Fight over SID expansion will go to court

A group of property owners is taking their fight over expansion of the downtown Special Improvement District (SID) to court.

Fanwood-based attorney William Michelson, representing Friends of Rahway Business, LLC, confirmed yesterday that he plans to file suit this week in Superior Court of Union County, seeking to overturn the ordinance adopted last month that would expand the SID to 522 commercial properties citywide.

City Council approved expanding the SID during its regular meeting on Dec. 8, after introducing the ordinance on Nov. 10. Property owners that were not previously in the SID likely would see a property tax increase equivalent to almost a 5-percent increase of their 2014 tax bill. For some large commercial properties outside of downtown, that could mean another $10,000 on top of their property tax bill.

Michelson will ask a judge to invalidate Ordinance 42-14, which he said does not preclude new legislation from being proposed. He expects the city will be served with a summons and complaint within two to three weeks and a ruling could take six to nine months. In the meantime, he would seek an injunction to not levy the new tax or set aside the levy into a special fund until the court decides.

“It’s a very unusual thing the City Council did. I never heard of expanding a SID outside its original boundaries,” he said in a brief telephone interview on Tuesday. Properties within a SID pay an additional assessment typically to fund things like decorative work, sidewalk improvements, better lighting or signage. Routes 1&9 and St. Georges Avenue have stretches with lots of businesses but then there are scattered sites around town that are not near or part of any business district, Michelson said. “SIDs like that are supposed to be contiguous. This is almost like spot-zoning.”

City Administrator Cherron Rountree has said the expanded SID will be able to bring existing services that only were available to downtown merchants to other businesses in the city, and help to better promote Rahway. She also has said that some commercial areas will have different needs than others so some services could vary.

Michelson pointed to an nj.com story about the SID expansion in which Mayor Samson Steinman is quoted as saying as the SID expands, other business will share in the success, and so must contribute. SID expansion appears to be a new tax to generate revenue for growing expenses of the Arts District, the attorney said, adding that it’s been difficult to pin down any budgets or expenses for the entity.

6a33d-img_1086The SID was created about 20 years ago with downtown boundaries that comprised about 138 properties. Expanding the SID citywide would increase the number of properties to about 522, and include commercial properties of four or more units (any classified as 4A, 4B or 4C). It’s unclear if properties that have been granted PILOTs would be included; the expanded list of properties includes some (Meridia Water’s Edge at City Hall Plaza) but not others (Metro Rahway, Park Square).

The current SID has a total assessed value of $37 million, with a tax rate of $0.351 per $100 of assessed value to generate some $130,000,  that’s overseen by the Rahway Arts District board. It’s been nearly five years since SID revenues were transitioned from oversight by the defunct Rahway Center Partnership to the RAD. Rountree said an expanded SID likely would have a lower tax rate but generate more like $600,000 to $700,000 in revenues.

Friends of Rahway Business, LLC hosted a meeting at Raffio 63652-img_0905Giacobbe’s East Cherry Street offices on Saturday to discuss the litigation. Giacobbe, a prominent property owner in the city for many years and a former councilman,  was among a number of speakers that questioned expanding the SID during last month’s public hearing. Also involved in the effort are Rafael Ortiz., who owns several properties within and outside the SID, and former Republican mayoral candidate Patrick Cassio, according to Michelson, who estimated that more than 100 property owners have expressed interest. Some have been active and others have been willing to contribute monetarily to the cause, which is why the LLC was formed, he added.

Michelson has represented other parties in disputes with the city in the past, including the former owners of Hamilton Laundry, A&M Supply when it relocated from its Campbell Street property, and Daron Fashions.