City Council approves Gramercy 20-year PILOT

Without comment from the public or its members, City Council on Monday night unanimously adopted a 20-year Payment In Lieu Of Taxes (PILOT) for The Gramercy.

The original PILOT application filed last month requested a 30-year PILOT based on a service charge of 10 percent of annual revenues but the ordinance (O-12-16) that was approved stipulates a 20-year PILOT. The measure was approved unanimously (7-0) with Council members Bob Bresenhan and Jennifer Wenson-Maier absent.

An annual payment of $78,000 will increase 1.5 percent each year but will be about $100,000 less than the 43-unit development would pay in properties taxes in the first year of the 20-year PILOT, according to my estimate.

The-Gramercy-elevation-150x150The five lots that will comprise the five-story project currently pay about $26,000 in property taxes. By my estimate, based on comparable developments, the 43-unit project slated for East Cherry Street would be assessed at about $2.8 million, for a property tax bill of about $179,000, based on 2016 tax rates.

The developer, R2-N2 Urban Renewal Properties, LLC, will contribute to road improvements, including the extension of Monroe Street from Main to East Cherry streets, but it’s unclear how much specifically will be contributed as there’s no specific line item in the pro-forma of the 26-page PILOT application. The timing of the extension of Monroe Street also will impact the timing of the 208-unit Main & Monroe development along Main and Monroe streets.

Under state redevelopment law, PILOTs are allowed within a redevelopment area, which Rahway’s Central Business District was declared some 20 years ago. The Gramercy is at least the seventh project to be awarded a PILOT. Two have received 30-year PILOTs, another two received 15-year PILOTs, and one received a 10-year PILOT. The 2016 budget, which will be approved on Tuesday, includes $1.855 million in budgeted PILOTs, including $367,000 from three new projects coming on line.

The $10.4-million Gramercy project is expected to break ground this summer, with a completion date of June 2018.