By Ron Leir
Kearny took steps this month to award its first-ever tax abatement for a non-senior residential development when the governing body voted to introduce an ordinance for a 30-year PILOT (payment in lieu of taxation) for Schuyler Crossing at 350 Bergen Ave., off Schuyler Ave.
The mayor and Town Council will likely make it official when they hold a public hearing on the proposed agreement at their next meeting on Dec. 23 at 7 p.m. in the council chambers.
Developer Ed Russo, of Carlstadt, who recently completed a new residential complex in Lyndhurst and has another in process in Harrison, has already applied for permits to build the foundation for the 150-unit Kearny project.
Under the proposed agreement, Russo would pay the town an annual service charge, beginning with $375,000 (calculated as 10% of the annual gross rents) with yearly adjustments pegged to inflation and the state budget cap; plus an annual administrative fee of $2,500; and a one-time only $150,000 contribution to the town’s Affordable Housing Trust Fund for the rehabilitation of existing dwellings in Kearny.
Russo would also repave a section of Bergen Ave., up to the trestle train bridge, according to Mayor Alberto Santos.
Santos said that, without the PILOT, Kearny could have taxed the development at full value for about $1 million but – after a review of Russo’s application by financial consultant Tom Banker – town officials opted to go with the PILOT as a justified “incentive to build.”
As stated in the proposed financial agreement, the rationale for the PILOT is: “In the current real estate marketplace, the rents likely to be achieved by this project are not sufficient to pay for the costs of land and construction and the payment of full taxes while allowing the developer the opportunity to make a return on its investment that is sufficient to both warrant the risks and to convince the lending markets to provide the construction and permanent financing required by the project.”
And, the agreement goes on to say that: “Since the Town believes that [the] amounts to be paid under the terms [of this agreement] are greater than the incremental costs to be incurred by the Town as a result of the project, the Town believes that it is in its interest to provide the necessary incentive that will cause the project to be constructed.”
Plans call for construction of six, 3-story buildings containing 78 one-bedroom apartments, that are projected to rent for between $1,600 and $1,700 per month, and 72 two-bedroom apartments, expected to rent for between $2,200 and $2,400 per month, according to Town Administrator/ Construction Official Michael Martello.
With an abated property, no school taxes are collected but Santos said that the project is expected to generate, at most, 12 school-age children, “but probably it’s going to be less,” so the impact on the local school system figures to be minimal.
Santos said that an environmental cleanup of the project site – originally owned by the U.S. Navy and, subsequently, by a variety of commercial and industrial firms – has been completed by Russo, who previously built a CVS pharmacy and Investors Bank on adjacent property. The entire site was previously designated as an area in need of redevelopment by the town and Russo applied for the PILOT in June 2013.
Once the PILOT agreement is adopted and permits are approved, Santos said that development of the residential units figures to get under way by early 2014. “They’ll probably start leasing the apartments in 12 to 15 months,” he said.
Overall project cost is listed in the financial agreement as $31,302,686, with a construction loan of $21.3 million committed by PNC Bank.
A successful completion of this project, on the edge of an industrial area, could open the door to an extended “residential corridor,” Santos said.
Russo said: “We are excited about expanding our residential portfolio into Kearny. Mayor Santos and the Town have been great to work with throughout the entire development approval process, and we look forward to commencing the residential phase of this project.”