Council takes up a PILOT of a different kind Monday

The Allen Young Apartments on Central Avenue
(across from the Fire Station) are on the agenda.

Monday's Plainfield City Council business meeting will take up a PILOT of a different kind.

PILOTs (payments in lieu of taxes) is a familiar tool of projects promoted as "economic development". Think of the current large-scale apartment project on South Avenue.

They are advantageous to the developers (which after all are in the business of making a profit) because the payments are based on a formula (in the case of a residential project, on the rents) that never rises to the level of full tax rates because the school district and the county assessments are excluded.

This is fine for the City of Plainfield as far as covering its expenses, but not so much for the schools and the county. However, everyone has become accustomed to living with the arrangement. (Though an individual property owner might wonder if he or she is being soaked for the difference -- after all, the school and county budgets must be made up no matter who is let off the hook.)

Monday's PILOT, though, is of a different stripe.

The State of New Jersey allows as how affordable housing is a desirable thing and provides for a particular kind of tax abatement for providers of such housing.

The Council will take up an ordinance (MC 2019-12) for a PILOT covering the Allen Young Apartments, which has two locations: Central Avenue at West 4th Street, and Myrtle Avenue at Clinton Avenue, with a total of 104 qualifying units (plus 3 at market rate, for a total of 107 units).

Apartments vary from 1- and 2-bedroom units on the same floor, to 3- and 4-bedroom duplex (2 floor) units.

The documentation with the agenda shows that the new owner, IC Development Urban Renewal, LLC, replaces the original owner/developer of the project, United Plainfield Housing Corporation (UPHC), which obtained the original PILOT in 1973.

The UPHC is the outgrowth of the Plainfield NAACP Branch's housing committee, chaired by Freeman Whetstone in the mid-1960s. (See the UPHC website here.)

(This matter does not reference the sale or sale price by the original owner/developer, nor the sale date, nor what use UPHC is making of the proceeds.)

THE IMPROVEMENTS

The PILOT is predicated on improvements the new owner will make to the properties.

Outlining the improvements (click to enlarge).
Full details are in the online documentation.

Given the developing scandal with the State's tax incentive program involving Camden projects -- where an investigation is finding lax (or non-existent) followup by the State on performance of the promises made -- it is incumbent on the City to follow up on this developer's promises.

I say this because in the most recent other affordable housing PILOT -- at Liberty Village on West 4th Street in 2014 -- among the promises made were to be replacement of the sidewalks and renovation of the community center, all to be performed within 24 months of taking ownership.

To this date, I have never seen any work done on the sidewalks, and only just recently have I noticed new siding being put on the community center. We are now at five years after the adoption of the PILOT.

At the time, the PILOT created quite a stir when there were allegations that $1.5M set aside for improvements by the previous management (the Plainfield Housing Authority) had mysteriously disappeared, and that promised improvements had never been made. I wrote about those discussions and the allegations surrounding it in several posts you can find here.



'FIRST SOURCE' EMPLOYMENT

'Good faith' effort to use local contractors and businesses.
Full details are in the online documentation.

On its face, this looks good enough. The management team is supposed to stay in place -- I assume that UPHC will then still manage the property.

Will the improvements be done by Plainfield businesses and contractors? "Good faith" is not a firm guarantee of any kind. What do you think?


PILOT PAYMENTS

The payment schedule is itself an incentive
to perpetual rollovers.

For those who are curious, the schedule of payments shows why for-profit businesses like to engage in these projects. For the first 15 of the 20 years of the PILOT, only the PILOT is paid. In the last 5 years, the owner liability rises rapidly to a maximum of 80% of the fully taxable rate -- providing a built-in incentive to repeat the process at the end of the PILOT's lifespan. By which time all of the current players (and many of us) will no longer be on the scene.

Doing well by doing good? I suppose it depends on whom you ask.

City Council meets at 7:00 PM May 13 in the Council Chambers / Courthouse at Watchung Avenue and East 4th Street. Parking available on the street and in the lot across from Police Headquarters.

NOTE: I have seen officers in patrol vehicles allow Council attendees to turn onto 4th Street in front of Police Headquarters to enter the public parking. Exiting is no problem. Be cautious.

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  -- Dan Damon [follow]

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