KEARNY – After a prolonged discussion in private session on Tuesday, April 25, the Kearny municipal body granted a tax abatement to developer Ed Russo for the first phase of his Passaic Ave. riverfront project.
They voted to do so, after returning to public session, and after having previously heard protests from two members of the public.
In substance, the financial agreement with one of Russo’s companies, permits the construction of 280 market-rate rental apartments at 113 Passaic Ave., with the stipulation that the company tender Kearny an annual PILOT (payment in lieu of taxes).
Currently, the town collects $66,000 a year in taxes on the property but under the financial agreement, Kearny will pocket “not less than $525,000 a year after the project achieves 90% occupancy.”
At full occupancy, the town projects it will receive “over $600,000 a year” in PILOT payments.
Additionally, the town will get a one-time “contribution for affordable housing totaling $420,000 as the project is built.”
No affordable units will be part of the Passaic Ave. project. Instead, the contribution will be applied to upgrading or providing additional rental units elsewhere in town.
A resolution adopted by the governing body justifies the PILOT as follows: “In the current real estate marketplace, the rents likely to be achieved by this project are not sufficient to pay for the costs of land and construction and the payment of full taxes while allowing the developer to opportunity to make a return on its investment that is sufficient to both warrant the risks and to convince the lending markets to provide the construction and permanent financing required by the project.
“Since the town believes that amounts to be paid under the terms of the financial agreement are substantially equivalent to the incremental costs to be incurred by the town as a result of the project, the town believes that it is in its interest to provide the necessary incentive that will cause the project to be constructed.”
After 30 years, “the project – (which will include a clubhouse and outdoor pool for tenants and riverfront walkway accessible to the public) – will become fully taxable.”
Kearny residents James Miller Jr., an alternate appointee to the Kearny Zoning Board of Adjustment, and Larry Handlin urged the mayor and council to reject the proposed PILOT.
Miller said it was “inherently unfair” to give future project residents the same municipal and educational services “at much less cost,” adding that the project would produce “greater density” and, therefore, additional “pressures” on the community at large.
In reply, Mayor Alberto Santos said he agreed that the new residents’ tax burden would be “less than the full tax rate,” but added that “the project wouldn’t happen otherwise. And we’ll get 10 times [the revenues] we’re currently getting.”
Although the Board of Education is deprived of its share of school taxes under a PILOT arrangement, Santos said any impact on local schools from the new development should only be minimal from the studios and one-bedroom units planned.
Handlin echoed Hill’s concerns, adding that, “We don’t have a crystal ball on PILOTs. The undue tax burden it places on us is unfair.” As for the tax inequity for local schools, Handlin said that while Jersey City diverts 10% of its PILOT fees to the BOE, “we do nothing” and that, he added, “puts an added burden” on Kearny schools.
Not so, said Santos; it’s only when affordable housing units are added to the mix that school density can become an issue. And, he said, Jersey City is allocating that 10% share only to “get the heat off from state legislators” annoyed about the city getting a disproportionate share of state school aid.
Kearny previously awarded Russo’s companies tax breaks on two phases of a residential development at Schuyler and Bergen Aves. known as Vermela Crossing.
In return for investing $33 million to erect six three-story buildings with a total of 150 apartmentson the south side of Bergen, plus a clubhouse, Russo will be providing an annual PILOT of at least $375,000 for 30 years plus an affordable housing contribution of $225,000. All the apartments have been occupied.
Additionally, Russo has been granted a 30-year PILOT arrangement for construction of 70 apartments spread between two buildings on the north side of Bergen, for which he will pay nearly $180,000 annually and make a payment of $125,000 to the town’s affordable housing trust fund. Construction is now proceeding.
