You might expect Jersey City to think twice about granting another revised tax abatement for a condo building on the downtown waterfront, especially after a similar deal recently approved by the City Council for the Crystal Pointe project on Second Street prompted public outrage.
But the city is considering revising a previously granted abatement for the $250 million 77 Hudson St. project. 77 Hudson is a 901-unit two-building project (420 condos, 481 rentals) on Hudson Street in Jersey City, overlooking the Hudson River, and construction is nearing completion. Units are selling from $300,000-plus for one-bedroom to $1 million for three-bedrooms.
An abatement is an agreement with the city to exempt a developer from paying regular, fluctuating property taxes. Developers often negotiate a deal to pay a stable, separate fee to the city in lieu of taxes, a payment which may sometimes be equal or nearly equal to current taxes. Those payments benefit the city because they go straight to city coffers, and do not include paying school and county taxes.
Recently, several developers have asked to revise their original agreement with the city because of the tough economy.
According to Councilman Steven Fulop, the city’s Tax Abatement Committee, with a push from Mayor Jerramiah Healy, is considering revising the deal for 77 Hudson that would change the terms of the 20-year abatement approved for the project in March 2006.
The present agreement, which calls for a 16 percent service charge (a percentage of annual gross revenue paid to the city in lieu of taxes), would be extended to 30 years, with the payments spread out to 11 percent for the first 5 years, 13 percent for the next 5 years, and then 16 percent for the final 20 years.
77 Hudson is a 901-unit building located near the Jersey City waterfront.
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“This is a situation remarkably similar to Crystal Pointe, where I warned that if the Healy Administration with Councilman Vega at the helm of this committee bails out one developer, every single developer will ask for the same,” Fulop said. The abatement could be up for a vote as early as the next City Council meeting on Aug. 12.
Fulop wants this abatement deal to be “scrapped,” citing not only its controversial nature but also because it was considered by the “closed-door” tax abatement committee that he wants opened up to the public.
When reached for a comment last week on the 77 Hudson revised abatement, Healy said he “needed to study it further” before he could offer any comment.
The need to ‘compete’
Doug Fenichel, spokesperson for Red Bank-based K. Hovnanian, said in a phone interview last week that K. Hovnanian is pursuing the abatement to “compete” with the New York City condo market for potential buyers in a tough economy. Fenichel said prices have been already lowered for units at 77 Hudson, and about a third of the units (about 140) have sold since 2007.
The price reduction is a big step down for this project, which set a record for condo sales in Hudson County in October 2007 when a double penthouse went for $6 million.
“We are looking to see if this abatement will be more competitive and we could fill the building more quickly,” Fenichel said.
It’s a trend
Developers of condo towers such as 77 Hudson, Crystal Pointe, and the Journal Square-based Canco Lofts have pursued revised abatements to stretch out the time period for special tax payments, known as PILOTS (payment in lieu of taxes), and to lower the percentage of the payment in order to allow the developer to pass along tax savings to the buyer.
Jersey City officials have advocated tax abatements for many years as an incentive for developers to come to the city and help build it up as an attractive alternative to Manhattan for young, upscale professionals to settle.
But now some of those professionals, since moving here, have turned against the abatements. Since PILOTs do not contribute to school taxes, they force the other taxpayers to shoulder that burden, especially since the state has increased the city’s annual school tax payment in recent years.
Ricardo Kaulessar can be reached at rkaulessar@hudsonreporter.com.