarify, it would be much appreciated.."

At the end of the 20 year period, the assessor will determine the current market value for your property (by looking at recent sales in your building, on your block, etc), multiply that value by the current Equilization Ratio (.28) and the current Tax Rate (.0522%). So if you bought your property for $400k and your current taxes are $7,000, and it comes off its PILOT January 1st 2007, and the assessor determines that it is worth say $500k, your new taxes will be $7,300.

No one can predict what the value of your unit or the rate and ratio of taxes will be 20 years from now. I seriously doubt you will still be living in the apartment at that point.

"NNJR: If you are refering to me you are wrong. I own my apartment (850 square feet 1 bedroom), it is worth nowhere near 500K dollars and 1 pay around 7300 for taxes. So if someone says a luxery apartment worth half a million dollars is only paying 8,000 for property taxes, i think it's too low (or perhaps my taxes are waaaay too high)."

If this is really true - if you are paying more than 1.46% of your apartment's real current value today, you can dispute your taxes with the help of someone called a "tax certiorari" attorney. There are a handful of firms in NJ who specialize in this kind of work. Basically your attorney will go to the JC assessor and show him that you are paying more than the current EQ Ratio x Rate, and force the assessor to give you a personal revaluation of your home. Given the dollars involved, if there is any logic to your claim the assessor will offer you a lower tax payment in order to avoid court costs to the city.

On the other hand, if your claim is baloney, the judge will throw it out immediately so don't waste your money on an attorney. Remember that if any of your neighbors sold their apartment for anything like $500k, the assessor can claim your apartment is worth the same. FYI - Waterfront 1-bedrooms sell for $600k now.

"As a real estate tax payer, I am concerned about the whole nut; city, school, county (and state) taxes. What good does it do for me if PILOTs surpress my city taxes and force my school and county taxes higher.

You stated expert knowledge in this area, please explain. "

I thought I had answered this before but once more just for good measure. Here goes:

The Jersey City School system is controlled and paid for by the State of NJ using money from the state income tax and other sources. So basically as it stands, people in Princeton are paying for JC's schools. When the City's budget started improving due to the cash influx from waterfront PILOTs, Mayor Cunningham took the City off the NJ Distressed (aka Dysfunctional) Cities Program. The State of NJ said "Woah, if you can skip out on the program because of all your new PILOT money, you need to start paying for you own school system." Well, the Cunningham administration wasn't about to force these expenses on regular voting taxpayers, so it imposed a 5% surcharge on top of all PILOT payments (a tax on top of a tax - so to speak) which goes towards defraying the State of NJ's costs of running the JC school system. Right now the NJ school system costs the state about $70 million/year and the PILOTs are generating a few million dollars against that which cuts the State's cost.

As far as the county goes, again during the Cunningham administration, the City of Weehawken sued Jersey City claiming that the PILOT program made it possible for JC to keep all the $ and Weehawken wanted to get its hands on the same loot. So to keep political peace, the Cunningham administration imposed a 2% tax on PILOT payments to enrich the County coffers. In any case, I need to correct your understanding about the County's revenue stream as follows. If the PILOT payments were converted to a regular tax payments, your regular taxes would skyrocket because JC would need to triple its local taxes in order to satisfy the county's 60% share of regular tax revenues and still pay off its own needs. Remember, the county gets a tax share but it doesn't set the rates. It's an illogical system, but the only one we have.

Hoping that helps.

I find myself responding to these posts because there is so much misinformation out there. Here is another perfect example.

In condominium projects, the real estate tax "abatement" aka. PILOT program goes to the BUYER not the builder. In fact the BUILDER has to pre-pay the city an entire year of taxes in exchange for this "abatement" which applies to the BUYER. The PILOT for condos is based on a complicated formula derived from the purchase price, the monthly maintenance charges and current interest rates. You can call the local tax assessor and he will calculate the numbers for you, as they can change.

The number 1.65% is about right, and if it seems high to you for taxes, its because it IS high. In fact, its HIGHER than regular taxes on a new "UN-abated" condo. An new unabated condo today would pay taxes based on the current published Equilization Ratio x Tax Rate, which is .28 x .0522 = 1.46%

So, as you can see, there is no such thing as an "Abatement" in Jersey City. The good news is, as a buyer you have the right to cancel your "abatement" anytime after 1 year from date of purchase, so after the 1st year you can go down to regular JC taxes like everybody else.

The biggest problem with condo "abatments" is the name. JC is so screwed up that buyers feel they need to hear the word "abatement" when buying a condo, so builders go to the city to get an "abatement" and the city says ok, I'll give you one but only if the "abatement" charges you more taxes than regular taxes. The builders have no choice so they get this PILOT "abatement" and then just assume the buyers will cancel it as soon as they buy. The only benefit of the PILOT program is that it protects the buyer from massive city tax increases in between the time that the buyer signs the purchase contract and the closing date - so at least you are protected for the perhaps 12-month wait until your move-in date.

If you are a new buyer in any of the new condo developments on the JC waterfront, after you move in, I strongly recommend that you write a note to the JC tax department (c/o Mr. Ed Toloza) and cancel your abatement at the legally permitted date which is one-year after you take title.

"Beautiful Hudson River side property"

I guess you didn't live in dirty Jersey City in the 80s to see what that property looked like before the Newport area was developed. Beautiful? A more appropriate collection of adjectives:

Oil filled
Smelly
Dangerous
Junkyard
Toxic
Barren
Rotten
Dump
Ratty
Scary
"CAUTION - DO NOT ENTER"

The JC Med Center (the biggest and newest facility in the county) is being taken over by Wellspring Partners hospital "constultants" for a turnaround operation. Will be tough going in a market where more than half the customers can't pay 10 cents but still have to receive the same great service as the paying (insured) customers.

Hey look at that - you quoted me NNJR, thanks!

I would've posted the same thing but as long as you took care of it, I'll comment on the other absurd law, the transfer tax fee.

So here's the thing - the legislators are such morons that they charge the full 1% transfer tax on a transfered property even if only a fractional interest is transfered. That means if someone owns a 10% investment stake in a building (as is common with commercial property) and that person sells his/her stake only, the tax charged is 1% of the whole properties sale value as if it had all been sold at the pro-rata price! No one in NJ or JC seems to understand how stupid this is, but as a result, you will see a major drop in property values because it becomes impossible to sell an investment in a commercial property and therefore because unwise to invest in them (property value goes down as a result of non-liquidity of asset).

So all the commercial property owners can march down to the tax assessors office and demonstrate how the law damaged their property values and get a decrease in their assessments in tax certiorari court - hence transfer tax goes up means real estate taxes go down.

Moron Mayor Martini never learns, you can't rob peter to pay paul.

Sonia is a medically-obese, middle-aged latina with a full-grown, unbleached, unwaxed moustache.

It's genetic. Both she and her daughter are certifiably insane. If she comes into a store while you're in there better get out fast unless you want to be around for a psychotic/schizophrenic episode.

The woman has gone bananas. Constantly railing against Fulop and anything he supports - good or bad. Lucky for us at least the JC pols know she only represents about 10 people who are permanently circle-jerking on her website.

People think she is a Lefrak stooge but she isn't - in fact she is only a stooge for Comcast, who pays her off and pays 90% of the budget for her organization as a way of getting access into the Newport complex.

In response to alb:

"But it seems as if a good rule of thumb as if abatements ought to go to low-income areas that are fairly far from public transportation and have a lot of vacant lots. Or maybe some really seriously blighted areas near public transportation."

They do. The City grants abatements of all varieties to both the fancy parts of town and the blighted parts. You only hear about the ones on the waterfront because those are the only ones that are politically interesting. The ironic thing is, they give real abatements in the rough parts of town (eg. 6% of gross residential rent instead of 16%) even though those are the residents who use the most local government services (police, social services, municipal jobs, etc.).

"Awarding abatements to waterfront properties in the 1980s or early 1990s probably made a lot of sense, but offering those abatements just clearly makes no sense whatsoever, at all, given that developers are jumping over one another for a chance to develop downtown."

The so-called "abatements" benefit the city more than the developer. That is why the city is always in a rush to give them out. For more info, please read my post here:
http://jclist.com/modules/newbb/viewt ... 29e446f20a#forumpost58135

"Another argument against waterfront abatements is that, for whatever reason, the waterfront residential properties are attracting a ton of families with children, and those children have to go to school somewhere."

Waterfront residents don't use the public school system in anywhere near the same proportion as the people in less affluent areas. Moreover, the schools are paid for by the State, ever since the State takeover.

"Either the developers of nice residential units have to start suitable subsidized private schools,"

This was done at Portside with the Montessori and at Newport with respect to Stevens Coop and the River School. I don't think any of the other developers have the scale to try this idea.

"Sorry about my ignorance. Are you referring here to Corzine or to Healy?"

I was referring to our drunken Mayor who comes to work at 10AM and starts literally shaking from withdrawel symptoms around 2:30PM because he needs a drink so badly. Try to make an appointment with him one time around 4PM and see what happens.

"How bad are the hotel taxes? My recollection from this morning's Journal article is that the tax would be 6%, which doesn't seem to be all that terrible. But is the tax actually worse than that?"

Just to put this in context, New York's hotel tax scheme is as follows:
Real Estate taxes: NO real estate taxes for years 1-11 after construction, PARTIAL real estate taxes for years 11-20
Room tax: 5% of room rate tax contributed to NYC & Co. citywide hotel tourism marketing fund.

JC's tax scheme is as follows:
Real Estate taxes: FULL or PILOT (same as full if you do the math) taxes from day 1 after construction
Room taxes: 6% of room rate contributed to general revenues of Jersey City. JC spends $0 on tourism promotion and marketing.

As a result, Jersey City hotels will literally pay DOUBLE the taxes of NYC hotels. What makes JC think it can charge higher taxes than NYC - the tourist capital of the world - and expect to see hotels be developed? Hubris or insanity?

In response to danl:

"Occupancy and resulting revenues DO impact commercial property taxes and PILOTs under abatement agreements."

Only in residential abatements. Office building abatements pay a flat fee regardless of occupancy.

"The city recently provided tax refunds to a number of commercial property owners."

The State provides these refunds (75% of actual payroll taxes collected by the State from employees who relocated from NY) under the B.E.I.P. program, not the City - it costs the City nothing. The State does this in order to compete head-to-head with the incentives offered in Lower Manhattan (which are actually much more generous).

"Are tax abatements and PILOTs sound tax policy?

Then, with the abatements negotiated by elected officials and those appointed by elected officials whose campaigns are funded by the same developers being granted the abatements, how is the city able to ensure negotiating the best possible tax abatement agreement.? Should tax abatements not be vetted by an independent analyses?

No one from the city has ever laid out a rational explanation to these issues. It would be beneficial if someone could."

Yes, Yes, Yes and Yes. I totally agree with you on this statement Dan. The local pols are too cowardly to admit that they NEED the PILOT programs to keep the city budget balanced due to their own mismanagement of the municipal finances. I think an independant accountant's analysis of every PILOT approval would be a great way to settle the issue to the satisfaction of the public. Meanwhile, the City will claim they don't have enough money to pay the accountant to check if the PILOT approval makes sense! :(

In response to GrovePath:

"So JCLAW, I assume agree with former Jersey City Mayor Bret Schundler."

Not really. I think the site should be zoned for a nice retail/residential development like Liberty Harbor North and then sold to the highest bidder. That way, the city would get cash up front for the sale and future tax ratables as the property is developed out. It would also set a standard for further high quality development on the city's West waterfront. The half-wits at the County want to make it into a golf course - for special use by elected officials, of course.

Obviously this is just my humble opinion.

Hope this helps. My hands are tired from typing now.

Re: Fun with Abatements: Goldman Sachs

"HAHAHAHHAHA "JC Tourism""

I like to laugh too - but seriously. JC has tourist destinations such as Ellis Island, LSP, and Liberty Science Center, et.al.. More importantly, NYC bound tourism that is priced out of the city choose Jersey City as a lower cost alternative. They sleep here, eat here, shop here, visit one or two local attractions while they are mostly visiting New York. Those tourist dollars are pure gold for JC businesses, because the people who spend that money do not consume local city services. They use school systems, social svcs, police, etc. in their home city of origin - not in JC. A hotel is like an export business. Imposing a tax on your own exports is moronic. No country would do it. And btw, New York's hotel tax (which is less than JC's) is specifically used to fund local tourism marketing ("NYC and Co." "I HEART NY") dollar for dollar. JC's hotel tax is just more money for the 3 job holding, free gas guzzling "elected" officials.

"Another informative post, you should post more JCLAW. There is a lot of speculation and misfacts flying around this board."

Thanks a lot, that's very kind of you NNJR. If you ever want me to try to answer something, start a thread with JCLAW in the title and I'll try my best.

"Re: your digression - what are you referring to that the mayor wants to build?"

It's called the AMB High Cube Warehouse. He wants to stick it right on the hackensack river (JC's "other" waterfront) on the old PJP landfill. It's the equivalent of letting Newport/Harborside/Exchange Pl. be developed as an industrial use in 1985 instead of a commercial or residential use. Could you imagine what JC would be like today if our waterfront's abandoned railyards were turned into big box factories instead of Wall St. West? Sorry to keep wasting letters on this mayor, but I spend too much time around these city people and they are the worst bunch of nincompoops in 20 years.

Hi alb.

What you heard cannot be right. All so called "tax abatements" have no caps on occupancy levels. Whether the building has 1 employee in it or 10,000, Goldman Sachs pays the same fixed amount directly to Jersey City. Also, the "tax abatement" on the Goldman Sachs building is one of the later ones which includes the surcharge for county and school payments on top of the predetermined "tax abatement" amount.

If you are wondering why the building is not full, let me offer you the following explanations:

1) GS expected to be able to move their Equity Division (ie. Stock Brokers) to their Jersey City office, just as many other firms like PaineWebber (to Weehawken), BankersTrust and DLJ Pershing had done. The swanky brokers at GS simply refused to move, so GS could only convince their mid-office IT, HR and corporate services divisions to go across the river.

2) When GS planned the building in the go-go late 90's, they had 35,000 employees and thought the dot.com era would never end. Now they only have 25,000 employees and a lot of extra office space around the world.

3) GS has no incentive to lease out the rest of their space because the revenue they would get from it after paying for Tenant Improvements (build-outs) and brokerage commisions on 3rd party leases, the income would be lower than their own extremely low cost of capital (4.5%). It is financially more efficient for them to warehouse the space in case of future needs than to lease it.

4) For security reasons they don't want anyone else (especially a competitor) in their building spying on their sensitive information.

5) The stock market will whack them for sub-leasing the space at a low rent, because they will have to capitalize it and declare the charge as a big one time hit against annual earnings (GAAP rules for public companies).

Hope that helps. I agree its a shame that more people won't move over to our side of the river by the way. Then again, the current administration, which is the most Anti-Jobs, Anti-Business since the Cucci era, is not exactly helping.

Digression: And don't tell me the high cube warehouse the mayor wants to build for his paying cronies is going to generate the kind of economic activity that makes a city great - while he imposes giant hotel taxes which stop the development of high class assets which DO generate the kind of economic activity such as tourism, trade, international culture, and growth oriented jobs, that a new city like JC really could use.

For that matter, why should the city give out special development incentives to waterfront builders? Should I get a "development incentive" if I want to buy and renovate a brownstone?

Hi JSalt - came back to peek at the thread and found your interesting remark. It may surprise you to know that the city actually does give significant development incentives to Brownstone owners/builders/renovators which are better than anything they do for large scale waterfront projects.

Let me detail (as briefly as possible) how this program works.

If you buy a building or a piece of land where you are renovating or creating less than 12-units of housing, you can get, as of right (ie. No council approval required) a significant discount in your property taxes over the first 5 years from the improvement.

If the value of the improvements are at least 1/3 of the value of the property before you improved it, the city will charge you real estate taxes on the improvement (building or renovation) in the following way.

Year 1: 0% of Regular Taxes Due
Year 2: 20% of Regular Taxes Due
Year 3: 40% of Regular Taxes Due
Year 4: 60% of Regular Taxes Due
Year 5: 80% of Regular Taxes Due
Year 6: Regular Taxes

Just by way of comparison, the mathematical results of the 'incentive' for any larger scale residential projects shows that they must pay between 90% (condo) and 125% (rental) of the regular taxes that would have been due under ordinary taxation, subject to council approval which they always grant because they want to keep 100% of this money, not 38% as in ordinary taxation (see my prior posts).

Good luck with your brownstone project!

As NNJR said, I'd like to know what you think is incorrect. I'm sure with some further detailed explanation I could make everything clearer.

PS. If you think I posted that because I care about 111 First st. Powerhouse Arts blah blah blah, then you are mistaken.

I don't care a fig what happens to those projects one way or the other. I just wanted to be helpful and explain something that many people don't understand.

I'm sure there are valid reasons why from a planning perspective many people don't like this project. The Jersey City Division of Planning is the right forum for those grievances. Like I said, I don't take a side in that argument because I have no emotional investment in it.

That said, there is no valid fiscal reason to oppose the city collecting more taxes from a developer than it would under ordinary taxation. Whether the project is a hated project (this condo) or a beloved one (like a hospital) if you reside in Jersey City you ought to at least be aware of the city's ability to take advantage of a financing mechanism for its own benefit.

Thanks for making me feel useful JSalt. (but after this answer you're going to have to sign a retainer and pay my hourly rates, ha ha)

OK so on the subject of Jersey City public schools:

Did you ever see the movie "Lean On Me" with Morgan Freeman as Crazy Joe Clark? Do you remember how he was desperately trying to get the kids to pass the Minimum Basic Skills test to prevent Patterson Eastside High School from being taken over by the State of NJ? Well Crazy Joe got the kids through the test, but here in Jersey City, there was no Joe Clark and the State DID take over the school system. They took over every aspect of it, and even though there are some local school patronage jobs, i mean "school officials," the State pays for the entire system and makes all the important decisions.

So Jersey City has been thrilled about this for the last 20+ years because the State of NJ has been paying $70 million a year for JC's School System, which is $70 million that JC doesn't have to come up with itself (JC has enough fiscal problems already - this would bankrupt the city).

The way the takeover works is that for every dollar the City raises in taxes for School costs, a dollar of State school payments goes away, so the City has had no incentive in 20+ years to generate or impose additional school taxes.

When the 'abatements' starting getting used frequently in the late 1990's, the State was predictably mad that they weren't getting any of the money to offset their cost of running JC's troubled school system. So they made JC change its 'abatement' formula to impose a surcharge of 5% of the 'abatement' payment which goes directly to the school system. (Sidenote- As part of the same legislation, they also made JC charge a 1% tax on top of the 'abatement' to pay Hudson County expenses such as Tom Degise's bar tab: see my last post )

So as a result, the same group of waterfront buildings which is paying $75 million in 'abatements' to JC each year, is also now paying another $2.5-3 million in JC school system payments each year, which the state uses to defray its $70 million dollar annual school costs.

PS. This puts JC Schools in a terrible situation. The city wants the schools to stay bad, so they can keep forcing the state to pay for them. If the public schools improve too much, the State will hand them (and their costs) back to JC to administer.

Hi Alan,

I'm going to break your question up because it's hard to answer any other way.

1. I have been told that the county gets gyped when the city gives an abatement, but that the city collects more taxes than it would under a straight tax scenario.

That's a true statement, but it's not meaningful. First you have to understand what the county is. Basically, the county is mostly just a flowpoint for the money that belongs to the cities within the county. So all the money from the cities' property taxes, state grants, federal aid, etc, go up to the county, degise and co. take a small cut for themselves and their county wide services (90% of which are no-show patronage jobs) and then the county redistributes all the rest of the money back to the cities on a per-capita basis. So Jersey City gets back only its population proportionate share of tax revenues which are passed through county accounts. When the City makes a tax 'abatement' deal, it is allowed, by State Enabling Legislation, to keep 100% of the money it agrees to get in taxes, without passing it through the county's flowpoint. So who get's screwed in this scenario? All of the other cities in the county, that's who. Since Jersey City has experienced huge development and lots of 'abatements,' JC has benefitted tremendously and Weehawken, Union City, Bayonne, etc. have not gotten a cut of the money. But why should they? Developers have basically turned the JC waterfront into a $75 million dollar per year PILOT farm for Jersey City, and this has not happened in neighboring towns on the waterfront. In 2001, Weehawken, in an attempt to grab Jersey City's cash, went so far as to sue JC to try to get some of its 'abatement' winnings. In the end, the State agreed that Jersey City should keep its 100%, because it was JC that worked to generate development on its waterfront, not Weehawken.

2. How does this impact my tax bill?

Assuming you live in Jersey City, your tax bill is lower as a result of this. Since JC collects 100% of this extra $75 mn in revenue per year, that's money that you don't have to pay. If it were un'abated' Jersey City would only be keeping about $30 mn and would have to raise taxes to levy the extra $45 mn from homeowners via regular property taxes. Meanwhile Hoboken residents' tax bills would go way down because they would be getting a share of the $45 mn. If you go through the math in my last post and apply them to this case you'd find that the 'abatements' basically save the other tax payers an average of $1000 per homeowner per year.

.66*($45mn/.38)/75000=$1,042

3. Does the increased city revenue balance out the need for higher county taxes?

In the context of the above, I'm not sure this question works. The reason your county taxes went up in the last cycle was the same reason the city needs more money. It has had huge employment rolls (patronage) over the years with generous long term retirement and health care packages. Just like GM and ford, those thousands of baby boom patronage employees are retired, collecting city/county pensions and health care, and living a lot longer than they were expected to back when they were first handed a job by the city/county politburo in 1964.

4. Are we paying Jerrimiah and robbing Tom?

We're paying Jerrimiah AND Tom. ;)

wow, I'm surprised someone actually read my whole post.

hi as07302

Let me try and clarify what was said to you, to the best of my ability anyway.

The short answer is, when a reval happens, the tax rate will decrease significantly, like down to somewhere around 2%. This is how it works. When the reval takes place, all the real estate in the city is reset to 100% of its current value. The city has an annual budget of about $350-$400 million dollars. Right now it gets financed in the following way:

$75 million from waterfront pilot "abatements"
$110 million from regular property taxes after the county gets its cut.
$190 million in state and federal flowthrough spending and aid(in various shapes and forms)

So in order to balance its budget, basically Jersey City needs to make $135 million from the traditional property rolls instead of the $110 it currently gets. The formula looks like this

Total Assessments x Equalization Ratio x Equalized Rate = Gross Taxes

Gross Taxes x .38 = Jersey City Share

So if Jersey City needs $135mn, then it has to collect Gross Taxes of $135mn/.38 = $355 mn.

Once the equilization ratio is brought up to 100%, and assuming a 2% tax rate, you've got

Total Assessments x .02 = $355mn, so total assessments have to be $355mn/.02 = $17.7 billion.

So Jersey City has about 75,000 housing units plus a lot of office space and industrial property. The office and industrial property alone are worth 1/3 of the city's total value, so that leaves about $11 billion to be covered by homeowners. $11 billion of value over 75,000 houses = $146,000 of value (at 100%) per household. That's a totally reasonable number as an average, and it means that even after a reval, the city is going to revalue the houses on the very low side and the rate won't be over 2% of that value.

What does this mean to you, 07302? Well let's assume you have a condo in hamilton pk (your zipcode). You're paying now like $300 a month in taxes on it. It's worth about $300k at market and the city's going to value it at $250k. You'll pay 2% of that per year which will be $416 per month. An unhappy surprise, but the city should have done this reval a long time ago.

ok I gotta go back to hourly work now.

In the words of artie lang:

waaaah waaaah waaaah

PS. If you want a quick math analysis of an "abatement" i will be glad to post one. the city gives them out because they yield 200%-300% of the taxes they would collect under an ordinary taxation scheme.

BTW- right now Jersey City's ordinary tax rate x ratio is one of the lowest in the state. even with the Healy increases, the municipal rate of .052 times the mandated equilization ratio of .34 means that a developer who accepts ordinary taxation only pays 1.768% of project cost. Next year's equilization ratio is expected to drop to .25 which will mean next years ordinary tax will be only 1.3% of project cost. The city only holds onto 40% of ordinary taxes (the county keeps the lion's share).

BTW 2- This compared to an abatement where the city gets at least 2% of project cost and keeps 100% of it (in residental projects the effective percentage is substantially higher).

BTW 3 - Most Jersey City homeowners, due to unupdated valuations, are only paying about .7% of property value in taxes even with the Healy rates. Healy is frantic to jam in as many abatements as he can to generate revenue to prevent a reval because typical JC homeowners taxes will double when a reval happens. Don't believe me? Pay a visit to the city business administrator for a full explanation of why the council keeps pushing "abatements" through.

BTW 4- I'm no fan of mayor mcDrunky. He's a disgrace and a mismanager, and if the city wants to really save money it should eliminate the double and triple public jobs given to the council members and all of their family and relatives. These people (like epps, gaughan, etc) are pulling down $400k a year plus perks for not-showing up (sober) at 3 different municipal and county offices. Under this administration (degise-healy) it's like frank hague all over again. Woody allen said most of life is just "showing up." with these characters, on the rare occasions they do show up they are usually holding a vodka-tonic.

BTW 5 - I'm new to your site! Hi everybody! I'm another refugee from S*^!a's N#$%^&T W@#$%^&*(T A$$)%^&!@#N board where I was told to stop criticizing the mayor for his behavior. Can you spell, pandering to the corrupt establishment, S*^!a? Hoping not to be stifled here.