Citing pandemic, Morristown council supports tax break for M Station

M Station rendering, Morris Street view, June 4, 2020. Screenshot by MorristownGreen.com
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Citing economic damage wrought by the pandemic, Morristown’s council voted 6-1 on Tuesday to give the M Station office redevelopment a controversial tax break known as a PILOT.

Mayor Tim Dougherty called the project vital to the town’s recovery. He and financial consultant Robert Powell told the council, via Zoom, that M Station probably would not get built without this concession to redevelopers Scotto Properties and SJP Properties.

“I am convinced that failure to move forward in a timely manner will jeopardize this project. M Station can be the key to our recovery, and we need to act accordingly,” Dougherty said, reading a statement addressed to residents.

He noted closures of several downtown restaurants, the pending shutdown of the Century 21 department store, and the bankruptcy filing of Kings supermarkets.

PILOT is short for payments-in-lieu of taxes. If approved at a public hearing on Oct. 13, 2020, the town still will get annual payments over 30 years, though at a lower rate than if taxed conventionally.

Consultant Robert Powell explains M Station PILOT project at Morristown council Zoom meeting, Sept. 22, 2020. Screen shot by Kevin Coughlin

The controversy surrounds elimination of taxes paid to the Morris School District. Morristown has offered PILOTs to at least six apartment and office projects in recent years, and the practice has become an issue in council- and school board races.

Tuesday’s vote came during a three-a-half hour virtual session that also saw the council introduce measures  prohibiting redevelopers from contributing to local politicians, and setting an 11 pm curfew for outdoor dining.

Additionally, the mayor ordered legal action against a “sober living” house that has vexed neighbors on Shady Lane for months. The council also heard neighbors complain about late night construction noise at Morristown Medical Center.

Black Lives Matter Morristown, Morristown High School students, and a school board member, meanwhile, urged the council to speak out against a Constitutional loophole they say perpetuates slavery.

The council held firm in its opposition to backyard chicken coops, despite a Catherine Lane resident’s insistence that fresh eggs are his insurance against a COVID layoff.

And an Altamont Court resident informed the council of yet another pandemic plague: Rats.

Thaddeus Kobylarz speculated that restaurant closures have sent the rodents foraging in overflowing dumpsters at nearby apartment buildings. The mayor and council said they would look into beefing up enforcement of dumpster management and pest control.

M STATION

M Station is poised to replace the popular Midtown Shopping Center strip mall with nearly 400,000 square feet of offices and retail, with a parking deck, promenade and plaza. The package also includes a traffic roundabout at Morris and Spring Street, and off-site improvements to Elm Street/Lackawanna Place and the Morris Street/Ridgedale Avenue intersection.

Before the health crisis, when the economy was booming, Powell said, he probably would not have recommended a PILOT. But lenders now have reduced their loans. The developers’ equity stake has more than doubled, to $27 million, halving estimated profits to around 9 percent–barely enough to continue, according to the consultant, who was hired by the council but is paid by the developers.

“It’s my conclusion that the provisions of the financial agreement to provide the payment in lieu of taxes are necessary in order for this project to be successful. And without those incentives, in my opinion, I do not believe this project would move forward,” said Powell.

Mayor Tim Dougherty, bottom left, endorses M Station PILOT to council, Sept. 22, 2020. Screen shot by Kevin Coughlin

When fully built out, he said, M Station will pay more than $1 million a year to Morristown–about four times more than the strip mall–while bringing 1,400 jobs to boost the local economy and paying nearly $2.5 million into the town’s affordable housing fund.

But “fully built out” is a big if, pointed out Council President Stefan Armington and First Ward Councilman Robert Iannaccone, who cast the lone vote opposing the PILOT deal.

Plans call for two stages of construction. The Eastern portion, which Powell said could start within months, would include a six-story building and a partial parking deck. The building would include retail on the ground floor, with the rest filled by anchor tenant Deloitte.

The Big Four accounting firm signed a 15-year lease in January to move its New Jersey headquarters there, and the developers have indicated they face pressure from Deloitte to expedite the project.

According to Armington, the traffic improvements also would occur during this stage.

Council President Stefan Armington speaks for M Station PILOT, Sept. 22, 2020. Screen shot by Kevin Coughlin

Phase two, the Western portion, calls for completion of the parking deck and construction of a seven-story office/retail structure. No tenants have signed on for that building, however, and it’s uncertain when or if construction will proceed. A passive-recreation park is proposed there in the interim.

The pandemic and social distancing have made telecommuting essential; post-COVID demand for offices is likely to shrink, intensifying competition among existing complexes for tenants, Powell acknowledged.

Morristown’s walkable downtown and cultural scene should attract corporate tenants to M Station, Powell and town Administrator Jillian Barrick told the council.

But Armington raised concerns that without another PILOT deal three decades from now to keep it competitive, M Station could become another Headquarters Plaza. That 20th century urban renewal project has been plagued by retail vacancies.

While generally supportive of the project, Iannaccone said the council needs more time to digest the complex financial arrangement, submitted on Sept. 18 and scheduled for adoption in two weeks.

“It can’t get done with the diligence and accuracy our public requires,” said Iannaccone, who is CEO of a Newark hospital and an attorney.

He balked at voting for the PILOT before seeing the redeveloper agreement — the document spelling out precisely what is required of the developers. It’s still being negotiated by town lawyers.

Councilman Robert Iannaccone questions M Station PILOT, Sept. 22, 2020. Screen shot by Kevin Coughlin

The PILOT ordinance includes issuance of 30-year bonds, for the traffic improvements. Iannaccone said the town will be paying the principal and interest on those bonds. He wants money placed into a reserve fund, to ensure the traffic work is completed even if M Station is not.

Iannaccone also voiced concerns that phase two delays will add years of construction inconveniences to area residents and commuters.  And he questioned the pace of project approvals, secured during virtual meetings with substantially less public participation than at public meetings before the pandemic.

“I don’t like the fact that we’ve been pushed a little bit with this project during a period of time that’s been COVID, during a period of time when public comment had certain limitations,” the councilman said.

The PILOT document was not available to the public on Tuesday.

M Station property taxes would be $6.50 per square foot without the PILOT, Powell said. In nearby Madison and Florham Park, he said, taxes are only about $3.50/square foot. The PILOT would bring the project’s taxes down to a “realistic, competitive” $3.70 per square foot.

“Without the PILOT, building two does not make any financial sense over the next five years to the developer,” the consultant said.

SHADY LANE

At Iannaccone’s prodding, the mayor directed town Attorney Vij Pawar to request a cease-and-desist order in state Superior Court to close a sober living facility on Shady Lane, while the town presses a zoning violation case in municipal court. Mayor Dougherty also pledged to update Shady Lane residents every two weeks.

The state approved the facility in April. The town contends it’s a commercial venture not permitted in the residential neighborhood.

Simmering for months, anger from frustrated residents boiled over on Tuesday.

One told the council someone from the sober living home tossed a syringe into his garden last week. Another neighbor, Lauren Bas, choked up describing the incident.

“It could easily have been our 2 1/2-year-old who picked up that syringe,” Bas said.

Other neighbors complained of noisy outdoor gatherings, foul language, increased traffic at odd hours, and defaced street signs.  A hazmat company entered the home during the summer, they said.

The residence has a checkered past, starting with a fatal fire a few years ago. Neighbors then fought a frat-style boarding home for college students. Next, it became an Airbnb rental. Now, the home is owned by a doctor who works across the street at Morristown Medical Center.

Dougherty and Pawar expressed sympathy, but said they are bound by due process and COVID-19 has delayed legal proceedings. Pawar said he anticipates a municipal judge to rule on written arguments by the end of October.

Bas said she felt “placated and ignored.” Neighbor Joel Schrieber, also a parent, put it bluntly to officials: “If you had to raise your kids next to a house illegally occupied by drug addicts, how would you feel?”

Councilman Iannaccone apologized, saying the council has been preoccupied with large projects.

“Enough is enough. Time to issue a cease-and-desist order,” he insisted. “These people’s lives have been totally disturbed, there is no sense of safety in their neighborhood. It’s our job to protect them.”

Another resident, Mike Quattro, said local officials seldom put citizens first anymore. He said police were dismissive when he complained recently about evening jackhammer noise from hospital construction. With the exception of construction code officer Fritz Reuss, Quattro said, town officials and police “look at things from their perspective instead of the residents’.”

A summons has been issued for the noise, Pawar said. Dougherty said he called Trish O’Keefe, president of Morristown Medical Center, the next morning and sent her a video of the off-hours construction.

“Whoever runs that operation should know better than to run a jackhammer at 9 at night,” the mayor said.

PAY TO PLAY

The council unanimously introduced an amendment to its 2009 “pay to play” ordinance that would prohibit the town from approving any project pitched by redevelopers who have contributed to local office holders or campaign committees while their redevelopment plans are under review.

The clock would start ticking when the council authorizes the planning board to study if a proposed property needs redevelopment. Restrictions would continue until completion of all matters specified in the project’s redeveloper agreement, or until rejection of the project.

Introduced  by Council President Stefan Armington to minimize potential conflicts of interest, this ban on contributions would extend to anyone with a 10 percent interest in the redevelopment entity, along with partners, officers, affiliates and subsidiaries, and “spouses and adult children at home.”

The amendment prohibits in-kind contributions as well as monetary donations to any Morristown official who can enter into or approve redevelopment agreements. Contributions are barred to the officials’ campaigns, political action committees and political parties.

More work is needed, said Iannaccone, who worked on the measure with Armington and Council Vice President Toshiba Foster.

The updated ordinance would exempt contributions that pre-date it. “I think that’s a cop-out. We should be accountable for any contributions we take,” he said.

Iannaccone also disagrees with a “get out of jail” clause that gives officials 30 days to return contributions in certain situations.

“If you’re running for political office, you should know what you’re doing, and the ramifications of what you’re doing,” he said.  The town’s professional consultants also should be scrutinized more closely for potential conflicts, the councilman asserted.

The measure could be adopted on Oct. 13.

AMEND THE THIRTEENTH

Responding to impassioned pleas from the public, Councilwoman Sandi Mayer said she will present a resolution next month endorsing Amend the Thirteenth.

The grassroots movement is spearheaded locally by resident Rebecca Karger. It aims for voter referendums in 2021 to remove language from the 13th Amendment of the U.S. Constitution that allows slavery and involuntary servitude “as a punishment for a crime.”

“It’s time you get on the right side of history,” T’Anna Kimbrough, founder of Black Lives Morristown, told the council.

Amend the Thirteenth advocates say the Constitutional loophole perpetuates exploitation of prisoners–particularly, Black inmates– in forced labor programs. Blacks comprise a disproportionate percentage of the prison population.

“This can no longer be acceptable. No more excuses. My life depends on it,” said Alia Masaud, one of several Morristown High School students who urged the town to set an example for Morris County by adopting a resolution similar to one passed in Jersey City, Paterson and Hoboken.

Morris School District Board Member Meredith Davidson made the same request. Board candidate Oliver Starnes said the council should go further, with an unequivocal denunciation of white supremacy.

““Please do not be afraid to out yourself out there—name white supremacy, denounce it, and abolish slavery in all its forms,” Starnes said.

IN OTHER BUSINESS…

Hours for outdoor dining at restaurants and bars would be 7 am to 11 pm, seven days a week, under an ordinance unanimously introduced by the council. Sidewalks must be cleaned by 8 am the next day.

For the pandemic, many restaurants received special permission for sidewalk dining. This ordinance should eliminate confusion about operating hours when things return to normal, according to Armington.

Courts have overturned the council’s ad hoc alcohol curfews on bars seeking expansions, saying such restrictions should be governed by ordinances covering all establishments.  This ordinance should be in line with those rulings, Armington said.

And…the council was unmoved by another appeal from chicken coop owner Peter Sudol.

The Catherine Lane resident said he may be laid off a second time during the pandemic, and wants to keep the four egg-laying hens he set up in his yard, in violation of town zoning.

“Having pets in the backyard that provide meals for my family gives me some piece of mind,” Sudol said.

Sudol has presented petitions, model ordinances, and testimonials from chicken proponents. But the council is not keen on rewarding residents who flout town regulations.

“The town ordinance will remain as it is,” said Councilwoman Sandi Mayer.

Coming up: The planning board will discuss potential redevelopment of a Washington Street office building, via Zoom, at 7 pm this Thursday, Sept. 24. Outdoor meetings are scheduled at Foote’s Pond, on Monday, Sept. 28, at 6 pm, to discuss pond hydro-raking slated to start on Oct. 5 ;  and on Thursday, Oct. 5, at 5 pm in the Burnham Park pavilion to discuss the park’s master plan.

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13 COMMENTS

  1. Karen and Ed – hahahahaha! Excellent argument there. Even if I was a robot living in another state, like you say I am, you won’t answer my questions? Perhaps you realized your comments made no sense at all…just a thought though.

  2. I am not comfortable with continuing a dialog on this site with people who don’t fully identify themselves with both first and last names.

  3. Karen, the PILOT program will be paying more than the tax the strip mall is paying….this is why I don’t understand your point.

  4. So the PILOT relieves the property owner from paying school taxes.
    The “lion’s share” of the property consists of Block 3505 Lot 10 and 10.01
    Lot 10 is assessed at $4.6 Million and was taxed $137,448 in 2020.
    Lot 10.01 is assessed at $1.4 Million and was taxed $41,832 in 2020
    So that means $87,480 goes to the school and $91,980 to the town.

    When fully built it is estimated $0 will go to the schools and over $1 Million to the town. PILOT payment over 4 times higher than taxes, but over 10 times more in revenue strictly for the town. When full built it will contribute 0 children to the school system. So the town will have over $1 Million to fund essential services rather than $91,980.

    But the office workers may buy homes in Morristown (Court St), Morris Township (Hanover Ave), or Morris Plains (Tabor Road) in newly built homes which make up for the loss in school tax revenue.

    How is this bad?

  5. Connor, no,the opposited. My point is that the Midtown Shopping Center was paying property taxes. Then they empty it out, tear it down and the new project gets a tax break.

  6. Thanks for some common sense Reza. You would think most people would understand that point.

    DV – did your house taxes go up a large amount because of the other PILOTs that supported projects which in turn greatly increased your home value in the last decade (assuming you own property in town) ? Are you saying in terms of tax revenue that the town will be worse off if this project didn’t go through?

    Karen, still waiting for your reply…

  7. “Black Lives Matter Morristown, Morristown High School students, and a school board member, meanwhile, urged the council to speak out against a Constitutional loophole they say perpetuates slavery.”

    LOL!

  8. “Town Council Approves Tax Increase for All Residents” should be the headline, because that’s the reality of it. Multi million dollar company developers get tax breaks while the residents are left to make up the balance. Morris Twp’s elected officials have no control over decisions made by the Town but Twp residents are left on the hook for higher school taxes to make up for it. If the tax rate on the new property was neither “realistic” nor “competitive” as they claim, why did they move forward with trying to get the project approved in the first place? This was planned from day 1, knowing full well Morristown never turns down an opportunity to give a company a tax break. The pandemic is just a convenient excuse.

  9. I am not close to the details of Morristown project at all but PILOTs are commonly offered by local governments to attract/retain projects – pandemic or no pandemic. Compare what is the current taxes that would have been generated with what the increased tax will be with all those new units and businesses. It will be lower than the authorities will get under normal rules but the total should still be significantly higher than what they were getting.

  10. No surprise there, what BS. Their application was heard AFTER the pandemic started. Morristown government is shady shady shady

  11. ugh Karen. Are you suggesting no taxes are being paid on the strip mall because it is vacant now….? Taxes are dependent upon tenant occupancy in real estate?

  12. This is interesting. M Station wants tax breaks because of the pandemic. If the strip center on Morris Street hadn’t been closed down, would it have been offered tax breaks because of the pandemic?

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