Market/Bank street project getting tax break from Morristown council; schools excluded

Conceptual rendering of 35-41 Market Street rooftop, with solarium and gym.
Conceptual rendering of 35-41 Market Street rooftop, with solarium and gym.
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On Tuesday night the Morristown council heard from lawyers, economic analysts and developers.

But the most persuasive argument for granting a 30-year tax break to a pending apartment/retail project came from a character named Butfor.

As in, “But for this tax break, this project would not get built.” And nobody gets any taxes.

Consultant Tom Banker, right, fields questions about Market/Bank project, Dec. 5, 2017. Photo by Kevin Coughlin
Consultant Tom Banker, right, fields questions about Market/Bank project, Dec. 5, 2017. Photo by Kevin Coughlin

Plans call for 54 apartments, renting from between $1,660 to $2,891 a month, with 20,000 square feet of street-level commercial space on a “blighted,” steeply sloped parcel straddling Market and Bank streets.

Acquired for $6.2 million from siblings Harry and Lisa Simon in 2015, the site is wedged between the new triangular Fox Rothschild office building and a future Cambria boutique hotel.

“Butfor” won unanimous council approval, on first reading, for a PILOT (Payments In Lieu of Taxes) agreement anticipated to shave $9.2 million from what developers Vertical Realty Capital LLC of Millburn and Stolar Capital of Hoboken otherwise might have paid in property taxes over three decades.  (Councilwoman Michelle Harris was absent.)

The town will pocket nearly $1.7 million more over this period, thanks to state rules that allow municipalities to keep 95 percent of PILOTs.

Biggest losers in this equation: The Morris School District, which instead of banking $9 million will get virtually nothing. Morris County will receive about $1.2 million less than usual; the Morristown & Township Library will forego approximately $282,505.

But hold on.

“That $9 million for schools doesn’t exist, because, but for the PILOT, the project wouldn’t exist,” asserted John Inglesino, the town’s redevelopment attorney.

And fewer than three children would be added to the public schools, calculated Tom Banker, a consultant for the developers, citing methodology from a Rutgers study.  The project, known as 35-41 Market Street SC LLC, is targeting young professionals who are unlikely to start families there, he insisted.

NEVER MIND THE MARKER: That's Councilman Bob Iannaccone, left. with Council President Stefan Armington, Dec. 5, 2017. Photo by Kevin Coughlin
NEVER MIND THE MARKER: That’s Councilman Bob Iannaccone, left, with Council President Stefan Armington, Dec. 5, 2017. Photo by Kevin Coughlin

Even so, Council President Stefan Armington, a Democrat, and Councilman Robert Iannaccone, a Republican, each pondered whether the town voluntarily should share a slice of PILOT revenues with schools because they serve the greater good of society.

Woodbridge Township gives its school district 25 percent of municipal PILOT money, which the schools leverage to bond capital projects that benefit the entire community, according to New Jersey Municipalities magazine.

Republican council candidates made PILOTs an issue in their unsuccessful Morristown campaigns last month. Market Street is at least the sixth PILOT deal authorized by the council in recent years.

Others involve the Modera 44 and Modera 55 apartments and the CVS pharmacy, all in the vicinity of Speedwell Avenue, and an apartment building nearing completion on DeHart Street.

Foreground: Attorney Frank Vitolo and developers Peter Brosens (Stolar Capital) and Joe Feldman (Vertical Realty). Background: Cameraman Joey Vitolo and Morristown Planner Phil Abramson, Dec. 5, 2017. Photo by Kevin Coughlin
Foreground: Attorney Frank Vitolo and developers Peter Brosens (Stolar Capital) and Joe Feldman (Vertical Realty). Background: Cameraman Joey Vitolo and Morristown Planner Phil
Abramson, Dec. 5, 2017. Photo by Kevin Coughlin

The Market Street re-developers have not spoken with the Morris School District, said their lawyer, Frank Vitolo. He predicted the apartments will become an “iconic building” that completes a transformation of the redevelopment zone near the historic Morristown Green.

It costs about $21,000 a year to educate a student in the district, Armington said, citing state figures.

Tuesday’s PILOT agreement, which must adhere to state guidelines, dedicates small annual land use payments to the school district. These payments may just cover expenses of enrolling three kids, said Maggie Haight, a consultant advising the town planners.

Schools already enjoy bonanzas from the town’s landmark 2015 tax settlement with the parent company of Morristown Medical Center (resulting in about $540,000 a year for the district) and from property taxes paid by 40 Park luxury condo owners, who have hardly any school-age children, Mayor Tim Dougherty noted.

The Vertical / Stolar team also contributed $800,000 to create 10 affordable, taxable housing units for Habitat for Humanity on Martin Luther King Avenue, the Mayor added.

What the Market Street side of the apartment/retail project should look like.
What the Market Street side of the apartment/retail project should look like.

Other benefits from the project, Banker said, include creation of 128 construction jobs and 78 permanent jobs. Some $10.5 million in PILOT payments would be made over 30 years, along with $24,000 annually in water fees and $34,000 yearly for sewer use, he said.

And 92 new apartment tenants are not expected to place much strain on local services such as fire and police, he added.

Yet even with tax incentives, the Market / Bank developers claim they only will see an 8.4 percent return on their investment. That’s “not spectacular” for this industry, Banker said.

Morristown Redevelopment Counsel John Inglesino and consultant Maggie Haight, Dec. 5, 2017. Photo by Kevin Coughlin
Morristown Redevelopment Counsel John Inglesino and consultant Maggie Haight, Dec. 5, 2017. Photo by Kevin Coughlin

One reason for modest profits is the high quality materials demanded by town officials, said Peter Brosens, principal and founder of Stolar Capital. “It’s very costly,” he told the council.

And the property poses topographical challenges. The structure will rise five stories above Market Street, and six stories above Bank.

Everything boils down to the “eradication of blight,” said Inglesino, the town’s redevelopment counsel. “At the end of the day, that’s really what it’s all about.”

Final adoption of the PILOT agreement is scheduled for Dec. 19, 2017.  Construction then should take about 18 months, estimated Brosens.

MORE ABOUT THE MARKET STREET REDEVELOPMENT

How the Bank Street side of the apartment/retail project may appear.
How the Bank Street side of the apartment/retail project may appear.

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4 COMMENTS

  1. In what other business could I create a business model that is not profitable unless I ask to be totally exempt from paying taxes? And while not paying taxes, I can go around telling people I’m serving the greater good by lining my pockets? Nutty stuff.

  2. William, there would be 0 taxes to talk about without the PILOT program, in addition to the ugly and blighted building there currently. Some things people get confused is they think these taxes are already in the towns pocket, and incentives are givebacks to developers. These are incentives that should be encouraged. Excited to see the new building.

  3. My household hasnt had anyone in the school district in almost 10 years, can i get some type of tax break?…absolutely not!

  4. $9.2 million in forgone taxes, now shouldered by the residents and ZERO $$$ to the school board.

    What a joke. How does a ticket that ran on a platform of afforablity and good governance approve a deal like this?

    I guess on the bright side, this new apartment building will only add “THREE” children to the school so the financial burden should be rather painless.

    I hope the message sent to the GOP, by the voters of Morristown, was heard, because you’ve provided town hall free reign to amplify these types of poorly structured deals that will negatively affect affordability for decades to come.
    Where are the tax rebates for the residents?

    Funny how it didn’t take long for the administration to show its appreciation to all of the residents who unwaveringly showed their support in November.

    Unfortunately, we all better guess use to this pretty quick, because there are going to be more and more of these types of deals to come in the future.

    Is it time to say we told you so?

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