The potential sale of a
Liberty Harbor North property has raised the question of
whether a tax abatement is a tradable commodity. It also has
resurrected the debate over whether tax abatements are a
benefit to the city or a drain on local taxpayers, and brought
into question the current valuation of downtown property.
A 20-year tax exemption is a condition of an exchange in which
developer Steve Hyman, owner of the Flintkote property -- a
3.75-acre parcel on Luis Marin Boulevard -- will sell the
property to developer Dean Geibel for $25 million.
Members of the City Council called the deal into question two
weeks ago because the property, which is surrounded by the
Liberty Harbor North redevelopment plan, was taken off of the
redevelopment plan in a plan amendment two years ago.
This meant the city would not take over the property by
eminent domain. Since now a private developer (Geibel) could
buy it rather than the city, Hyman was able to get a much
higher price for it.
Council member Bill Gaughan claims the move was
initiated surreptitiously by Housing, Economic Development and
Commerce Director Mark Munley, a former business associate of
Hyman.
After purchasing the property, Geibel intends to build a
16-story tower, an eight-story tower, and a four-story tower
with approximately 432 residential condominium units and 12
commercial and retail condominium units in approximately
35,000 square feet of space with parking for 442 cars.
Had the property remained on the redevelopment plan, the city
would have paid Hyman a sum far lower than the $25 million on
the table.
A conflict of interest?
Gaughan raised attention about the Flintkote
property because he felt it was removed from the Liberty
Harbor North Redevelopment Plan under suspicious
circumstances. According to Gaughan, Munley got the council to
remove the property from the plan by placing a sentence in the
last line of a seven-page document.
"They worked together as developers," Gaughan
charged. "[Munley] never should have been involved in
this."
But City Spokesman Stan Eason said there was no conflict. (Munley
deferred all comments to Easton).
"Mark Munley was never a partner with Mr. Hyman in any
financial or real estate ventures, period," said Eason.
"The sole relationship of Mr. Munley and Mr. Hyman
occurred in 1998 when Mr. Munley was one of many engineers and
consultants hired by Mr. Hyman to develop a site plan which
was approved by the redevelopment agency [prior to his
employment with the city]. I think it objectionable and
unfortunate that our councilmen, particularly second- and
third-term councilmen, would claim they're voting on documents
that they have not read. If they change their minds about an
ordinance, they should stand up, show some integrity, and
admit that."
Tax abatement controversy
The discrepancy between the valuation and
the sale price prompted Geoff Elkind, an attorney who
specializes in financial and economic restructuring issues, to
speak at the February 11 council meeting.
Elkind spoke about tax abatements, which are incentives that
cities give to developers to build there. The developers are
subject to a specific tax agreement rather than to the regular
fluctuating property taxes.
"We need a top-to-bottom review of the structure of our
tax system to get to the bottom of why there is a
disproportionate burden of property taxes that falls on the
residential homeowner," said Elkind.
A developer receiving a tax abatement pays a predetermined
amount to the city instead of taxes, known as a Payment in
Lieu of Taxes (PILOT/PILT). While a PILOT/PILT payment can
often bring in more money for the city than taxes, the county
and school systems often receive none of it. This can lead to
increased school taxes for city residents and higher taxes for
homeowners throughout the county.
In 1998 and 1999, Secaucus initiated a lawsuit against Jersey
City, claiming Jersey City paid a disproportionately low share
of county taxes, based on the valuation of certain Exchange
Place properties. North Bergen, Bayonne and Hoboken joined the
suit in 2000, 2001, 2002 and 2003 and were awarded a total of
$1,200,000.
Jersey City resident Mia Scanga, a certified public
accountant, said the city is supposed to do a revaluation if
the assessed valuation of city property is less than 70
percent of what the properties are being sold for. The last
citywide revaluation went into effect in Jersey City in 1988.
"The $25 million is a commercial assessment," said
Elkind at the meeting. "Undervaluation encourages
warehousing properties [to be flipped] for profit."
The debate has come up again because Hyman promised that the
property would be tax abated, as are some neighboring
properties, as part of the sale to Geibel.
The council voted at its February 11 meeting to introduce an
ordinance increasing the abatement minimum service charge from
15 to 16 percent for this property. The service charge is a
percentage of the development's annual gross revenue each
year, which they pay in instead of taxes.
The abatement ordinance will be voted on again at Wednesday's
council meeting.
Some residents doubted the necessity of an abatement as an
incentive.
"From Weehawken to the Jersey Shore, developers are
clamoring for property," said resident Steven Gucciardo.
"We do not have to stimulate development through an
abatement."
Resident Peter Zirnis agreed. "If a developer can't make
money without a tax abatement, they should get into another
business," he said. "Vote no, and that development
will take place anyway."
|