November 3, 2002 Citizens of Hoboken and Jersey City:
Most local services (such as creation and maintenance of most of our roads, parks, and schools, garbage collection, sewerage, water, police, fire, building and safety inspection) are provided by the municipal government, the School Board, or are privatized. And yet, in Hoboken, 39% of our property taxes go to Hudson County (HC)! Why are we paying so much tax to the county?
One reason for the increase in HC taxes is the substitution of Payments in Lieu of Tax (PILOTs) for full taxation in projects sanctioned under the New Jersey Redevelopment Law. This law was originally intended to give a municipality the means to develop "blighted" property that would otherwise remain fallow due to lack of interest in the private sector to develop it. The redevelopment law allows the municipality, county, and state to encourage the redevelopment of such blighted land by giving the redeveloper a significant tax break.
Unfortunately, in both Hoboken and Jersey City, the use of blight and Redevelopment designation has departed from the intent of State Law: it has been applied to the most valuable property in these cities, i.e. waterfront property, giving the occupants of these redevelopment properties fantastic tax breaks and transferring the taxes onto the backs of the other taxpayers.
With no scrutiny from the Zoning and Planning Boards and the public, Redevelopment Projects are free to degrade our environment and lower our quality of life for the benefit of a few developers.
Ordinarily, a project would have to comply with the Hoboken Zoning Law. In the case of two Redevelopment Projects that have been recently approved in Hoboken (the PA southern waterfront and Northwest Redevelopment projects), the Zoning Law would have required multiple variances from the Zoning Board and/or approval of a Planned Unit Development (PUD) by the Planning Board. Both of these Boards have both the statutory power and the responsibility to turn down any project that causes harm to the public. The developer must present expert witnesses to testify that no such harm will occur, and the public has the right to testify as to the harm they anticipate. In theory, the Boards can deny approval to any project requiring variances or PUD approval if there is not strong evidence that no harm will be created.
In contrast, a Redevelopment Project is NOT subject to the Zoning Law. Instead, the Mayor and Council negotiate directly with potential developers, with no public input or scrutiny, to create the zoning for the project which is then incorporated directly into the Redevelopment Ordinance and into binding contracts with developers. Projects which cause harm to the public, through loss of open space, giveaway of public lands, huge buildings, stress on infrastructure (sewer, water, parking, roads), environmental pollution, and extra traffic, can be approved behind closed doors by the Mayor and Council and the developers, escaping the protective scrutiny and public process of the Boards.
PILOTs shift most of the Redevelopment Project taxes onto the backs of the other taxpayers.
Ordinarily, as every property taxpayer knows, there are three components of property tax: municipal, county, and school. In contrast, a Redevelopment Project is tax exempt for up to 40 years, paying no municipal, county, or school taxes. Instead PILOTs are paid to the municipal government.
How does this affect a Hudson County property taxes? To answer this, we will consider an example: the impact of one Hoboken Redevelopment Project, the Port Authority Hoboken Southern Waterfront Redevelopment, on Hoboken property taxes.
The Hoboken PA Waterfront Redevelopment Project consists of 2.3 million square feet, with a property value of about $300/sq foot. (This estimate is based on a 1000 sq.ft. condo costing $300,000.) The PILOT is $2/sq foot, so an owner of a $200,000 condo (667 sq.ft.) would pay a yearly PILOT of $1,334 and no other property tax. If fully taxed at the current annual rate of 3.26%, the same redevelopment condo would pay $6,520, so the redevelopment condo owner is paying only 20.5% as much tax as the rest of us!
Now if the PA Redevelopment paid full taxes at the current rate of 3.26%, its property tax would come to $9.78/sq.ft. Instead the project pays $2/sq.ft. so it is underpaying its taxes by $17,900,000. This underpayment is borne by Hoboken and HC taxpayers, in the following proportions: 61% (municipal and school tax), or $10,915,000, is paid by Hoboken taxpayers, and 39% (county tax), or $6,979,000, is paid by HC taxpayers. Hoboken's taxpayers pay 14.96% of this underpayment of HC tax, or $1,044,000, so the total annual increase in Hoboken property taxes due to the Port Authority Redevelopment adds up to $11,959,000.
Since Hoboken has a total property value of $2.255 billion, this increase amounts to $5.30 per $1000 in assed property value, or $1,061 per year for a $200,000 condo, which is 16.3% of the condo's $6,520 in property taxes.
That's right! Your property tax would go down by 16.3% if the Port Authority Project paid its fair share of taxes! Here's the full comparison for a $200,000 condo: With the PILOT/redevelopment scheme, such a condo in the redevelopment zone pays $1334/year and elsewhere pays $6520/year. With full taxation, both condos pay $5459/year.
Now Mayor Roberts is advocating the designation of the Maxwell House site, another prime waterfront property, as a Redevelopment zone. If the 1.4 million sq.ft. Maxwell House project currently before the Planning Board were given the same PILOT deal as the Port Authority project, it will underpay its taxes by $7,279,000, adding an extra $639 to your property tax bill!
This scam is attractive to municipal officials because they can arrange PILOT payments to initially exceeds full taxation. This gives the Mayor and Council more money to play with without increasing the municipal levy, so it seems that municipal taxes are "stabilized" and the tax "problem" is with the school and county taxes. But in truth much of this "problem" stems from the redevelopment/PILOT scam itself: most of the redevelopment tax obligations are removed from the developer and passed onto the backs of the rest of the taxpayers. It is appalling that out municipal and county officials would participate in such a scam.
The Green Party is working to elect representatives that really represent us.
I will be on the November 5th ballot with my Green Party running mates, Claudette Meliere (Hudson County Executive), Henry Faulkner (Congress, 13th District), and Ted Glick (Senate). Together we stand for protecting our environment, our civil liberties, and our right to have a say in what our government does.
On Tuesday, November 5th, you can vote for a change.
Sincerely,
Daniel Tumpson
Green Party Candidiate for Freeholder, 5th District