The developers of Jersey City’s Newport Office Center VI want a tax abatement so that they can convert parking space on the second and third floors of 570 Washington Blvd. into office and storage space at the request of a future corporate tenant.
The Depository Trust and Clearing Corporation (DTCC), a company that deals in stocks and bonds, plans to relocate about 1,600 employees from Manhattan to Jersey City in 2013.
The Depository Trust and Clearing Corporation is scheduled to bring 1,600 employees to Jersey City in 2013.
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Agreements are controversial
Tax abatement agreements with developers are usually controversial. Developers enter an abatement agreement when they want to avoid fluctuating property taxes and instead pay a separate yearly service charge – usually based on a percentage of their profits – that will go straight to the city rather than being split among the city, school system, and county.
In the last year, several developers have asked the city to renegotiate their original abatement deals because of their financial problems during the recession.
However, Jersey City just underwent a 11.25 percent property tax increase last year. This year’s budget has not been finalized, but the city is operating with a budget deficit estimated at between $42 and $70 million. So the city needs all the tax money it can get.
Jamie LeFrak, managing director of the LeFrak Organization that built Office Center VI, said the requests are not really a big deal, just a “technical” matter that has to do with the original abatement granted in 2000, before the office tower was built.
However, the city could lose over a million dollars in taxes if the revision is approved.
The original abatement was for a building with 12 floors of office space and two floors of parking, to be eventually occupied by powerhouse corporate firm JP Morgan Chase.
JP Morgan Chase did eventually move in, but has been moving most of its personnel to other locations.
The developers want a new abatement for the two-floor conversion, LeFrak said, because the original abatement agreement called for taxes to be paid on the 12 floors of office space and two floors of parking (with a ground floor for retail), not for 14 floors and a ground floor.
The conversion project is scheduled to commence by Jan. 2 of next year and be completed by 2013.
When the project is completed, JP Morgan Chase will sublet the space, and will collect rent from DTCC, and in turn will pay the LeFrak Organization, who owns the building under the name NOC VI Land Associates.
JP Morgan Chase will move any remaining personnel out so DTCC can occupy the entire building.
City could lose money
Critics of abatements have complained that because the service charges are paid only into the city’s treasury, other property owners must shoulder a bigger burden for county and school taxes the fees don’t cover.
Last week, Deputy Mayor Rosemary McFadden issued a statement through city spokesperson Jennifer Morrill saying that both abatements are “not under consideration at the present time because the administration does not support the present terms and has informed the applicant of that fact.”
LeFrak said he hopes the agreement will be approved before the end of this year.
One new, one re-do
The proposed abatement for the conversion calls for a tax break over a 20-year period. It also seeks to deduct the $9 million it cost to build the two parking floors from what was considered to be the overall cost of the original Office Center, since those floors will be altered.
The original abatement for the entire building, completed in 2002 for $46 million, called for an annual service change of over $920,000 per year, or 2 percent of the original cost. The revised abatement would mean taxes would be based on a new cost of $37 million.
In years 1-15 of the abatement agreement, the developer wants to pay an annual service charge of 10 percent of annual gross revenue based primarily on DTCC’s rent. After that, the payments would become a percentage of the taxes due.
Ricardo Kaulessar can be reached at rkaulessar@hudsonreporter.com.