After a year of questions from the public, the city’s tax collector will audit a high rise waterfront development that received a generous tax exemption agreement which some residents say shortchanges the city millions of dollars in tax revenue each year. A state official also confirmed last week that the audit of this development, known as Aqua Blu, is part of a larger audit of other properties that have received controversial tax breaks from the city in recent years.
Developers often enter into a tax abatement agreement, or payment in lieu of taxes (PILOT), to pay a separate fee to the city instead of paying fluctuating property taxes. This keeps their tax rate stable over a number of years. The amount they pay is occasionally equal to regular taxes, and can be based on a percentage of their profits. The money goes directly into the city budget and does not support local schools, although developers pay a nominal fee for county taxes.
Some residents say these tax credits shortchange the city millions of dollars in tax revenue each year.
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By the numbers
The original intent of such deals was to draw developers to blighted areas. But the tony Newport community that houses Aqua Blu is hardly blighted.
Located at 110 River Dr., Aqua Blu features floor-to-ceiling windows, a 24-hour concierge, and gorgeous views of the New York skyline.
According to the development’s web site (www.NewportRentalsNJ.com), there was a 409 square foot studio available for $2,028 last week. An 812 square foot one bedroom, one bathroom was advertised on the web site for $2,560. A two bedroom, two bath 1,111 square foot apartment was renting for $3,348. Another two bedroom unit with an unobstructed view of Manhattan rents for $3,749.
But these rates aren’t even close to the rent estimates Aqua Blu’s developer, Jamie LeFrak, used when he applied for his abatement from the city in 2007. According to LeFrak’s application, Aqua Blu would have approximately 20 studio apartments that would collectively generate $208,000 annually in rent. This breaks down to about $866 per month in rent for a studio – $1,162 less than the studio apartment advertised online last week.
Similarly, LeFrak’s application to the city’s abatement committee stated that Aqua Blu would have approximately 166 one bedroom apartments that would collectively generate more than $3.1 million annually in rent. This rate averages to a monthly rental of $1,600 per one bedroom, or $960 less than the one bedroom unit the Reporter found online last week.
Aqua Blu’s 159 two bedroom units were to collectively generate $4.5 million in revenue each year, which breaks down to an annual per unit rental rate of $2,383. Two of the two bedrooms found online last week were $965 and $1,366 higher than these estimates.
“An abatement is based on your projected revenue,” said Esther Wintner who began raising concerns about this development last year. “I understand that you have to use estimates when you submit the application. But if the revenue is significantly higher than the estimate the city needs revise the agreement and get the money it’s owed. ”LeFrak submitted the abatement application in January 2007 and broke ground on the development by the end of May. The City Council approved the PILOT agreement by a split vote of 5-1 in September of that year. Viola Richardson was the only City Council member to vote against the Aqua Blu abatement. Councilmen Steve Lipski, Mariano Vega, chair of the city’s abatement committee at the time, and Steven Fulop, who generally opposes abatements for waterfront developments, were absent when the Aqua Blu vote was taken.
“I have never been a supporter of continuing to give out long-term tax abatements on the waterfront. I think they are no longer needed, as they were years ago, and I don’t vote for them,” said Fulop, who represents Ward E where Aqua Blu is located. “I 100 percent support an audit and think the community request by Esther and others is spot on. I am sure what you will find is shortchanging the city is commonplace with minimal oversight from city hall.”
Time for an audit
Since Wintner began questioning whether the city was getting all the money it is owed from Aqua Blu, other residents have been asking about other developments that received PILOTS from the city. Most recently, anti-tax advocate Yvonne Balcer has raised similar concerns regarding Canco Lofts on Dey Street.
These complaints, it seems, have fallen on listening ears.
Last week, Colleen Kelly, a staffer with the state Department of Community Affairs’ Division of Local Government Services, informed a resident that Gerry Seneski, “our assistant director for Financial Regulation, called and spoke with [city Business Administrator Jack Kelly] to discuss what the city is doing to ensure that PILOTs are being paid. [Kelly] indicated that the city has engaged an independent firm to audit a sample of PILOTS and [Aqua Blu] will be included in the sample…He noted that the process of auditing PILOTS began last year to ensure that any billing issues are identified and corrected. He further noted that part of the city’s efforts to ensure appropriate compliance with PILOT obligations included reassigning staff responsible for PILOT collections to the Tax Collector’s Office.”
City Tax Collector Ed Toloza last week confirmed that his office is assisting with this audit and said, “I will be putting the request for an audit on the August 22 [City Council] meeting agenda.”
A spokeswoman for the city said audits have been or will be done on 77 Hudson, Marbella Tower, Hudson Hospitality, Newport Hotel One, and Craven Point, in addition to Aqua Blu.
“I am glad to hear of the administration’s effort to audit abatements and hope this includes not only ensuring that payments are being made, but making certain that numbers used in calculations reflect real values and not possible underestimations,” said Wintner. “These are challenging economic times, and we must make sure that everyone is living up to all of their obligations.”
E-mail E. Assata Wright at awright@hudsonreporter.com.