A diagram for the building has been made on skyscraperpage.
And here it is compared to the other skyscrapers of Jersey City. It dwarfs 99 Hudson who itself dwarfs 30 Hudson Street on the skyline
And also next to the skyscrapers of NYC
I do hope that if this height is approved some sort of change will be made to the design of the building so we don’t get a 1000 foot glass square.
Have we seen a full rendering of this project? I think the only image that has been officially published is the base. Someone else made a rough massing on the skyline which is only illustrative of the height.
This project would require a ton of state subsidies and a PILOT from the city to be financially viable.
It is not totally dead yet however. The city and owner are still negotiating over terms as of 2 weeks ago, including a public school and a tax abatement. However it is not very clear whether the negotiations will be successful, especially since they have rights to build the 52-story Rem Koolhaas version as part of the settlement from 2006.
With the cities budget concerns I wonder if a PILOT would go anywhere. On one hand, if the budget deficit was smaller, but not so small as to be easily solvable, a PILOT could be a great injection of cash. On the other hand, with a large, systematic shortfall, a PILOT would only make things worse in the long run. The property tax of such a large tower would be… unwise to forego.
Let’s hope this gets built! However it gets there.
Sigh, PILOTs have to be the most misunderstood thing in NJ municipal finances. The City of Jersey City would get more money from a PILOT than straight taxes. Yes, PILOTs — Payments in lieu of taxes, are financially advantageous to the city.
The County or JCBOE, not so much.
With the city budget issues, they should be granting more PILOTs to get more revenue.
This is absolutely true all else being equal, but the unfortunate reality is also that a 100% market rate project with no PILOT produces more in taxes than a 20% or 15% below market rate project with a PILOT. I analyzed the PILOT deal for 177 Grand St and it illustrated that the 15% below market rate units cost the city about $250k+ each in foregone tax revenue in terms of net present value. Still, I supported that PILOT due to the 62 BMR units while the current mayor voted against it. But it does carry a cost.
Can you confirm that no PILOT produces more taxes for the City?
It might be more taxes overall for the County and JCBOE, but the City will see less revenue then it would have got in a PILOT.
Please show your math if you have it.
My math on 177 Grand St is here (in my next post below I provide a walkthrough). The crucial thing is that we are comparing a 100% market rate project with no PILOT, versus a 15% BMR with a PILOT.
However, I agree with you that a 100% market rate with a PILOT would produce more revenue for the city than 100% market rate without a PILOT. And a 15% BMR with a PILOT also produces more revenue for the city than a 15% BMR without a PILOT (because it would produce $0 because it simply wouldnt happen without the subsidy).
To walk through it:
NW Financial produced this chart for 177 Grwnd zSt, showing how much Silverman would pay in PILOTs versus how much Silverman would pay in conventional property taxes (if this table intimidates you, you can skip to the explanation right below the image):
The bottom row of the “Gross PILOT” column, tells us that Silverman would pay the city $106 million in PILOT payments over 30 years, while the bottom of the “Conventional Taxes” column tells us that without a PILOT, Silverman would pay a total of $142 million in property taxes, a $36 million difference. If we were to divide $36 million by 62, we would arrive at a public subsidy of over $581,000 per affordable unit. But this computation unfairly overstates the size of the subsidy. For one, a dollar invested or used today is worth far more than if you were given a dollar 30 years in the future. This is a concept known as the net present value [4]. Basically, accountants use something called the “discount rate” to compute net present value. The discount rate is often selected by determining an entity’s cost of capital; in this case, since the city is a government entity, the 10-year Treasury rate is an appropriate choice. At the time of writing, this rate was 4.139%. When we plug in our discount rate into the net present value formula [5], we get a net present value for the subsidy of $21,903,167, or $353,297 per affordable unit.
There is one other wrinkle, however. Not all of the cost of that subsidy will end up being borne by city taxpayers. According to the latest city budget [6], 81.6% of a property’s tax levy goes to various city entities (municipal government, schools, libraries, the arts fund, etc), while 18.4% goes to county entities. In contrast, only 5% of the PILOT revenues go to the county. So we have a 13.4% gap in county taxes under the PILOT scenario. This 18.4% figure can be deduced from the chart below.
In a sense, this means that the city gets a bit of a free ride from the county, making the PILOT subsidy somewhat less costly to the city. However, of the county’s $453 million tax levy [7], $196 million (or 43.2%) is paid for by Jersey City taxpayers (see the chart below). So even though Jersey City is “cutting” the county out of its full share of property tax revenue on the development, the county still needs revenue so they turn around and raise their portion of the property tax bill on all the other tax payers. Thus, a PILOT that attempts to cut out the county is still 43% “paid for” by Jersey City anyway. It’s like your spouse treating you to dinner by paying with your joint credit card.
If we look at the change in direct city revenues due to the PILOT, we get an net present value figure for the direct city subsidy of $164,274 per affordable unit. A similar calculation for the county shortfall gives us a county share of $189,003 per affordable unit. Assigning 43.2% of this shortfall to city taxpayers, we get:
($164,274 city shortfall per affordable unit)
+ (43.2% county share paid by city)
× ($189,003 county shortfall / affordable unit)
= $245,829 city taxpayer shortfall per affordable unit.
The calculations that led to the net present value figures presented here are available in the Google Doc above for review.
I will say if 100 Bay St gets state subsidies, the math would change and become more favorable to the city. If thr subsidy is big enough, you could again have a situation where the PILOT+subsidy+affordable scenario brings in more revenue than no PILOT and market rate.
Thank you. I really appreciate the chance to look at your math.
It was a little hard for me to personally follow, but I understand the point you’re raising. As a suggestion, is there a way to better show the distinction between the two analyses? Maybe two separate tabs or a bordering indicating the math applicable if a PILOT is granted and the math applicable if no PILOT is granted.
Second suggestion is to include the JCBOE taxes if no PILOT is granted. I see the County there for the no-PILOT situation, therefore JCBOE should be there too.
Third, it might not be a bad idea to include 2-3 years before the project is built, while in its planning phase. It really emphasizes the point that the city is getting so much more revenue either method then the vacant or under utilized plot of land before.
Four, include an another column showing the ratable and city tax rate at the given year. Also, for pilots, it’s typically done as a percentage of construction value that escaping its year. Would like more details about the assumptions.
Finally, the net present value was an excellent addition. In that case, it may make sense to expand the projection another 10-years or so to see what happens when the pilot ends and how much revenue the city would then get from normal taxation. It’s not going to make a huge difference for a 30-year pilot but things become interesting if it’s a 5, 10, or 15-year pilot.
One more thought, your analysis also includes the below market rate housing that’s created in a PILOT, that the city is effectively subsidizing, compared to the all market rate units in a non-pilot building. There probably needs to be a better way to account for this benefit, but I don’t know how. Maybe the value of the affordable housing can be added back in for year 2 when the building is built. This is essentially funds the city directed to the creation of affordable housing instead of being sent to general revenue. The Federal government foregoes income taxes with affordable housing with the LIHTC developments. But the foregone tax revenue is still accounted for and it’s treated as an expenditure.
One idea would be to include the value of having a 30-year below market rental unit that the city essentially created through tax policy that forgo the tax collection. That has to be accounted somehow to make the comparison more apples to apples.
Thanks for the feedback!
As to your second point, I did not include JCBOE because from the POV of city taxpayers, there is no difference between a tax dollar that goes to them vs one that goes to the city. The BOE and city levy taxes on the same exact tax base. If the city “steals” a dollar from the JCBOE, then that means that for thr same level of spending, the city lowers the city’s tax levy on taxpayers by a dollar. But the JCBOE has to raise their tax levy on the same taxpayers by a dollar to make up for the lost dollar. The net effect is zero.
I hear you, but we’re not talking about the perspective from the tax payer alone, we’re talking from the perspective of Jersey City’s budget.
There is no real distinction between the two perspectives imo. Jersey City’s budget is limited by what can be raised from taxpayers. The more that taxpayers are taxed by schools, the less that they can be taxed by the city, politically speaking. And vice versa.
This is really interesting, thanks for sharing! I assume this article is yours: Jersey City Housing Plan: The True Cost of Affordable Units ?
If I reverse engineered the Rent Rolls and Developer Returns parts of your spreadsheet and did the math right, 277 Grand St would be viable at 7.5% affordable housing without a PILOT (just paying normal taxes) with the rents the developer thinks they will get and their 5.5% interest loan.
Also assuming my math is right, at the rents the auditor NW Financial thinks they would get, ~9% affordable housing looks viable without the PILOT and if they can get a loan at 4% instead of 5.5%, then the 15% affordable housing begins to look viable without a PILOT.
The 20% affordable set-aside the developer is proposing for 100 Bay Street leads me to speculate they are looking for state aid…
Seems like the obvious answer is “add more net-positive taxpayers”. Building this could help accomplish that.
I’m looking at this data from the viewpoint of the Jersey City municipal budget. Especially now in the time of a budget crisis. My interest is does a tax abated building with PILOT revenues generate more revenue for the city budget than through normal taxation.
I believe the answer remains yes, because Jersey City is also trying to secure affordable housing units, which really should be seen as increase expenditures.