A Look at Jersey City’s Latest Tax Abatement Policy
October 12, 2015
Jersey City Mayor Stephen Fulop recently unveiled several important revisions to the city’s popular tax abatement policy.
The latest changes reflect a new, comprehensive housing policy objective that seeks to distribute more evenly the benefits of the unprecedented wave of development now taking place in parts of the city.
Shortly after taking office in 2013, Mayor Fulop first revised Jersey City’s Payment in Lieu of Taxes (PILOT) program. The centerpiece of the revamped PILOT program was a tiered-system under which the terms of available tax abatements (most notably the length of the abatement) are largely determined by the location of the project.
The latest iteration of Jersey City’s tax abatement policy retains the tiered structure, while making minor tweaks to the policy. As set forth in Executive Order 2015-007, the revised program is intended to build on the success of the current PILOT program and instill greater transparency, objectivity, uniformity and predictability and to better employ the program’s incentives to meet the city’s strategic goals. Notably, the revised tax abatement revolves around a new tier map. The first three tiers incorporate the latest income data gathered by the city, while the expanded fourth tier includes areas in the city most in need of development.
In an effort to leverage the economic activity that is taking place in Jersey City, the amended tax abatement policy includes new affordable housing requirements and incentives. In the most sought after Tier 1, developers seeking abatements are required to set aside 10 percent of the total number of units for moderate-income housing, which is defined as housing available to households earning at or below 80 percent of the area median income. Alternatively, developers can make a contribution to the city’s affordable housing trust fund. Developers in the other tiers can further extend their tax-abatement terms by up to ten years by committing to construct affordable units or by making a voluntary contribution to the affordable trust fund.
Under the new tax abatement policy, the annual service charges increased slightly. Below is a brief summary of the new service charge levels provided by Jersey City:
|Tax Tier||Term||Annual City Service Charge||Annual County Service Charge||Administrative Cost Charge|
|Tier 1||10 years||13% annual gross revenues||5% of annual City service charge||2% of annual City service charge|
|Tier 2||10 years||12% annual gross revenues||5% of annual City service charge||2% of annual City service charge|
|Tier 3||20 years||11% annual gross revenues||5% of annual City service charge||2% of annual City service charge|
|Tier 4||30 years||10% annual gross revenues||5% of annual City service charge||2% of annual City service charge|
The revised policies and procedures apply to future long term PILOTs and related financial agreements. To determine how the new tax abatement policy may impact your project, it is advisable to consult with an experienced New Jersey attorney.
Donald M. Pepe
About Donald M. Pepe
Donald M. Pepe devotes his practice to all aspects of complex real estate development and real estate transactional work with an emphasis on retail and residential development.
The Tax Abatement Process in Jersey City, NJ: The Basics