Jersey City - Bret Schundler - Tax Abatements

Star Ledger, The Jersey Journal and Bret Schundler's Campaign Literature ^ | May 25, 2005

[Calpernia]

Jersey City's downtown waterfront market is one of the strongest real estate areas in this country. Developers pay millions to buy small parcels of land. Colgate sold an acre for $10 million.

Before Bret Schundler ran for office, he spoke against tax abatements at council meetings. When he ran for office, his campaign literature (Special Election 1992) candidate Schundler said, "... reducing sales and property taxes for all will promote far more jobs than tax abatements for the powerful few."

Previously, Mayor Cucci gave abatements linked to affordable housing. Avalon Cove, an abatement that Mayor Cucci turned down because it was not linked to affordable housing, was resurrected under Bret Schundler. Former Mayor Schundler gave Avalon Cove a tax abatement.

After its construction, the Jersey Journal ran a story about the eviction of a "rap artist" for excessive noise from Avalon Cove. The story stated his rent was $3,100 per month. Obviously, there is no need for an abatement, except as an inducement for Schundler to raise money for his political warchest.

Under the campaign laws, there are limits to the amount of money a candidate may receive. Developers circumvent these laws by having various members and their spouses give to candidates. The more they give, the greater the deal. Below is an example of an abatement that kept getting better:

Example: Ordinance 99-082, approving a 20 year tax exemption for Market Rate Residential Condominium Project to be constructed by Sugar House Urban Renewal Company, LLC. That ordinance rescinded Ordinance 98-002 which previously approved a five year tax abatement. Why ask for a 5 years when 20 years are better?

Developers found a political crony in Bret Schundler. Other towns go after developers who shade the truth on their assessed values. In fact, an article ran on July 15, 1999, in the Star-Ledger titled, "Tax war rages on property values, Plainsboro in battle with Merril Lynch."

In 1993, Merrill Lynch told the township that its corporate campus had an assessed value of $92.4 million. That same year it told the Internal Revenue Service that it cost more than $250 million.

When the township discovered the discrepancy it took Merrill Lynch to court. Plainsboro increased the building assessment by $170.5 million.

It is extremely important to have the correct assessment. The contract usually states that government collects 2% of construction costs or 15 of rentals. Sadly, Former Mayor Schundler did not follow standard protocol when giving an abatement. Schundler's abatements lacked appraisals, fair market value, and construction costs at the time of the ordinance hearing. The 2% figure is based on old market values (more than 10 years ago).

Tax abatements are dangerous, they do not add to the city's ratable base. In 1993, near the beginning of Schundler term as mayor, Jersey City had a ratable base of $7.4 billion, in 1998 the ratable base dropped to $5.4 billion. That means it takes more dollars to run government at the same level. If new development were taxed at a ratable base, not treated as abatements, then taxes would stabilize.

The ratable base also dropped because it is unlawful, according to city ordinance to pass along tax increases to multi-family buildings. If taxes or water increase, then the landlord can use tax court to lower their assessment on the buildings. Jersey City is home to many low income housing projects which means the tax burden falls on 1 to 4 family homeowner, approximately one-third of the city's population. Now luxury apartments are treated like low income housing projects-they are tax abated.

Abatements were designed to protect the life of a mortgage but Bret Schundler's goal while Mayor of Jersey City was to protect developers. As mayor, he allowed abatements to be transferred.

Abatements pay no school or county taxes. Any taxes (in lieu of) are paid to the city; however, land taxes are deducted decreasing the value of the abatement. Bottom line, Jersey City was for sale, regardless of the budget crisis, as long as you contributed to the Former Mayor Schundler's warchest.

Former Mayor Schundler has given more tax abatements than any previous mayor. Commissioner Kenny referred to Jersey City's tax abatement policy under Schundler as "...a kid who kills his parents then throws himself on the mercy of the court because he's orphan." What a marvelous description!

[Calpernia]

Former Mayor Schundler gave out tax abatements to waterfront development during the height of a market boom. In the Year 2000, the average rent for commercial space was $32.84 per square foot on Jersey City's waterfront. However, the average rent for commercial property then in the state of New Jersey was $24.30. Jersey City realtor Allen Bardack said, "With all these buildings that have been built in the area in the last few years, there is no space for rent."