City Council is slated to approve the fourth Payment In Lieu Of Taxes (PILOT) for a new development in the last 18 months. The governing body last month introduced an ordinance for a PILOT for Metro Rahway and will have a public hearing and final vote at its meeting on Monday night.
The exemption application requests a 15-year term and an annual service charge of 10 percent of annual gross revenues although there is some question about the length because the ordinance in some instances makes reference to a 10-year PILOT. The financial agreement and ordinance (O-31-13) also still lists Jean Kuc as city clerk (who retired and was replaced by Jeff Jotz sometime ago), among other errors. A revised ordinance is expected by Monday’s meeting.
Attorneys for the developer, Metro Rahway Urban Renewal, LLC, submitted the PILOT application and financial agreement to the Redevelopment Agency in early March. According to the exemption application and ordinance introduced last month, the developer likely would pay 10 percent of annual gross revenue for at least the first six years (estimated at $1.36 million in year one, with a projected annual increase of 3 percent) and then shift to a portion of taxes on the new property assessment:
* Year 1: Greater of $136,012 or the amount of “total taxes levied against all real property in the area in the last full year in which the area was subjected to taxation.”
* Year 2: $263,249
* Year 3: $273,884
* Year 4: $279,362
* Year 5: $284,949
* Year 6: $290,648
* Year 7: Greater of $296,461, or 20 percent of ordinary taxes on the new assessment.
* Year 8: Greater of $302,390 or 40 percent of ordinary taxes on the new assessment.
* Year 9: Greater of $308,438 or 60 percent of ordinary taxes on the new assessment.
* Year 10: Greater of $314,607 or 80 percent of ordinary taxes on the new assessment.
The developer anticipates that 12 units per month will be leased in the first year. Union County would receive 5 percent of the the PILOT payment.
The 1.6-acre project consists of Lots 1, 5, 6, and 23-25 in Block 149, which currently are assessed for a cumulative $1.285 million, paying almost $78,000 in property taxes. A new assessment for a 116-unit rental complex would be significantly higher than the former use as an industrial building. For instance, the Park Square buildings downtown are assessed at $4 million (Main Street side) and $9 million (Irving Street), respectively. Over the last several years, Metro Rahway/Heartstone spent almost $3.5 million to acquire the six parcels.
The estimated $17.7-million project, along Campbell Street between Elm Avenue and West Cherry Street, will have 116 residential rental units in four stories over ground-floor access parking of 120 spaces for the 52 one-bedroom units and 64 two-bedroom units. The exemption application indicates start of demolition in April 2013 (actual demolition was closer to June 2013), and completion by September 2014.
The City Council unanimously approved PILOTs last year for two projects: a 10-year PILOT for Meridia Water’s Edge and a 15-year PILOT for Meridia Lafayette Village. Early this year, the governing body also approved a PILOT for an affordable housing artists development slated for the former Elizabethtown Gas building. Another development completed by Heartstone about a decade ago, River Place, also received a PILOT in an arrangement that included the Parking Authority.