Public outcry over a proposed 20-year tax abatement for a Senate Place development project played only a small part in why the City Council chose not to vote on the ordinance at the March 26 meeting. The City Council had questions about a change of ownership for the development, and delayed awarding what was seen largely as a routine abatement under new rules established by Mayor Steven Fulop.
An abatement allows a developer to pay a fixed fee yearly and avoid fluctuations in the tax rate, and to avoid paying school taxes and most county taxes as an incentive to build in areas of the city that are deemed blighted or which don’t otherwise attract development.
The ordinance would have given a 10-year abatement to Senate Place Urban Renewal LLC with an option to “buy” an additional 10 years.
By donating 1.5 percent of construction costs to a yet-to-be established city youth program account, developers can get 10 years added to their abatement. This, according to Councilwoman Candice Osborne, is part of Fulop’s initiative to have developers who receive abatements give something back to the city.
“It may be legal, but it stinks.” – Yvonne Balcer
Resident Yvonne Balcer, however, compared the abatement to a kind of kickback similar to a program that was found illegal when done under Mayor Bret Schundler, and she promised to take the matter to the state.
Under this program instituted by Mayor Fulop, developers can opt to pay 1.5 percent of construction costs for an additional 10 years of abatement. These funds would go into a yet-to-be established account dedicated to youth recreation and other education programs. Osborne said this is intended to allow developers granted abatements to give back to the community, although she admitted that legislation has not yet been written to determine how the funds would be precisely used.
In this case, the developer would pay an extra $339,000 one-time fee into the account.
The legal department said they have already looked into the matter and concluded it was a legal practice.
“It may be legal, but it stinks,” Balcer said.
The developer originally asked for a 20-year abatement that would have required the project to include a first floor pre-school.
But according to Donald Pepe, attorney for the developer, in order to qualify, the developer would have to have already negotiated a lease agreement with the Board of Education and received approval from the state – something that would have significantly delayed the project.
“We’re ready to break ground next week as soon as this is approved,” Pepe said.
A question of ownership
Perhaps as many as two dozen residents from Gull’s Cove, a half-completed project in the waterfront area, came to protest the abatement, saying that the developer had not lived up to former obligations in previously abated projects.
Developer Dean S. Geibel, who was a partner in the Gull’s Cove development, Trump Tower in Jersey City, and problematic projects in Hoboken and elsewhere in the state, became a lightning rod for criticism. Some other owners in this project were also partners in previous projects.
Pepe, who is also an attorney for Geibel as well as the proposed project, said Geibel had been brought on as a consultant for the Senate Place project, but was never a partner – despite a state document Osborne said listed Geibel as an owner.
Pepe said the state document was inaccurate, but admitted that Geibel has served as the face of this project in promoting it.
“We never hid the fact that he was involved,” Pepe said.
At several City Council caucuses, Pepe said many of the problems that are associated with other Geibel projects were the result of the downturn in the economy, and that promises to build a second tower at the Gull Cove project would be fulfilled.
Councilman Richard Boggiano said he had spoken with Geibel about the Gull’s Cove project and was told it would soon be underway again.
“If he doesn’t do what he is supposed to do, then we can hold his feet to the fire,” Boggiano said. However, he was opposed to allowing that issue to delay the approval of the Senate Place project.
Ownership in the company has shifted three times since November, city officials said, with the latest change coming only two hours before the council was slated to vote to approve the ordinance. City officials said they review ownership in order to be sure that owners have no outstanding unfulfilled projects with the city.
This was one of the issues that caused the City Council to table the ordinance.
Union project or not?
But some residents also raised concerns about the estimated cost of the project and the city’s requirement that any project that costs $25 million or more to build use union labor.
The estimated cost on this project is about $22 million, leaving some council members such as Khemraj Ramchal to wonder if the estimate was deliberately set low to avoid implementation of union labor on the project.
City official said the estimates are reviewed by professionals on the city staff, and that the figures seemed to comply with standard construction estimates.
The city, however, cannot require the developer to use union labor if the cost of construction exceeds $25 million as a result of unforeseen circumstances.
This project of about 260 units, if it gets approval from the council, would generate about 100 construction jobs, 47 permanent jobs, and contribute $450,000 towards the development of affordable housing elsewhere in the city, Pepe said.
The site – located northwest of Journal Square in a former industrial area near Tonnelle Avenue – is currently vacant and generates about $15,000 annually in taxes.
Pepe said once started the project would take about 18 months to complete. He said that the schedule would phase in taxes gradually over the 20 years. He also said the amount of the payment to the city would increase if actual rents are higher than those currently estimated.
The city is expected to bring the ordinance back on its agenda once some of the questions of ownership are answered.
“You have to remember, we didn’t come to the city to build this, the city asked for proposals of what to do with this property and we responded,” Pepe said.
Al Sullivan may be reached at firstname.lastname@example.org.