Monarch Tax Abatement Questions - Some Answers

Dear Friends,

On August 17, 2009, I submitted a list of questions about the city’s controversial tax abatement plan to the administration. Below is a memo containing the official response provided by the City Administrator, Marc Dashield, dated September 3. The original questions (as submitted by me) are italicized and numbered for your convenience in reading this post, and the answers from the administration are in bold type. I have a bit of commentary of my own, which is at the end of the post.

1. What happens if the building goes into foreclosure?

Foreclosure will result in the property reverting to the bank which holds the construction loan. We are currently reviewing the possible outcomes with the legal Department and will forward their determination when available.

2. Shouldn't the deed restrictions outlined in the original agreement prevent the units from being turned into rentals without prior city council approval?

Anti-discrimination law prevents the restriction of specific type of the housing; therefore, no such clause exists in the agreement.

3. Can the senior citizens and veterans sections of the building open in September, as promised, even if all the units are not sold?

The opening of the Senior Center/Veterans Center space is not connected to all the units being sold. There are a number of code issues that must be addressed before full occupancy can occur. The expected move-in time is still September 2009.

4. I keep hearing that the project cannot be allowed to "fail." What is the definition of failure with regard to this project? Also, how do you define success?

The Monarch development is linked to important public policy objectives.

• First, the construction [of] a new senior center will provide increase[d] quality of service to our senior community.
• Second, the public/private partnership facilitated the financing of the senior facility without raising additional tax dollars. The land acquisition was financed through a federal grant and the developer is financing the construction of the center.
• Finally, this project represents the future of condominium development in [the] City. If this project does not succeed, financing institutions and developers will find it difficult to invest in condominiums in the city. Without developer and finance institutions willing to invest in condominium development the City’s efforts to attract transit oriented development will be damaged.

As illustrated above, the failure of this project would affect service delivery to the senior community and future economic development. Failures (sic) for this project means the development is unable [to] sell its units. Success would be a fully sold complex.

5. How many of the units have contracts and when are they supposed to close?

There are approximately 13-15 units with contract for sale. No closing dates have been scheduled because of the pending request for tax abatement.

6. How many of the units have closed as of today (Thursday, August 13, 2009)?

This question was not answered—the answer to the prior question, of course, means that no units have closed. –AM

7. Is the word "abatement" really just a substitution of the word "bailout," meaning the developer is seeking help from the city?

No, this is not a bail out. This request for tax abatement is a reasonable response to the changing market conditions that significantly impact the City’s public private partnership with the developer. During the boom market, the additional cost to build the Senior Center could easily be absorbed by the sales price of the units. However, the current market conditions have slowed sales and decreased sales prices, which makes it difficult for the developer to recover the cost construction of the Senior Center. Therefore, it is reasonable for the City to offer tax abatement to potential property owners in an effort to expand the potential buyer base thereby increasing the likelihood of sales.

8. When the seniors move into the new center, how much of the rent we pay for the old senior center will be put back into the city budget?

The operating cost of the new senior center will be utilities and condominium fees, which cover for the general maintenance of the building. The new facility will save the city an estimated $30,000 annually.

9. Given the stalled projects that this developer has in Rahway and elsewhere, what assurances do we have that he won't abandon the project?

The developer has financed the entire project therefore the issue is not financing of the project. The developer is now attempting to sell the unit to recoup cost and pay off financing.

10. Can the administration and the city council give an update on the financial "health" of this particular developer, given his other projects and in light of the Connolly bankruptcy?

The developer has financed the entire project therefore the issue is not financing of the project. The Connelly (sic) bankruptcy is a completely different set of circumstances.

11. Will the city order an independent appraisal of the units to determine their true worth in the current market?

An appraisal of the property does not deal with the real issue concerning the need for the tax abatement. The need for the abatement is directly related to the cost of construction of the senior center as stated above.

12. What can the city do to make the surrounding area more attractive, i.e., controlling the loitering near the Ben Franklin Liquor Store?

The City has already engaged the tenants/property owners in the surrounding area to entice them to participate in the City’s façade improvement program. In addition, the community policing unit is making special efforts to monitor the area.

Thank you for your attention to this matter. If you have any further questions, please feel free to contact me.

END

My Commentary

The memo was copied to Mayor Sharon Robinson-Briggs, as well as to my city council colleagues. This proposal will be brought up again at the next city council meeting. There are still several unresolved questions, and the administration's responses in this memo are incomplete. No specific data has been provided to the city council--it's simply conjecture.

For example, regarding Q. 3, the administration answers that the senior center opening is "...not connected to all the units being sold..." which implies that it may be connected to some portion of units being sold. We need to clarify what "all" means.

In Q. 4, several parts of the administration's answer are simply conjecture. In addition, the terms they use are vague and apparently interchangeable. There is no single profile of what the administration terms as "financing institutions" and "developers." There are many different financing institutions and many different types of developers. Nor does the administration provide any actual data on how the prospects of future development will be affected by this particular project (for better or worse). No administration would put all its eggs in one basket, and no one would proceed without a true cost/benefit analysis fitted for a variety of possible scenarios, given the vagaries of the market.

The response to Q. 9 does not answer the question asked--yes, the developer has financed the project. The question, however, had to do with the possibility of abandoning the project and letting it fall into foreclosure, given the concern over the status of other projects by this developer, one in Rahway in particular. The developer goes into a project knowing that there is a certain amount of risk, and knowing that the return on his investment (if there is indeed a return) may take years. Why should he be expecting to "recoup" his investment so quickly? A new comparative analysis of the prices in the area may lead to a lowering of the price of the condos so that it reflects the true value.

In Q. 10, the request for the administration to provide an update on the "financial health" of the developer is not answered. Instead, the answer simply repeats the previous answer. The questioner has not suggested that the issue is the "financing of the project." The questioner wants to know how much money the developer has in investments in a variety of projects.

Again, in Q. 11, the resident wanted to know if the city would order an independent appraisal of the condo units to determine their true worth, but the administration has avoided this question. They state that the "real issue" is the "need for the tax abatement," which they say is directly related to the cost of the senior center. Now, the senior center is only one part of the cost of construction, so how is it that the abatement is only to offset this cost? How could the cost of just the senior center be so great that the developer needs the abatement to cover just those costs? It doesn't make sense.

And of course, underlying all of this is the same issue: the fairness of a tax abatement, and who will pay.

• Who will pay the cost of a residential tax abatement for a select group of prospective new home buyers?
  
• How will it affect the tax burden of the rest of Plainfielders?
  
• How is it fair that ALL Plainfield residents are not able to benefit from a residential tax abatement?
• Why doesn't the developer simply lower the cost of the condos? If he has to take a loss, so be it. It happens all the time, and developers take this into account.
  

I thank you again for submitting your questions. As I read through the administration's responses again, I am sure that I will have some additional comments and questions. I am sure that you have many as well. I have not been swayed by any of the administration's arguments, and I am greatly concerned about the way the administration has gone about this process. I look forward to seeing you at the city council meeting.

Regards,

Adrian

The Public Speaks at Town Hall Meeting on Tax Abatement Proposal

Dear Friends,

I want to thank you all (attendance count: 54) for coming out on a humid and gray Thursday evening to share your thoughts on the proposed residential tax abatement ordinance at the public town hall meeting I sponsored. The purpose of this forum, which was attended by residents from all four wards of our city, was to provide you with an opportunity to express your views, pro or con, on the abatement proposed by the Robinson-Briggs administration for the 63 condominiums on East Front Street. Those of you in attendance held some very strong views on this controversial issue; judging from your comments (both spoken and written), it would be safe to say that the vast majority of Plainfielders are united in their opposition to residential tax abatements. I will be forwarding the list of the many questions raised at the forum to the mayor and her staff to give them an opportunity to provide answers to all questions prior to any further action on the proposed abatement. I will also be providing the list of questions to my colleagues so that they will be fully aware of their constituents' concerns. It is important that the city council, as the governing body of Plainfield, hear your feedback on the issues affecting our city, so I am glad that so many of you were able to attend.

In the spirit of transparency and ethical leadership in government, I have posted the video documentation of the meeting on YouTube for the widest dissemination possible.I will also find out when the video can be shown on Plainfield's public access channel on Comcast of Plainfield (PCTV-74) and will let you know the specific air dates. The first segment (of 6 episodes) is posted below, and I have included the links to the others. Additional questions were asked after the tape stopped rolling. Some of these questions were asked of the administration, so I am hopeful that they will have some answers for all of us at the council meeting. There is no reason, in my opinion, to give this proposal a second reading without these and other questions being answered to the full satisfaction of the governing body. I strongly urge you all to come to the Monday, August 17 meeting at the Municipal Court (Watchung Avenue and Fourth Street) at 8:00 pm to voice your opinion on this proposed ordinance.

--What happens if the building goes into foreclosure?
--Shouldn't the deed restrictions outlined in the original agreement prevent the units from being turned into rentals without prior city council approval?
--Can the senior citizens and veterans sections of the building open in September, as promised, even if all the units are not sold?
--I keep hearing that the project cannot be allowed to "fail." What is the definition of failure with regard to this project? Also, how do you define success?
--How many of the units have contracts and when are they supposed to close?
--How many of the units have closed as of today (Thursday, August 13, 2009)?
--Is the word "abatement" really just a substitution of the word "bailout," meaning the developer is seeking help from the city?
--When the seniors move into the new center, how much of the rent we pay for the old senior center will be put back into the city budget?
--Given the stalled projects that this developer has in Rahway and elsewhere, what assurances do we have that he won't abandon the project?
--Can the administration and the city council give an update on the financial "health" of this particular developer, given his other projects and in light of the Connolly bankruptcy?
--Will the city order an independent appraisal of the units to determine their true worth in the current market?
--What can the city do to make the surrounding area more attractive, i.e., controlling the loitering near the Ben Franklin Liquor Store?

In the coming days, I will be posting the impact of the tax abatement on the average homeowner. Finally, I would like to thank the elected officials and the residents who attended the forum, as well as the many volunteers (Dorothy, Carmencita, Will, Carol, Dan, Rebecca) who assisted me in putting it together.




I wanted to post the video as quickly as possible, so the slight problem with the sync (the audio lags) will be corrected within the next day or so.

Episode 2
Episode 3
Episode 4
Episode 5
Episode 6

Again, I thank you all for coming out to this town meeting, and I look forward to the next one. I will let you know the date as soon as it is confirmed.

Regards,

Adrian

P.S. There was an unrelated question about the $10.00 garage sale permit fee charged by the city, and a statement that the city hall library is simply to small for the agenda meetings, and that the meetings go on too long. A few residents complained about the changes to the meeting schedule, favoring a return to the old schedule of 2 agenda sessions and 2 public meetings per month.

Town Hall Meeting on Proposed Monarch Tax Abatement

Dear Friends,

I will be holding a town hall meeting this coming Thursday, August 13, at 7:00 pm at the duCret School of Art (1038 Central Avenue in Plainfield) to discuss the administration’s proposed ordinance to give a residential tax abatement to the developer of the Monarch condominium property, located on East Front Street.

This issue has generated a lot of interest in the Plainfield community. I have received numerous emails, telephone calls, and blog comments from constituents who have expressed grave concerns about this proposed ordinance (as have my council colleagues). In a previous post, I stated my opposition to it (see below).

However, I feel that it is important to have a public hearing to get feedback from you, Plainfield residents and taxpayers, before the ordinance goes to second reading on Monday, August 17.

Residents and taxpayers deserve a forum to be heard, where your concerns are the focus of the meeting, as opposed to a brief “privilege of the floor” at a council meeting. After all, we are elected to represent your interests. I want to be able to clarify for you what abatements are about, and how this one (designed for residential buyers) differs from the usual abatements.

Although I am the Third Ward councilman, this meeting is, of course, open to all. It is the first of regular town hall meetings that I will be setting up for my Third Ward constituents. You asked for real transparency in city government, and I pledged, when elected, to provide that transparency, along with honest, ethical leadership. You, the residents and taxpayers, have to live with the decisions made on your behalf by this governing body, so it is incumbent upon us to give you an opportunity to weigh in on those decisions before they are finalized, and to play an influential role in the future of Plainfield.

What happens at the council table will affect all of us for years to come, so I hope you will be able to attend and offer your opinion on this important ordinance.

Regards,

Adrian

Town Hall Meeting

Hosted by 3rd Ward Councilman Adrian Mapp

Topic: Monarch Tax Abatement Ordinance

Thursday, August 13, 2009

7:00 pm

duCret School of Art

1038 Central Avenue, Plainfield

A Resounding "No!" to Tax Abatement on Monarch Condominium Project

The issue of tax abatement, in the past few days, has been raging like a wild fire out of control, and Plainfield’s elected officials have been challenged to put it out. I’ll take this opportunity to state my position on the concept of five-year tax abatements, in general, and the tax abatement pertaining to the 63 condos in particular.

During the council agenda fixing session of July 17th and the regular meeting of July 20th, I explained at great length my opposition to the PILOT (Payment In Lieu Of Taxes) application for 1272 Park Avenue, as well as my issues with the abatement application for the 63 condos on East Front Street.

In the case of 1272 Park Avenue, it is my position that the owner has enjoyed the benefit of a PILOT incentive for the past 37 years; therefore, it is now time for Plainfield to benefit from a full tax assessment on that property. The owner(s) of 1272 Park Avenue should not be allowed to profit on the backs of our fixed-income seniors and other struggling tax payers; in addition, refinancing through the NJHFA should not be used as a vehicle to guarantee lucrative profits in perpetuity.

The PILOT on 1272 Park Avenue should end and the City should collect full taxes based on the property’s assessed value. Mine was the only "NO" vote on this agenda item at the July 20th meeting.

As for the East Front Street condominium project, I told my colleagues and the public in attendance on Monday that I felt the project was a horrible one from the very beginning. It was given life by a council that was too weak to do the right thing, too concerned about self-preservation, and too eager and willing to abandon Mayor Al McWilliams in the wake of his 2005 election primary loss.

As a result, instead of moving ahead with an investment in a new senior center with commercial space that would be a guaranteed revenue stream for the City, as Al and his team had begun with a bonding process, council members at the time fell for the misguided notion that the seniors would get a center for "free" from a developer. Thus, it traded a senior center and debt service that would have been covered by a commercial revenue stream for what is now known as "The Monarch at Plainfield," with its 63 condos and all of the issues (or additional burdens) this project will bring, including additional costs for city services and education, which would be greatly exacerbated if the developer were to be allowed to have this abatement at the Plainfield taxpayers' expense.

Plainfield was let down by the previous council, which gave away prime parcels of real estate for $1 and allowed the Monarch to happen. Knowing the work that went into tearing down the properties that once stood there, and the time, costs, and effort that went into assembling the parcels of land, I felt an incredible feeling of betrayal for our seniors and for the City. It was for all of these reasons that I expressed some very strong sentiments at the last two council meetings regarding the request for abatement by the developer.

Now, I must make a confession: in spite of my very vocal opposition to this proposal, which is on the record, I fell for this past week's bait and switch hysteria that the condos could become rentals without the abatement. This was a mistake--a momentary lack in judgment that prevented me from seeing the request for what it really is--an attempt to preserve the profit margin of the developer at the expense of Plainfield’s tax payers. My hesitating "YES" vote should have been a resounding "NO!"

However, my first vote not withstanding, I knew at the time that I would have a second opportunity to make it right. Now that the public has weighed in on this firestorm, I am convinced that what I communicated to another blogger (and to numerous other residents who have contacted me over the past few days) is the right thing for me to do. That is, I will be casting a resounding "NO" vote on the second reading of the ordinance.

I know that I may face some tough critics, and I accept your criticism with humility--my feeling, though, is that a blunder corrected quickly is better than a mistake preserved with all its negative impact on Plainfield's tax base and taxpayers for years to come. Mea culpa! I said when I was elected onto the council last year that I wanted you to hold me accountable. I said I would listen to you, and I thank you for your thoughtful and passionate feedback on this issue. It is my hope that my council colleagues, too, will see this ordinance for what it is and vote "NO" as well.

P.S. In my next post, I will provide you with the true tax abatement numbers and the 5-year impact on Plainfield, meaning on you and me.

Regards, Adrian