Due to “popular demand,” our “Tax appeal week” posts have been extended into another week. OK, the real reason is I couldn’t get it done last week.
Rahway Office Center, LLC, which owns the top two floors of the building that also houses the public library, reached agreement on a 25-percent reduction in its property taxes for the last four tax years and the City Council approved the settlement (AR-248) at its Nov. 12 meeting.
Rahway Office Center, LLC, (Block 305, Lot 8.03 C0201) challenged the tax appeals for 2010 through 2013. The 41,000-square-foot office condo, which occupies the top two floors of the building, sold for $4.55 million in late 2008. Rahway Public Library occupies 32,000 square feet (the first two floors) of the building’s overall 75,000 square feet.
The property was vacant until 2009 when 7,000 square feet was leased to Anlar Construction, “which stopped paying rent in 2010 and was eventually locked out in September 2011, owing $166,000 in back rent,” according to a July letter from Livingston-based Value Research Group as part of Exhibit A in the resolution, detailing the assessment dispute and settlement. The building is currently vacant but I’m told there is a potential tenant in a healthcare company that requires some renovations.
“The property has a chronic vacancy problem compounded by an extraordinarily weak office rental market,” according to the appraiser’s letter. “Vacancy rates have risen significantly during the past five years” while asking rents for available space have dropped at the same time. “Given the depressed state of the office market and the subject’s poor performance, the settlement assessment represents the best outcome for the city.”
The office condominium had been assessed for $1.862 million, with an equalized value ranging from $4.37 million (2010) to $3.614 million (2013). In the disputed years, property taxes were $95,499 (2010), $107,362 (2011), and $108,777 (2012 and 2013) — a total $420,415 over the four years.
In negotiations, Rahway Office Center first proposed a reassessment of $900,000 for each appeal year, which would have been a total refund of $217,240 over the four years, or almost 52 percent. The appraiser believed an equalized value for each appeal year ranged from $3.5 million in 2010 to $2.891 million in 2013, which would be a stabilized assessment of $1.489 million for each appeal year, offering a refund for all years of $84,092, roughly 20 percent. The property owner countered with a reduced assessment of $1.1 million, which would have yielded a reduction of $172,089 over the four years, or 41 percent.
After negotiations, the two sides agreed to recommend an assessment of $1,396,700 for all years, which would result in a total refund of $105,110, or about a 25-percent reduction on the four years of taxes.
A little history on the project: Hailed as a revolutionary public-private partnership at the time, the $15-million facility opened in 2004 with funding from sources outside of city government after the previous library at St. Georges and Central avenues was flooded during Tropical Storm Floyd in 1999. It was the eighth flood of the building in 32 years at that site. Of the $15 million, the city received approximately:
- $4.4 million from federal and state governments;
- More than $3 million from the sale of the top two floors;
- $3 million from Federal Emergency Management Agency (FEMA);
- $2 million from a state library grant;
- $1.4 million from the state Office of Emergency Management; and,
- $1 million from U.S. Economic Development Administration.