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Re: Can Someone Explain CONDO PILOTS?
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Thanks guys.

Posted on: 2009/9/9 11:42
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Re: Can Someone Explain CONDO PILOTS?
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The simple answer is that the payment is locked in until you sell.

The more complicated answer is that if your home value goes down markedly, you have a lot of negotiating leverage to go to the JC Tax Assessor and threaten to cancel your PILOT if he does not re-calculate it based on the new value, current interest rates and maintenance, as if it were just sold.

After all, if you cancel a payment of 1.7% of purchase price in order to just pay 1.4% of its value under ordinary taxes, you come out ahead. That is why the PILOT deal is really a trade-off of paying more in the first years in exchange for the certainty of a fixed payment until you sell. Ordinary taxes are lower for around the first 5-6 years of a condo PILOT.

The irony is, the average holding period of a condo in NJ is only 5 years so the City never loses since by the time the ordinary taxes catch up to the PILOT, you will have sold your unit and it will be recalculated at the new (potentially higher) sales price.

Posted on: 2009/9/9 1:18
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Re: Can Someone Explain CONDO PILOTS?
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Thanks again, JCLAW.

Quick question. Since one of the benefits of having a pilot is being locked into your payment (right?), I assume it's correct that your payment can't be increased if you refinance your home (and the appraisal comes in higher than the original price) or if the Condo Association increases maintenance down the line. I know someone who posed this question to a person in the tax office and they were told that the pilot would go up. I told them they were misinformed, but I'd like to get your take.

Posted on: 2009/9/9 0:57
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Re: Can Someone Explain CONDO PILOTS?
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It's

16% (plus city fees amounting to another 1.1 % so 16 really means 17.1%)

x

the sum of

> annual mortgage principal and interest payment assuming a 20 year self liquidating loan at prevailing rates.

+

> annual condo association maintenance

=

TAXES

So let's assume a $1mm condo of about 2,000 sq ft with $1500/month maintenance.

Annual mortgage p+i at 5.75% rate is $85,423 and maintenance is $18,000 for a combined total $103,423. Take 17.1% of that for annual taxes of $17,685 or about 1.7% of purchase price.

The higher interest rates and maintenance are at the time of purchase, the higher the taxes are.

Posted on: 2009/9/8 23:34
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Re: Can Someone Explain CONDO PILOTS?
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Pilots (payment in lieu of taxes) are different than abatements. With abatements you essential get a discount on the assessed value of the property lowering your tax responsibility.
Sometimes these are graduated over a period of time. Ex: Assessor says your taxable property value is 100,000 your abatement might discount that amount by 25% for the first few years then 15% for several more by the end you may only get 5% before the abatement expires.
Pilots are different and somewhat arbitrary because you are not subject to the increases that everyone including abated properties are because Pilots are not pegged to actual property value.
This is why abated properties DID see there taxes increase along with everyone else in this past hike..because they increased the % of tax paid on assessed value even if that value is discounted..pilots were not subject to that increase.

This is just some basic info I don't think it explains the situation with Crystal Point. Maybe someone else could help out there.

Posted on: 2009/9/8 23:26
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Re: Can Someone Explain CONDO PILOTS?
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just think of it as 1.7% down to ~1.1% per year, and increase per their schedule as the years pass. This makes CP's deal sweeter, i kinda regret not buying CP, the building looks so nice...but the valet only parking still sucks, oh well.

Posted on: 2009/9/8 23:13
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Can Someone Explain CONDO PILOTS?
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Quote:
On June 1, McCann asked the council to extend the length of Crystal Point's abatement from 20 to 30 years, and reduce the percentage of annual gross revenue paid to the city from 16 to 10 percent for the first five years, with 12 percent payments for the next five years, and 16 percent payments for the final 20 years.On June 1, McCann asked the council to extend the length of Crystal Point's abatement from 20 to 30 years, and reduce the percentage of annual gross revenue paid to the city from 16 to 10 percent for the first five years, with 12 percent payments for the next five years, and 16 percent payments for the final 20 years.


On June 29, the council approved the ordinance with the development paying 11 percent for the first five years, 13 percent for the next five and 16 percent for the last 20


This is the requested and the granted redo of the Pilot Payments in lieu of taxes. So now what does this mean for a condo? What are Gross Revenues for 20 or 30 years? I clearly understand how a RENTAL earns Gross Revenue, but in a very few years the developer has sold all his product and has no further ownership? So then what gross earnings are the condo owners taxes on or "In-lieu of taxed" for? So it's 16% of WHAT for the last 20 years?
It CERTAINLY cannot be 16% of the original purchase price.

Posted on: 2009/9/8 21:48
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