Both development and tax breaks soar on Paterson mayor's watch

By: Joe Malinconico
special to
NorthJersey.com
USA Today Network - New Jersey

PATERSON - A downtown theater that stood vacant for well over a decade is being converted into housing. Apartment buildings are rising on what had been empty lots in drug-plagued 4th Ward neighborhoods. Homes for people with special needs are being built near a hospital.
..... Those projects are part of a wave of development that has unfolded in Paterson in recent years, and in many cases the builders are getting tax abatements from the city government through the new Jersey Economic Opportunity Act of 2013.
..... The number of Paterson tax abatements approved under that state law has doubled since Andre Sayegh became mayor, according to Paterson Press analysis of a 17-page list of projects provided by city officials in response to a public records request.
..... During the first 30 months of the Sayegh administration, the city has approved 34 abatements that cover 20 years and 142 tax breaks for five years. In comparison, during the 30 months before Sayegh took office, Paterson had approved 17 of the 20-year abatements and 61 for five years.
..... "Many of those projects would have never been built without the abatements." said Michael Powell, Sayegh's economic development director. "It's important to take the long view here and see the economic impact this will have in 10 or 15 years.
..... But City Council President Flavio Rivera called the increase in the number of abatements inn Paterson "very alarming," noting that the tax breaks for five and 20 years are approved administratively by the mayor's staff without council oversight.
..... "You see these nice buildings going up all over the city, but they're not adding anything to the tax base,: Rivera said.

'INCENTIVES' OR TAX BREAKS?:

..... Critics of the tax abatement describe them as a way for outsiders to take advantage of the city, while supporters argue that the program provides a tool for convincing builders to put money into Paterson. "It's an incentive for investors," Sayegh said.
..... Councilwoman Lilisa Mimms questioned whether those investments truly help Paterson residents.
..... "Our first priority shouldn't be to attract investors," said Mimms, who endorsed Sayegh in the 2018 election. "Our first priority should be putting the residents and taxpayers of Paterson first."
..... Paterson was one of four cities in New Jersey designated as "Garden State Growth Zones" under the state law that authorized the five- and 20-year abatements as ways to attract investors and create jobs in areas that need revitalization. Other New Jersey cities - Atlantic City, Camden and Trenton - are also so-called growth zones under the state law.
..... In November 2013, the Paterson City Council approved an ordinance setting up the city's Growth Zone program. The municipal law requires builders to continue paying full taxes on the value of their land, with the tax breaks applying to the new construction, or "improvements," at the sites.
..... The five-year program tends to cover renovations on single-buildings projects. The property owners resume paying full taxes on their improvements after five years.
..... The 20-year program involves mostly vacant or abandoned sites where large-scale developments - generally ranging form six to60 apartments - are built. The improvements under 20-year abatement are tax-exempt for the first decade. Then, the owners begin paying taxes on 10% of the improvement in the 11th year, with the percentage increasing by that same rate each subsequent year until they reach full taxation at the end of the 20 years.
..... Paterson officials have not yet calculated the total value of the new construction that has happened in the city through the recent surge in tax abatements, Powell said. The new tax assessments for those sites won't be determined until the properties are scheduled to return to full taxation, he said.
..... Charles Florio, Paterson's biggest real estate investor in the past decade, has gotten about 40 abatements during the Sayegh administration - including about 12 in the 20-year program, the records show. Before Sayegh, Florio had gotten about 18 Growth Zone abatements.
..... "Andre Sayegh ran on economic development; there's no secret there," Florio said of the mayor's 2018 election campaign. "So Sayegh has doubled development in Paterson in half the time."
..... Florio said he probably would have gone ahead with many of his projects without the tax breaks but would have done so "with cheaper labor."
..... "Other developers are coming into Paterson because they have confidence that with Andre Sayegh we don't have a corrupt administration," Florio asserted.

COUNCIL QUESTIONS PROCESS:

..... But Sayegh's council critics complained that the administrative approval process sued for five- and 20-year abatements lacks the public scrutiny given to projects seeking 30-year tax breaks, which must be voted on by the city's governing body.
..... "I have a real issue with that method," Rivera said.
..... The city's 2013 Growth Zone ordinance gave the authority for approvals for the abatements to the tax assessor, rather than the council.
..... Florio said critics of the tax abatement misunderstand the value they bring to the city.
..... He asserted that his tax abatements have created about 250 apartment jobs, such as building mangers and maintenance workers, which he said are given to Paterson residents.
..... "You have to understand, these were blighted areas," the developer said.
..... Before the improvements, Florio said, the sites in question needed frequent attention from city workers: public works employees who boarded up abandoned structures, firefighters who battled blazes started by squatters and police officers addressing drug havens.
.... Florio argued that by eliminating the need for those frequent responses by city workers to the sites, the abatements in essence are saving Paterson money.

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