People renting apartments, condos, or other residential units for short periods of time will be required to pay the city’s 6 percent hotel tax as a result of an amendment to the city’s hotel ordinance adopted by the City Council on April 8.
Tourists and associated brokers, who have been using a loophole to avoid the tax in the past, will bear the burden of the cost, although the change could expose local residents to closer scrutiny by state and federal tax authorities if they have not declared the income on their tax returns.
The proposal introduced by Councilwoman Candice Osborne is designed to help pay for the impact that temporary or transient residents have on the community, something that is addressed by hotels who were previously subject to the tax.
Venues like AirBNB allow residents to rent out space, often for very high fees. In some cases, waterfront properties have rented condos and other residence for as much as $300 to $900 per night. Previously they were not taxable, even though each rental has the same impact on the local community as someone renting space in a hotel.
The change brings the city into compliance with the state definition of “short term rental.” Previously, Jersey City defined it as renting for 30 days or less. The state sees 90 days or less as temporary or transient.
Not everybody approves of taxing residences
Some residents who spoke at the public hearing opposed the tax.
Yvonne Balcer opposed the change, saying local residents already pay taxes to the city, and the hotel tax amounts to another tax.
Jarl Haugedal, who resides in Jersey City but also owns a rental company that has brought in as many as 200,000 tourists to Jersey City since its founding in 2008, said tourists spend money in Jersey City, shop in the local mall, and have a larger positive impact on the local community than most tourists who use hotels.
“People who rent these spaces spend money in local restaurants, while most of those who go to the hotels do not,” he said, noting that if the city imposes its hotel taxes, these people will seek similar arrangements in Hoboken or Weehawken.
But not all the residents were against the tax.
Daniel Sicardi said rental of these spaces has an impact on neighbors and the neighborhood. He said hotels have protection, such insurance, and have a clear record of who stays in them.
“When someone rents one of these you don’t know what kind of people will stay there, and it can be for a lot of money, as much as $500 a day.” He did question how the city would enforce the tax.
Carolyn Kolombaris, who owns and operates a rooming house in Jersey City, objected to the inclusion of rooming houses in the ordinance. She said she already pays sales tax to the state based on gross income, and is inspected by the state, while places renting space are not.
“It is not fair,” she said.
Councilman Richard Boggiano, who voted against the measure, said homeowners should not be taxed, and saw the law as unenforceable.
“I would want to amend this to have one and two family homes taken out of it,” he said.
His motion to table the ordinance change failed when no other council people would support his move.
Osborne defended the legislation
“All businesses, big or small, have to pay sales tax,” she said. “So it is not fair to favor one homeowner over another.”
Even Boggiano’s usual ally, Councilman Michael Yun, supported the measure.
“I agree with Candice,” he said.
City to deposit fund in new bank at the HUB
In two resolutions, the City Council also approved the use of a new bank as a repository for city money.
In the first ordinance, the council voted on a lease agreement with Investors Bank for a location near the proposed City Hall Annex on Martin Luther King Drive.
The council also approved a memo of understanding with the bank that would allow the city to deposit up to $75 million into the bank in exchange for promises from the bank to provide technical assistance and education support for small business start-ups and expansion, financial literary workshop, and other programs, and would be open to providing loans and other investments in that part of the city.
This would be the first full service branch bank in the Hub area since Bank of America closed its branch there in 2009.
As part of the agreement with Investors Bank, the city will name Investors as the city’s primary depository, with Investors providing all the products and services the city is currently receiving, in addition to the personalized service that Investors is known for providing.
“Bringing a bank back to the HUB used an innovative approach, leveraging city resources to provide for the needs of the local community,” said Mayor Steven Fulop in a release. “In Investors we found more than a bank, we found a strong community partner who will offer valuable services for Jersey City residents, such as financial literacy courses, first-time homebuyer loans, and mentoring support for small businesses.”
In remarking on City Hall’s announcement, Investors Bank President and CEO Kevin Cummings said, “We are pleased to begin an alliance with my hometown, Jersey City. I want to thank Mayor Fulop, the members of the City Council, and the community at large for providing us with the opportunity to make significant and positive contributions to people who live and work here. Our pledge is to share our resources by serving the bank’s consumer and business customers, creating opportunities and building relationships with the community to improve the lives of the people in my hometown.”
The branch, which is expected to open in the summer, will have hours Monday through Saturday and will feature a full service ATM that will be available to handle the deposit and cash needs of clients outside of normal hours of operations.
“Bringing a full service branch to a neighborhood that other banks have left is a positive step by Investors Bank and we applaud the city and Investors for this approach,” said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action. “We need to make sure the potential homeowners and small businesses in the area are well served and are confident that will be the case.”
Al Sullivan may be reached at asullivan@hudsonreporter.com.