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If what you say is true, then why haven't developers chosen the shortest possible abatement...NO ABATEMENT at all?

I'm sure it's still legal to legal a residential tower without an abatement.

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Just a tenant of non-tax-abated property owners.

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Sorry, I actually knew that (roughly). So, of course, at this point, those of us who are officially above the poverty level are paying "only" about $400 to $800 each for the schools (either by paying our own property taxes, or by paying rent to property owners who pay property taxes).

I know we get most of our money from the state, but, of course, the state still gets a bunch of that money from us. And, in rich districts, I guess residents pay almost all of the cost of running the public schools. Do households in Bergen County, say, really spend $300 or $400 per month just on school taxes?

Wow. They're still building towers

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$21,000 would pay for a pretty fancy private school. The amount spent on public schooling here is a travesty. If there are budget cuts coming, this is a great place to do it. Make the school administrators figure out how to make do with less.

Talk is cheap. How many of you voted at the Board of Ed election last week? At closing of the polls, I found out only 60 people voted at ps 3, which I think included 3 districts in ward E.

Christ! a lot more people than that voted for the dog run at Hamilton Park. And this election was so much more important for our taxes, our children, our city. Needless to say, the one candidate who spoke competently at the debate lost, because she was not endorsed by the Machine. Does the board of ed have to dangle a dog run in front of you guys to get you to go and vote?

Assuming those 2 numbers are correct (627M/29,536), it takes $21,228.33 to educate a student per year?

Geoff, YOU!! have my vote as well.
Because I mean really you make sence of it all...we could REALLY use some one like you.
Really.
Please, put us out of our misery run for office!!!!
And if you you do...GREAT

Then Mariano who's badly in denial, can just keep his head in the sand.

BTW, you wouldn't happen to be the bare naked lady on 4th. Street would you?

Jersey City has at last count 29,536 students in 41 schools.

If we're going to get into a discussion of JC schools we should consider starting a new thread.

Cheers.

G

$627M How many registered public school kids do we have?

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A quick correction... the reference above to $5 million (from post #12) should have been typed as $4 million. Either way, the conclusion in order of magnitude remains the same.

All the best.

Geoff

P.S. Parkman: Thanks for the vote.

Geoff,

When are you running for office? You?ve got my vote.

Anyone who can understand the convoluted workings of abatements deserves a chance at changing the local government.

Hi Alb:

Although school funding and budget awareness deserves an independent thread all its own, here are a few answers, which may help you.

1. Again, at the risk of oversimplifying a complex budgetary process and series of formulas, the rough amount of yearly revenue which is diverted from schools to the Jersey City general budget by virtue of the abatement process is about $20 million or 25% of the annual abatement revenue. (I am heavily caveating the numbers and percentages here to illustrate the magnitude of what we are dealing with. The actual numbers and percentages are slightly different but the magnitude is not.)

2. I don't know if you are a property owner, but if you are, you should take a few minutes to examine the breakdown on your tax bills. Your total tax payments are distributed in varying percentages to the city, county, and schools, but the total amount of local school taxes collected from JC taxpayers is not enough to cover 100% of the JC School Budget.

Where does the balance come from? Well, it comes from a reallocation State collected income taxes and comes back in a variety of offsets and equalizations under State Law, not all of which can be counted going forward into the future.

For now, the State has got us covered, but given the serious budgetary ills at the State level and looming budget cuts to school spending proposed by Corzine, we should all be seriously concerned about how we spend our school budget and how we raise the necessary funding should a worse case scenario materialize.

I am no big fan of abatements, but the $20 million diverted annually by the abatement process is actually only about 3% of the total school budget, which is (after I checked) actually $627.4 million for 2007. Even if we could cancel the $80 million in abatements previously approved (which is most likely not legally possible), the amount of revenue generated would not begin to address the real school finance issue to any significant degree.

If we're to guarantee a quality education for our children, there will have to be some significant changes at the Board of Education and a real analysis of how efficient a job our school system and its management is doing -- especially if Corzine's cuts really do go through in the coming years. Changes to the abatement process (much less a pitiful 5% proposal for education) won't help.

By the way, the actual amount raised in local JC taxes for schools is only $86.12 million in accordance with another mind numbing formula with the balance being provided from State Aid -- and those number are really big numbers; bigger even than the JC Budget.

Time for dinner!

All the best.

Geoff

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I think it would be really useful if someone put the abatement effect and school budget figures in a table somewhere.

I used to think that the abatements had a huge effect on the schools, but, really, even reversing all $80 million in abatements would be just a small start at paying for the schools.

What I don't understand is how other communities pay for their schools. It seems as if, say, there are about 100,000 households in the county that earn enough to pay much in the way of taxes (directly or through landlords), we're paying about $6,000 each just for schools. (Or maybe the figure is something like $3,000 if really 200,000 households pay much in direct or indirect taxes.) That seems like a lot of money.

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Finally, something on which we both can agree! +1

I have no problem steering money away from the county, but it certainly seems abatements are more addictive than crack-cocaine.

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The abatement process is a matter of NJ State Statute, so there's no further approval process involving the county and school system.

A further note regarding school funding.

The proposed 5% from abatements would not have helped our school system at all. Even if we could have magically snapped our fingers and renegotiated a 5% for schools from all existing abatements, the amount raised would only be about $4 million out of that $80 million -- a mere pittance. We we would have left people thinking that we did something good for the school system, yet when held in context of a $600+ million school budget, the $5 million is something less than a 1% contribution. In reality, 5% for schools would be applied to future abatements, yielding neglible amounts for schools, and leaving in place what has become an abused and flawed system in need of reform at the state level.

At the county level, other Hudson county municipalities from time to time have complained (and in some cases sued) about the amount of abatements coming out of Jersey City and it's impact on the county budget, but we'll this aspect for future discussion.

Bottom-line: It's the 100% revenue flow that's got the city hooked on abatements.

All the best.

Geoff

Great explanation, JCLAW & Geoff.
Question: how does the city obtain approval from the state & county (assuming it needs to) for the PILOTs, especially considering that the state is funding our public schools?

JCLaw almost got it right.

Let's try to put some real numbers around the issue. At the risk of oversimplification for illustrative purposes, here's the revenue impact from a PILOT:

1. The developer gets a fixed tax rate for a defined term. Frankly, the trend towards shorter rather than longer terms is better.

2. From the developer perspective: Payments, initially, at the beginning of the PILOT period are slightly higher than if directly compared to ordinary taxed property; however, by the end of the term, PILOT payments have historically turned out to be less than what they would pay under ordinary taxation. This is due to the inexorable rise over time in the various tax rates all around (City, School & County). In the few cases, where properties have come off the PILOT process (most all of them condos), the condo owners (not the developers who have long since been out of the picture) experienced large increases in tax payments. A rather unpleasant surprise.)

3. From the City perspective: What does the City get from a PILOT? 100% of the entire revenue from the PILOT revenue during the term of the abatement. In oversimplified form for ease of understanding, the components which would ordinarily be paid to the School and County (about 50% of the regular tax bill) are redirected to the City. In very rough terms the city is getting a 100% boost in annual revenue over the amount it might ordinarily receive from regular property taxation.

4. The City currently generates about $80 million in annual revenue from existing pilots. If you go to the city's approved budget, you can find the revenue generated from each and every abated property. If these pilots did not exist, the city would have had to search for about $40 million in alternative revenue sources to fill the gap. Definitely a very addictive practice.

5. Why does the city love pilots even more? As new projects and abatements come on line, they city loves to negotiate pre-payment of the first year payment in advance of construction to help fill whatever immediate budgetary gap they are facing. Hence, in the case of this thread, the city was faced with either a collapsed project and a return of a substantial amount of the advanced monies or to renegotiate the abatement. The city gets to keep the up front payment rather than have to go digging for another $1 million from somewhere else (such upping your tax rate)

Frankly, it's about time the city began adjusting the terms of its abatements down to shorter time frames. The city could actually go cold turkey on abatements if it choose to. They would still receive payments from the $80 million or so existing and performing abatements, but that would require the city to focus on hard choices on how to be more efficient in its spending and where else to squeeze revenue dollars from other than the backs of local taxpayers.

6. Who loses? The school system and the county... and to a large degree the local taxpayer loses as these properties are not considered part of the ratable tax base for local taxes during the term of the abatement, forcing our tax rates up to compensate, especially in the latter years of extended abatements.

The real addiction is that abatements have become too easy and attractive as a short-term, stop-gap to fill the annual budget shortfalls both in the short-term and the long-term.

Abatements have their uses as an incentive device, but the city has gotten far away from this policy objective, instead making abatements almost a matter of right.

More for another time.

All the best.

Geoff

One reason it's hard for developers to get financing right now is that it's hard for condo buyers to get financing on new condos.

I think it makes sense for the city to be generous with builders who already have started construction. The last thing we want to have is acre after acre of unfinished buildings.

But I think the city ought to be pretty tough on developers who have not yet broken ground. Why help developers dump yet more capacity on what will probably be an oversaturated market?

a TEN story parking lot -

Why won't the city build a municipal parking garage downtown like they have on the edges of Manhattan? Then these new buildings wouldn't have to create these extremely tall parking structures on the base of all these high-rises. Most people don't have cars, and the spaces remain unused.
Walk around downtown at night, witness the excess of parking garages and their beaming 24 hours of light. Every high-rise building (proportional to the amount of units) is required to build these massive parking bases.
I have yet to see a good design for any of them. Nor the need for all of them.

JCLaw, great explanation on the abatement schemes. I assume the reason the city's revenue drops at the end of the abatement then is because of all a sudden the majority of tax revenue is going to the school system and the county, rather than directly to the city as a PILOT?

No, the "pep boys" project is the Metropolitan. The Monaco Towers would be east of the light rail line on the south side of Sixth street across from the new Westin in the current parking lot of the doubletree hotel. The San Remo would be south of the double tree hotel.

Last summer they actually nailed a few pilings for this and then stopped: photos of site.

Is this the project that will replace Pep Boys?

NNJR:

During the 10-year "Abatement" period, assuming a "10%" formula instead of a "16%" formula, the developers will pay approximately 115% of what they would pay under normal taxation. Also during this period, the City will collect and keep approximately 190% of what they would collect and keep under normal taxation.

At the end of the 10-year "Abatement" period, when the property goes under normal taxation, the City's year to year revenue will drop by 90% from this building, and the developer's payment will drop by 15%.

In other words, the longer the "Abatement" the longer the City gets more money than it would under regular taxes.

In recent examples, developers have asked for the shortest term "abatement" possible, and the City has been pushing back by requiring longer term.

In this case, the "giveaway" by the City is in the shortness of the term, since the developer was planning to walk away from the "abatement" and just pay regular taxes and demand his $2.4 mn dollar "prepayment" back.

Doesn't this mean that that the city will get the full tax rate 10 years sooner?

I don't think this is absolutely 100% bad news except for Fulops comment.

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Right you are, Mariano.

Abatement revise to be approved for two towers
Wednesday, April 23, 2008
By KEN THORBOURNE
JOURNAL STAFF WRITER

Persuaded by the developer that a two-tower development proposed for Downtown Jersey City is dead in the financial water without a new tax abatement deal, the Jersey City City Council is expected to introduce a new 10-year agreement for the project tonight.

In November 2006, Roseland Properties of Short Hills agreed to a 20-year tax abatement paying the city 16 percent of annual gross revenue to build Monaco North and Monaco South at the corner of Washington Boulevard and Sixth Street.

But given the downturn in the economy, the developer can't raise financing for the project without the shorter 10-year agreement, James McCann, the attorney for Roseland, told council members at their caucus Monday night.

The new agreement - negotiated by city administration officials - calls for payments to the city of 10 percent of gross annual revenue per year, amounting to roughly $1.8 million in "payments in lieu of taxes."

Downtown Councilman Steven Fulop complained the new deal will open the floodgates for other builders who signed tax abatement deals before the 10-year model was in place, namely the proposed second towers for Goldman Sachs and Trump Plaza Jersey City.

City Council President Mariano Vega said he was persuaded to support the new deal since "it gets my head out of the sand because I'm not an ostrich."

As a incentive to get the city to agree to the new deal, the developer relieved the city of its obligation to repay $1 million of roughly $2.4 million the developer pre-paid in taxes.

In addition, the developer agreed to give up more money if the project isn't completed by October 2011.

The project consists of two 47-story towers containing 524 market-rate rental units and a 10-story parking lot. Tonight's meeting is scheduled for 6 p.m., at Middle School 4, 107 Bright St.