2009 Jersey City Report on Tax Abatements

8/9/2019 2009 Jersey City Report on Tax Abatements

1/20

A Vehicle for Growth & Prosperity


2/20

Statute passed by NJ Legislature in 1961 to facilitate redevelopment ofurban areas

Aggressively used by Jersey City to redevelop decaying waterfront (1980s)

Success of initial P.I.L.O.T. (Newport) led to new demand for waterfront

offices and residences (1990s) Legislature renews statute in 1992, citing its success in Jersey City


3/20

More than 200 start-up business have opened their doors in thepast decade

More than 22,000 full-time jobs have been added in the pastdecade

Wall Streets most prestigious financial firms have relocatedoperations to Jersey City thanks to 14 million sq. feet of new, tax-abated office space
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4/20

Success of waterfront development has led to the revitalization ofHistoric Downtown and rehabilitation of historic propertiesthroughout the city

Homeowners have experienced unprecedented property value

appreciation, resulting in an enormous increase in personal wealth Jersey City has used abatements to promote smart-growth and

sustainable development


5/20

Abatements are now driving development throughoutthe city Canco Lofts (Journal Square)

The Beacon (Bergen-Lafayette)

Centex Lofts (West Side) Center City Towers (Journal Square)

The Foundry Lofts (Bergen-Lafayette)


6/20

Jersey City abatement policy hinges on the concept thatbut for an abatement incentive many projects wouldnot be built New Jersey property taxes are the highest in the U.S.

Most redevelopment sites require intense environmental remediation

Most projects must make significant upgrades to city infrastructure Facing similar conditions, Philadelphia study found that 2/3 of recent

development in that city would not have occurred if not for taxabatements

Therefore, comparing P.I.L.O.T. payments to theoreticalconventional tax payments is a false comparison The vagaries of the municipal budgeting process create uncertainty in

the financial models used by lenders to grant construction loans

Because of this, many developers are unable to secure financing if thetaxes on their project are not fixed for a given period


7/20

Stabilize bottom line for rental projects Abatements help developers secure financing in the face of high

construction costs, environmental remediation and aginginfrastructure by locking in future revenues

Stabilize monthly payments for condo buyers Abatements lower early year payments, making the numbers work

for many buyers

Lower monthly payments encourage home ownership and bring newresidents to Jersey City

Stabilize rents for commercial tenants Abatements lure long-term commercial tenants, bringing jobs for

Jersey City residents and new customers for Jersey City smallbusinesses


8/20

Jersey City receives 100% of P.I.L.O.T. payments vs.45% of conventional taxes Most abated properties contribute more to city revenues than they

would through conventional taxes

Developers receiving abatements have contributed $15million to the citys Affordable Housing Trust Fundsince 2003, with another $8 million pledged

Efficient Taxation: Abatements stimulate large scaledevelopment that can be fully taxed upon expiration Economists agree it is more prudent to tax fixed assets (existing

property) than mobile assets (proposed development)


9/20

101 Hudson10 Exchange

PlaceCali-Grove

StreetHarborsidePlaza 2 & 3

Final year abated 3,920,347 1,706,063 1,513,998 2,985,011First year conventional 2,533,749 1,053,223 636,578 3,235,314

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

P.I.L.O.T. vs. Conventional An analysis of fourformerly abated officebuildings found that the

city received an average of31% less revenue in the firstyear of conventionaltaxation than it had in thelast year of the P.I.L.O.T.agreement

Only one of the fourproperties generated morerevenue for Jersey Citywhen conventionally taxed

P.I.L.O.T. payments usually generate more revenuefor Jersey City than conventional taxation


10/20

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

PILOT Revenue

Service Cost

Every abatement applicationis subject to a cost-benefit

analysis prior to approval

Only in the case of affordablehousing developments dothe costs of city servicesoutpace P.I.L.O.T. revenues

Market-rate rental

(65 units)

Affordable rental

(39 units)* Projects chosen at random


11/20

Under a P.I.L.O.T. agreement, The Sugar House in downtown Jersey Citypaid $652,216 to the city in 2007

Under conventional taxation, the Sugar House would have paid a total of$1,016,044 in taxes that year, of which Jersey City would have received$466,364

Jersey City received 40% more revenue through the P.I.L.O.T. than itwould have through conventional taxation

Analysis by Jersey City Tax Assessorand Office of Tax Exemptions


12/20

Denser development Abatements allow developers to secure financing for larger projects Philadelphia study found that a 10-year abatement led to 20% denser

development Dense development represents smart growth and limits

environmental impact

Wealth creation Rising property values in surrounding neighborhoods have created

significant wealth for longtime homeowners, especially low-incomeresidents, seniors and minorities

Employment and Economic Opportunity At least 20% of laborers on every abated project are union apprentices

from Jersey City hired through a Project Labor Agreement signed bythe developer

Commercial office construction has brought thousands of high-payingpermanent jobs to Jersey City

New and revitalized neighborhoods have created entrepreneurial

opportunities for retail and service businesses


13/20

$-

$50,000.00

$100,000.00

$150,000.00$200,000.00

$250,000.00

$300,000.00

$350,000.00

$400,000.00$450,000.00

99 00 01 02 03 04 05 06 07 08 09

Jersey City

New York MetroRegion

Case-Shiller 20City Index

Market Value of Home(Base Assessment $100,000) Jersey City home values

have increased by 267% inpast decade according tothe citys assessment tovalue ratio

Source: Jersey City Division of Taxation,Case-Shiller Home Price Index


14/20

-0.25

-0.2

-0.15

-0.1

-0.05

00.05

0.1

0.15

0.2

0.25

0.3

99 00 01 02 03 04 05 06 07 08 09

Jersey City

Case-Shiller 20 CityIndexNew York MetroRegion

Year-to-Year Home Value Appreciation (1999-2009)

Source: Jersey City Division of Taxation,Case-Shiller Home Price Index


15/20

0

5000

10000

15000

20000

25000

99 00 01 02 03 04 05 06 07 08 09

New Full-time Jobs

Over the past decade, morethan 22,100 new, full-time jobs

have been added in JerseyCitys Urban Enterprise Zonesalone, an average of more than2,000 new jobs each year.

These jobs have been

overwhelmingly added in andaround abated properties

Source: UEZ annual business reports, JerseyCity Economic Development Corp.


16/20

0

50

100

150

200

250

99 00 01 02 03 04 05 06 07 08 09

New Start-up Businesses 213 new businesses have opened in JerseyCity over the past decade in the citysUrban Enterprise Zones alone

For every $100 spent in a locally-owned

business, $68 remains in the communityvs. $43 for a national chain

More local start-ups have openedthan corporate relocations andnew retail chains combined

Source: UEZ Annual BusinessReports, JCEDC

0

5

10

15

20

25

30

35

99 00 01 02 03 04 05 06 07 08

Start-up

Relocation

Retail

Chain


17/20

Just the waterfront 43% of active P.I.L.O.T. agreements are outside Ward E and an even

higher percentage are away from the waterfront

Just condos Only 23% of active P.I.L.O.T. agreements are for condominium

developments

43% of active agreements are for affordable housing developments

Just Jersey City Tax abatements are an economic development tool used throughout

New Jersey and the United States

Not using this tool would place Jersey City at a competitivedisadvantage


18/20

0 5 10 15 20 25

2003

2004

2005

2006

2007

2008

ABCD

F

Active P.I.L.O.T Agreements by Ward

P.I.L.O.T. agreements off theWaterfront have increased20% in the past 5 years

There are currently 55 activeP.I.L.O.T. agreements outsideof Downtown and theWaterfront


19/20

23%

15%

43%

10%

3% 2%4%

% of Active P.I.L.O.T. Agreements

Condo

Market-rate rentalAffordable rental

Office / Commercial

Hotel

Industrial

Other

28%

32%

9%

27%

2% 0% 2%

% of P.I.L.O.T. Revenue


20/20

A, 72

B, 80

D, 15

F, 334

Source: Jersey City Department of Community Development,Affordable Housing Trust Fund

Since 2003, $15 million incontractual contributionsfrom tax-abated projectshas been directly invested

in affordable housingconstruction

As a result, 501 newaffordable units have beenconstructed in four citywards

Affordable developmentsinclude 74 apt. units onDuncan Ave., 39 apt. unitson MLK Drive, andrehabilitated two-

family homes on Pacificand Orient Aves

New Affordable Housing Units by Ward

Documents

2009 Jersey City Report on Tax Abatements