This week the City Council will weigh a proposal advanced by the administration of Mayor Steven Fulop to overhaul the way in which the city approves tax abatements for development projects built in the city. The plan, the first of its kind for Jersey City, is designed to give tax incentives to developers who agree to develop in communities that saw little or no redevelopment during the city’s housing boom.
Until now, such requests from developers were reviewed with little regard to where the projects were being built, which critics say led to an abundance of redevelopment downtown, particularly along the waterfront, and comparatively less development elsewhere in the city.
Developers typically went before the city’s Tax Abatement Committee to request an abatement. Based on the recommendation of the committee, the City Council would vote on the request.
The plan being advanced by the Fulop administration seeks to incentivize development in parts of the city where revitalization has been sluggish by establishing a tiered structure for abatements based on geography and income levels. Its purpose is to incentivize development in the inner city, away from the waterfront.
“This policy will make the use of tax abatements better for the residents, the city, and labor,” Fulop said. “Additionally, the developer will have clarity as the government will have a set policy in place with clear objectives.”
Encouraging development, off the waterfront
Beginning in the 1970s, the city began using abatements, sometimes also known as payments in lieu of taxes ( or PILOTs), to entice developers to build in blighted neighborhoods that were in need of urban renewal. Initially, tax abatements had their advantages. The advantage to the city was that it got development in areas where it was needed, and developers – who were taking a risk by building in unproven neighborhoods – received a tax break in exchange for taking this risk. While developers occasionally ended up paying a tax rate that was equal to conventional taxes, they frequently ended up paying less than the conventional tax rate.
often received a significant tax break through their abatement deals. So long as the tax break balanced out the risk the developer took, many residents seemed to accept these deals as good policy.
In time, however, most of the city’s 151 tax abatement agreements were clustered long the waterfront, Jersey City’s most valuable and lucrative land. Tax abatements became more controversial as the city continued to approve tax deals for developers who were building luxury residences downtown where there was less risk involved for the developer.
The deals were also controversial because developers with abatements pay a predetermined tax to the city – but pay nothing to the local school system and make only a nominal fee for county taxes. Other property owners without abatements are meanwhile required to pay municipal, school, and county taxes.
The Fulop administration plan seeks to give developers incentives to take greater risks for building in untested communities again.
JSQ, Bergen-Lafayette impacted most
The administration’s plan divides the city into six sections, or tiers. The amount of the tax break will be tied to the area in which the development takes place. Under the plan, developers will be given the greatest incentives to build in either the Bergen-Lafayette or Journal Square area, two communities that have long been considered to have potential, but where few projects have broken ground.
“Until now, all the market rate development has been limited to downtown because of a lack of a policy,” said Fulop. “These one off deals have created a culture of artificial competition with parts of the city, abatements based on who you know, and no foresight for future development in those parts of the city where it is needed most.”
Another critical aspect of the Fulop plan will be require affordable housing development to be spread more equally throughout the city.
“I sat down and discussed this with [Corporation Counsel] Jeremy Farrell and from what I understand, it sounds like a good concept,” Boggiano said. “We know that development has been stalled around Journal Square and this could help get some things going, so I support that. But, of course, I want to hear from the community. I plan to take this back to my constituents and I want to hear from them about what they think about bringing more development to Journal Square.”
Boggiano, who has sometimes been painted as being anti-development, insists he is not opposed to development in his ward.
At press time last week Boggiano said he had yet to see any details of the abatement overhaul in writing and was still waiting to see some of the plan’s finer points.
West Side activist Esther Wintner, who has often been critical of the city’s abatement strategy and who last year convinced the city to conduct an audit of specific abated properties, was less enthusiastic about the plan.
“The intended purpose of an abatement is to spur development in areas where development might not otherwise occur. This plan seems to be designed inversely,” she said. “Abatements with the highest incentive will be given to the Journal Square area, which needs it the least, when compared to the Greenville and West Side areas. Journal Square’s proximity to transportation makes it attractive for developers.”
Impact on affordable housing
Another critical aspect of the Fulop plan will require that affordable housing development be spread more equally throughout the city.
Under the administration of former Mayor Jerramiah T. Healy, developers who received abatement deals were required to make contributions to the city’s Affordable Housing Trust Fund, which was then used to build residential housing for moderate income residents. Much of this affordable housing was, however, concentrated in Ward F and Ward D, thus segregating moderate income residents to those areas.
Last year, Fulop and current City Council President Rolando Lavarro Jr. unsuccessfully tried to get the city to build its affordable housing in that same wards that generated the Affordable Housing Trust Fund contribution.
The Fulop administration’s plan revisits the earlier Fulop-Lavarro proposal.
The City Council is expected to consider the proposal on Wednesday, Aug. 28 at 6 p.m. at City Hall, 280 Grove St.
E-mail E. Assata Wright at firstname.lastname@example.org.