The practice of earmarking developers’ tax abatement funds for a certain function, which began in Jersey City in the late 1980s and was stopped by the state in 2000 amid cries of impropriety, might be resurrected at next month’s City Council meeting, despite concerns from some council members that the ordinance is unwise and inefficient.
Introduced for first reading Aug. 13, the ordinance simply says it will "establish an Affordable Housing Trust Fund and require a contribution to the Trust Fund as a condition for receiving approval for Long Term Tax Exemption." Almost all council members voted yes on the first reading, with Ward D Councilman Bill Gaughan casting the only dissenting vote.
"I’m not happy with the trust fund being restricted to affordable housing," Gaughan said last week. "We’ve been down the road with this one before, and I don’t think it worked as well as it should have."
Unpleasant memories
Gaughan is referring to the affordable housing fund set up in the 1980s by Mayor Anthony Cucci, which mandated that companies receiving tax abatements also throw in an amount of money – in addition to what they remitted to the city in payment-in-lieu-of-taxes – for what the city called "additional considerations." As implemented by Cucci, these considerations included the construction of low-cost housing and the financing of other social programs.
When Bret Schundler was mayor in 1999, the City Council voted to turn the affordable housing fund into a "recreational fund" whose monies were distributed by council members through majority vote. Some uses of the money included assisting favorite community groups and funding local sports teams. When the state Department of Community Affairs got wind of the practice, they stopped it immediately and ordered the money to be distributed through the state-mandated budget-appropriations process.
"Some of my colleagues went a little overboard," Gaughan said of the recreational fund. "But a lot of us did a lot of good things with it. They just thought a party for seniors was a good way for recreating."
After the state’s dissolution of the fund, money for affordable housing was put into the city’s general treasury and then allocated to the city Department of Housing, Economic Development and Commerce [HEDC] when it was requested. Money has been transferred this way ever since.
Seizing an opportunity
Mayor Glenn D. Cunningham, however, thinks it is a good time for Jersey City to change how it funds and builds affordable housing. Because of a recently passed state law that now gives municipalities more leverage in negotiating tax incentive agreements, the mayor feels Jersey City should take the opportunity to wrangle more money from the new, high-profile businesses coming into town.
"Before the new law, we could only ask people to contribute voluntarily," said mayoral Chief of Staff William Ayala. "That’s the mayor’s priority and his policy directive. Before, we were hamstrung by the law that said we couldn’t mandate these things. It makes sure we spend the money on housing and nothing else."
Added Ayala, "I think it’s more important that we show a commitment. We’ve made a solid commitment to provide affordable housing to people in all parts of the city, not just the waterfront. [The ordinance also ensures] that we don’t leave the money subject to the whims of what people want to use it for. The mayor wants to make [using tax abatement money for affordable housing] into law."
Crowding out other needs
Council members, however, maintain that the mayor’s current strategy for financing and constructing affordable housing not only wastes money, but also fails to address the need that affordable housing initiatives were originally designed to meet.
One issue is that funneling abatement money into an exclusive fund will rob other city programs of resources, Council President L. Harvey Smith said.
"I’d rather earmark [the money] for a broader range of things, [like] for recreation programs and other stuff like that," Smith said, "for the city to do some things to help the kids. I’m not saying we shouldn’t have money for affordable housing, but we could also use that money for recreational programs. Or if we needed a fire engine, we could buy a fire engine."
"Affordable housing is a catch word," Smith added. "But the one thing we’re missing in this whole equation is, ‘What about the people who fall below affordable?’ Affordable is a different area. Affordable housing in Jersey City is different than affordable housing in other places. There’s ‘low-income’ housing that’s needed in Jersey City."
The difference between what is "affordable" and what is "low-income" – an important distinction council members said has been consistently confused by the administration in years past – is at the crux of the dissension.
Questioning efficacy
What brought the issue to the forefront is a current plan to build several units of "affordable" condominiums at 412-420 Martin Luther King Drive, in one of the most depressed neighborhoods in the city. Being developed by Downtown-based developer Eric Silverman, the approximately $5 million project will be entirely funded by waterfront landowner Goldman Sachs.
The development will consist of a total of 21 units, at least 18 of which will be owned and the rest of which will be rentals. The condo units will range from one-bedroom to three-bedrooms, which will cost anywhere from $50,000 to $150,000, Silverman said.
But Gaughan said that the costs seemed too high.
"Building 15 units for $6 million sounds a little outrageous to me," Gaughan said. "The reality of it is, on top of the mortgage, these residents have to pay condo fees and taxes. I’d much rather build housing people can afford. The city even gave them the land."
The city is wasting money on its current affordable housing program, he said, adding that it doesn’t warrant its cost and is not solving the affordable housing shortage.
"And plugging more money at it is not going to make it work," he added. "One development with 15 units of condos doesn’t make a neighborhood."
Residents in the MLK Drive neighborhood also said they felt the condo prices were too high for them. Iownna Shivers, 22, said she already struggles to pay the $750 a month for the one-bedroom apartment on Atlantic Street she lives in with her two children.
"[$130,000] is too much," Shivers said. "I wish I could find a low-income apartment. The lists are long and I don’t know why when there’s mad building going on."
The mayor, however, believes his plan will succeed.
"With the new system, we anticipate $1 million dollars annually going into the fund," said city spokesman Stan Eason. "Those things are determined, obviously, by economic activity and how many projects are taken in by the city. This will finance more affordable housing, which is directly in line with rejuvenating long neglected neighborhoods."
According to Eason, the current administration has 569 affordable housing units in planning stages. Two hundred and eighty of these units have been fully approved by the city and 172 are currently under construction. A total of 301 rental and ownership units have been completed, he added. .