Taxes, Wall St. blamed

Thursday, January 08, 2009
By CARLY BALDWIN
JOURNAL STAFF WRITER

Hoboken's real estate market is softening. And a recent 47 percent hike in overall property taxes - 85 percent on the municipal side of things - hasn't helped.

But has the economic swoon and tax avalanche completely turned off buyers to the Mile Square City, once the crown jewel of the gentrified Hudson County waterfront?

Not totally, but "the market has been very difficult over the past few months," said Nick Costantino, owner of Empire Realty Group, at Fourth and Washington streets.

"I haven't seen people say no to homes because of the tax increase, but people are making lower offers on homes because of the tax increase," Costantino added. "If your taxes go up 47 percent your price will have to come down. They just have to."

Other real estate agents agree.

"It's definitely affected home sales because it makes the cost of owning the home more expensive," said Lori Turoff, a real estate agent with Prudential Castle Point Realty who writes the blog HobokenRealEstateNews.com. "Having a city that has financial problems is a deterrent (to buyers)."

Hoboken's real estate tax hike this past fall couldn't have come at a worse time, these real estate experts said.

"It's really been the perfect storm - the economy getting crushed, job losses on Wall Street, no bonuses, and then that tax increase - it all happened within four weeks of each other," said Costantino.

Hoboken resident Ed Joback, 39, rents at The Shipyard. He considered buying a condo at Maxwell Place last year but decided to hold off after his portfolio "took a 50 percent hit" in the stock market this past fall.

"It is a concern," said Joback of the property tax increase. "Of course it's going to affect the market. People selling property are going to take a hit in terms of the market value.

Costantino said many out-of-state buyers are unaware of the fiscal straits the city finds itself in - or that they'll have to pay more taxes than they expected.

"It's the 2008 taxes on the listing forms," said Costantino. "When I see property at Eighth and Grand, it was $8,000 a year (for taxes) and now it's going to be $10,000 or $11,000. I have to sit down and tell the buyer that. I know some people aren't explaining that, but that's a violation of our ethical duties."

But Turoff said buyers are well aware of what they are facing.

"It's all over the media," she said of the 47 percent tax bump.

Like many in town, the tax increase prompted Costantino to attend last month's rally in front of Hoboken City Hall.

"For years and years and years most Hoboken residents didn't care about what was going on in their community or getting involved in local politics and it's only after it hit them in their pocketbooks that they're getting involved," Costantino said.

Staff Writer Amy Sara Clark contributed to this story.

Sounding the alarm in Bayonne

by Maura McDermott/The Star-Ledger
Saturday January 03, 2009, 10:10 PM

Bayonne's new fire engine is a big red beauty.

It has a 1,500-gallon-per-minute pumping capacity, totes around 2,000 feet of hose, carries four firefighters, costs $332,000.

And it hasn't gone to a fire since the city took delivery four months ago. In fact, it doesn't go anywhere.

Engine Company 3 can't take it on the road because the city hasn't started making payments and can't obtain the pumper's title to get it registered and insured.


An apartment building takes shape at the Peninsula at Bayonne Harbor development at the former Military Ocean Terminal. For years, the city has gotten cash by selling off pieces of the old terminal.

And that's just a small part of what newly elected Mayor Mark Smith calls his city's "fiscal nightmare."

Bayonne is not the only city whose spending and debt load have ballooned in recent years. And it's not the only city where construction plans have hit a virtual standstill.

"These are not normal times, and I know that towns generally, not just Bayonne but all municipalities, are really facing a severe budget crisis," said William Dressel, executive director of the state League of Municipalities.

But Bayonne's cash crisis is special.


It takes in $122.5 million a year but it is $148 million in debt. Nearly a quarter of the Hudson County city's budget has no steady funding stream to back it up -- and if the taxpayers had to start closing the nearly $29 million gap in the city's budget, taxes would shoot up by 50 percent, the mayor says. Half of the shortfall goes to service the debt.

"That's unacceptable," Smith says. "When you talk to people, they're scared, they're truly frightened. Young people who want to stay in Bayonne are just struggling."

A historically blue-collar city with nearly 58,000 residents, Bayonne has been coping for some 20 years with the steady loss of major industrial employers such as Best Foods, Hunt-Wesson, Ciba-Geigy, Exxon and Texaco. Lately, it has been the municipal version of the national economic crisis -- it's what happens when you spend money you don't yet have in your pocket, hoping the future will somehow take care of itself.

"The previous administrations that were here, they lived beyond their means," Smith said. "We used every gimmick and every one-shot deal imaginable."

For many years Bayonne seemed to be blessed with an ever-ready source of money. It could get big cash infusions by selling off pieces of the former Military Ocean Terminal, a 2-mile spit of land jutting into New York Harbor. Developers have begun building a mini-city in the area that could one day include some 6,700 housing units and acres of shops, along with parks and ferry service to Manhattan.

The tract -- known as the Peninsula at Bayonne Harbor -- is about half the size of Hoboken, with views of the Statue of Liberty and the Manhattan skyline. Already, Trammell Crow Residential is constructing a 544-unit apartment building with a gym and outdoor pool.

Trammell Crow paid $18.5 million for the land, and when the complex opens in June it is expected to pay Bayonne $2 million a year in lieu of taxes, said Joseph Nichols, executive director of the Bayonne Local Redevelopment Authority.

But tight credit and the general slowdown have put a crimp in other ambitious construction plans at the old terminal site. Roseland Property Co. and the Fidelco Group, both based in Millburn, have asked for permission to build rentals instead of the 447 for-sale units they had planned.

Developers can get financing for rentals, but not for condominiums, said Carl Goldberg, a principal at Roseland.

"I can only build as a developer what is capable of being financed," Goldberg said.

The Bayonne Local Redevelopment Authority is considering that request and reviewing six new proposals from developers for other tracts at the former terminal. The proposals are "serious and worthy of consideration," Nichols said.

But city officials say there's no way to know for sure when those projects might get started.

The plans have generated controversy over the use of the land, with some officials pushing for thousands of housing units and others saying the land should be used for commerce, or a container port.

The state risks losing more than 100,000 jobs if it does not improve its port operations, and Bayonne is the best place to do that, said David Bensman, a Rutgers University professor of labor studies.

By 2015, many container ships will be too tall to fit under the Bayonne Bridge and reach the ports in Newark and Elizabeth, Bensman said. But those ships could reach the former military terminal with no problem, he said.

If Bayonne does not allow the former terminal to accommodate those larger ships, those ships will go to southern states, making New Jersey's ports "second rate," Bensman said.

The trouble is, the rail lines across Newark Bay couldn't accommodate the increased traffic without construction of new lines, Nichols said.

In another dispute over the land, Jeff Tittel, who heads the state's Sierra Club chapter, argued it is not healthy for people to live so close to idling, diesel-powered ships. The north side of the property is a port for freight and cruise ships, and a container port is just north of the peninsula.

Strong winds from the west sweep those fumes out to the harbor, Nichols said.

Plus, the local authority is fighting a court battle to save its planned $90 million land sale to a private firm, Ports America. Without the funds from that deal, the city will need to make drastic cuts, Smith said.

The Port Authority of New York and New Jersey had a contract to buy the land for $50 million, plus $86 million in infrastructure work. Bayonne scrapped that deal because local officials hadn't given proper public notice of a meeting to approve the sale. The Port Authority sued and lost a Superior Court ruling in July. The two sides are due in appeals court on Jan. 14.

In the meantime, the mayor has proposed cutting the size of the police and fire departments -- the city hasn't ruled out layoffs, an all but unheard-of step in New Jersey -- as well as closing library branches and a recreation center and requiring all non-union workers to take a one-week unpaid vacation.

And then there's the city's new fire engine.

"In mothballs," says Councilman Anthony Chiappone.

Engine Company 3, based at city hall, received an American LaFrance engine in August to go with its Pierce Saber truck.

But more than four months later, the engine cannot go out on calls because the city does not hold the title. The owner of the truck allows it to sit in Bayonne, confident he will eventually get his money.

"If the vehicle was ordered I'd have to believe that it was necessary to operations and public safety," Chiappone said.

The vehicle's delivery was delayed by the manufacturer, "and by the time it was available, our market access to reasonable financing had become impaired due to the downturn in the economy," the mayor's chief of staff, Steve Gallo, wrote in an e-mail. "Our business administrator is working on a solution."

Joseph Doria, who served as mayor for nine years, takes great exception to any suggestion that he contributed to Bayonne's problems. Doria stepped down in 2007, when he was appointed commissioner of the state Department of Community Affairs, where he oversees all the state's local governments.

Doria said he inherited a roughly $10 million deficit when he took office in 1998.

He cut spending, laid off workers and raised taxes by reasonable amounts, Doria said. However, Bayonne faces the same steadily rising costs -- pensions, health care -- as other towns facing fiscal troubles, such as Jersey City and Hoboken, he said.

Bayonne residents elected him three times, Doria added.

"The people felt we were doing the best we could under the situation," he said.

Bayonne has 669 full-time employees and 111 part-timers this year, although officials hope to reduce the payroll, said Terrence Malloy, the city's finance director. That compares with 699 full-timers and 184 part-timers in 1998, Malloy said.

But in that same period, salary costs have increased from $32.8 million to $52.9 million, he said. And pension and Social Security costs have jumped from $4.1 million to $7.9 million, he said.

Chiappone, who also serves as a Democratic state assemblyman and was recently named to the local redevelopment authority's board, said the city struck ill-advised deals for peninsula land because it was under so much pressure to plug its growing deficits.

Now, the city has a new plan to issue bonds backed by future revenues from the peninsula.

The bonds would allow the city to use future development income -- even parking fees -- to bridge its current budget gap, said Joseph Baumann, the city's bond counsel.

And what if those development revenues do not materialize?

In that case, bondholders would suffer the loss, not city taxpayers, Baumann said.

Millville, population 28,500, is the only other New Jersey city to try such a strategy. It approved a plan to sell the bonds, called revenue allocation bonds, in 2007. A few other towns, such as Somerville and Elizabeth, have expressed interest as well.

James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said it's unclear whether such bonds would find buyers.

The bonds sound like yet more "one shots," Hughes added.

"In the ideal world, you wouldn't like to use those types of revenues for operating costs," he said. "That's not a permanent solution, that's just trying to minimize the pain for one year. ... Ultimately, you run out of one-shots."

Thanks NNJR. Did not consider the different tax categories.

Also found this article which outlines what happened to cause such an increase and the cost associated with each government "screwup" this time around.

http://www.nj.com/hobokennow/index.ss ... cil_followup_does_it.html

BTW..considering the fact that Hoboken is right next door and not that different from Jersey City in the way of having lackluster governance, major new development, and a similar political culture scares the hell out of me.

A 47% tax increase in one year???? WTF???

So according to the following article, the city could have applied to exceed the 4% cap. It didn't, basically requesting that the State come in to set the tax rate for them. State went in and uncovered all sorts of craziness. Result: 47% tax increase.

http://www.nj.com/hobokennow/index.ss ... _to_state_come_on_in.html

He is probably stating his total tax payment for the year which is made up of state, county and city tax.

Only Hoboken is raising its rate by 47% thus the discrepancy.

Quote:

Exactly the reason I asked the question. Article says 47% and gives an example of a person whose taxes increased by some other number which begs the question of whether the 47% increase is in overall tax revenue or per taxpayer.

If per taxpayer wouldn't each taxpayer's amount increase by the same percentage? And which is it 47% or 31%? If overall how did they determine each taxpayers percentage increase without a citywide reval or reassessment?

Concerned for several reasons:

1) Can JC end up in the same situation?
2) The State law indicates a maximum increase of 4% per year so what circumstances made Hoboken taxpayers face an increase which basically makes the law useless to them?
3) Is JC heading down the same road, ie have similar circumstances?
4) If so, what are the clues to watch for so that I can start packing.

If the guy's taxes went from $16K to $21K that's a 31% increase, not a 47% increase. Either is outrageous, especially when there has been no credible effort, from the governor on down, to cut spending.

From a Nov 12, 2008 Star Ledger article:

http://www.nj.com/news/index.ssf/2008 ... asked_for_tax_cap_ex.html

"State lawmakers in 2007 imposed a 4 percent limit on the growth of any municipality's property tax collections, in an attempt to rein in fast-growing local tax bills.....

The cap includes several exceptions including one that exempts $112 million in increased public employee pension costs from the levy cap......."

Article does not outline the other exceptions...will dig a little more cause, assuming this is legal, I am having a hard time understanding what the hell could be outside the cap to require such a large increase, or whether in the event a state monitor is assigned the 4% rule goes through the window?

Quote:

Didn't a recent State law set a threshold for how much (percent) a muncipality can increase the tax levy each year? Think it was part of the package of laws on property tax reform. 4% annually I think...will do some research. I think the reform measures were to prevent situations like this.

I guess in this case it is not the municipality making the decision but the State telling the muni that it has to increase its tax levy by 47%.

of course it can. You have your property value and the tax rate. Without a reval, all they will do is increase the tax rate that they apply to your property value. That is how it happened in Hoboken.

Has anyone noticed that the budget that Jersey City was suppose to pass by July of 2008 has not even been submitted....and there is no talk about it either......wait til you see what they do to us this year.....

Is the 47% increase an increase in the overall amount of tax revenue Hoboken collects, which is spread to taxpayers on a nonequal basis (meaning some taxpayers are seeing increases well above 47%) or is it a 47% increase for each individual taxpayer?

Article did not mention a reval. Anyone know if the increase is simply a result of manipulating the tax rate or some other method?

Article also mentions that Hoboken missed their budget deadline for 7 straight years and a state monitor was assigned. Anyone know what failures a city must exhibit to get a state monitor?

SUCKS....but the most important question is can this happen in Jersey City from one year to the next WITHOUT a reval?

47%!? In this economy!? Anybody heard of budget cuts?

Quote:

I wish that's all I paid......

Hoboken's 47% Tax Rise Sparks Exodus Talk in Manhattan Option

By Terrence Dopp

Dec. 1 (Bloomberg) -- The blue property tax statement Andrew Sapira received in the mail last month from Hoboken, New Jersey, has him questioning whether the city billed as a lower-cost alternative to Manhattan is worth it.

A state monitor, installed after city leaders failed to agree on a budget, ordered a 47 percent increase in property taxes for the 40,000-population community across the river from Wall Street, widely known from its portrayal as a blue-collar shipping port in the Oscar-winning 1954 film ``On the Waterfront,'' starring Marlon Brando. Payment is due today.

Sapira, a 40-year-old doctor who lives in a four- bedroom brownstone on Garden Street, said his annual tax bill for city, county and school services will jump to about $21,000 from $16,000. The married father of two says he may have to move from the city he loves for its restaurants, night life and proximity to New York.

``That's a shame, because it's great here,'' Sapira said outside the tax collector's office in city hall last week after making a payment.

Hoboken, cited in a Business Week and PolicyMap.Com study in September as among communities most vulnerable to a Wall Street decline, is a favorite of young professionals. One-third of residents were 25 to 34 years old in 2000, compared with 14 percent for New Jersey, according to the city's master plan.

New Developments

Renovated brownstones and new construction within the city's one square mile (2.6 square kilometers) boundaries have drawn the rich and famous, including Governor Jon Corzine and New York Giants quarterback Eli Manning. The Maxwell Place waterfront development the governor calls home markets three-bedroom units for more than $1.1 million.

The property tax increase hits citizens at a time when New Jersey's unemployment rate is at a six-year high and with 60 percent of residents telling Quinnipiac University pollsters last month that they are financially worse off than a year ago.

``Businesses are having a hard enough time with the downturn; this is salt in the wounds,'' said Stephen Kilnisan, 58, who owns Traders of Babylon Fine Jewelers at First Street and Willow Avenue and will pay $4,000 more to the city this year. ``The timing couldn't have been worse,'' he said.

The new rates put Hoboken above the average in New Jersey, which had the highest such levies in the country last year. City residents paid an average $5,780 in property taxes in 2007, compared with $6,796 statewide, which was 5.4 percent higher than 2006 as local governments raised their take to cope with less state aid.

Political Squabbles

Discontent is widespread, according to Sapira. ``I blame everyone,'' he said.

Hoboken's finances suffered from political squabbles between the mayor and nine-member council even as the city boomed. New Jersey's local finance board placed Hoboken under state supervision in September after the city missed a deadline for passing a budget for a seventh straight year.

State monitor Judith Tripodi proposed a $120 million budget for the year that began July 1, up from $93 million in fiscal 2008. The higher amount equals about $3,000 per resident. New Brunswick, a city of 50,000 in central New Jersey that is home to Rutgers University, has a budget of $72 million, or $1,449 per resident. The total amount to be raised by municipal taxes in Hoboken surged to $62 million from almost $34 million.

Increases Avoided

Mayor David Roberts, a second-term Democrat whose term expires next year, said that since he took office seven years ago, taxable real estate within Hoboken's borders swelled to more than $10 billion from $2.8 billion.

The city has avoided ``substantial'' tax increases for 16 years, Roberts said, instead using ``one-shot'' revenue items such as selling city assets to balance budgets. Roberts, 52, blamed the council for not amending and passing his spending plan by the start of the fiscal year.

``The citizens of the city are angry at everyone; they're angry at all the bickering and the grandstanding that has taken place,'' Roberts said. ``They feel that because of all the political bickering, they're being punished. And I can't say I disagree with that.''

Councilman Peter Cammarano, 31, said Roberts allowed $10 million more in expenditures than what the council approved in the last fiscal year and provided no suggestions for closing the gap, prompting the budget stalemate. Roberts has said the spending was beyond his control.

Angry Constituents

``You're talking about blunt force trauma,'' Cammarano said. ``People are getting hit at the worst possible time and people are already concerned about the largest asset on their books, which is their home.''

Cammarano said he will pay $250 more each month to his mortgage company, which handles taxes as part of servicing his loan. While the increase, which he likens to ``a small car payment,'' is too much, too fast, there's no option other than to pay, he said.

Property owners aren't the only ones hit by higher taxes, said Nicholas Petruzzelli, a Hoboken Realtor and developer. As many as 60 percent of city residents are renters who will feel the sting as landlords pass on the increase in taxes.

Renters' Pain

Jen Areneo and her husband, who rent a three-bedroom apartment in Hoboken, said the higher taxes will affect the size of the mortgage they can afford when they buy their own place.

``I'm as furious as everyone else,'' Areneo, 31, said as she and a friend watched their children in a playground at Church Square Park.

Corzine, a former Goldman, Sachs & Co. chairman, answering reporters' questions last week during a stop in Jersey City, said he would tell Hoboken residents ``that we are trying to work with them, that we are trying to reduce the rate of growth of property taxes or even try to level them.''

To contact the reporter on this story: Terrence Dopp in Trenton, New Jersey, at tdopp@bloomberg.net.