| Author | Message | ||
     doublea Citizen Username: Doublea Post Number: 305 Registered: 3-2003 |
Today's News-Record reports that LCOR, the developer and current owner of Gaslight Commons, has confirmed the rumor that they have had discussions about selling the development. The rumored sales price is $40 million. Those of you who have followed the PILOT discussions will recall that the PILOT payments, which last for 30 years, were based on a construction price of $25 million, which I am guessing will be the same for any buyer, even if the development is purchased at a higher figure. If this is correct, it means that LCOR was able to obtain a tax abatement which allowed them to "flip" the property for a $15 million profit in a short period of time, and South Orange gets none of the windfall. This is exactly what I was guessing Beifus would do if he obtained a tax abatement. In fact, with the planning board approval and then a PILOT agreement, he would probably flip the property even before construction began. | ||
| mrosner Citizen Username: Mrosner Post Number: 667 Registered: 4-2002 |
doublea: The $$25,000,000 was the actual construction cost for LCOR although there might have been some additional costs for property acquisition. The $40,000,000 is a rumor and there is no signed agreement. The biggest problem with your logic is that the tax abatement is not automatically transferrable. That means Beifus cannot do what you suggest. The new owner would need a new developers agreement and a new PILOT agreement. By the way, S. Orange continues to receive more money from the PILOT than we would have received without. LCOR purchased the property in early 1999 and if they sell it will have owned a total of 5 years. $3,000,000 / year profit (assuming they get the rumored price) less any expenses (legal, arhcitects, property taxes during construction, etc) comes to less than a 12% annual return. I have a feeling they were hoping for a better total return. | ||
| doublea Citizen Username: Doublea Post Number: 306 Registered: 3-2003 |
mrosner: Just to clarify, if in fact Gaslight is sold for $40 million (or any figure higher than $25 million) does the purchaser have to negotiate a new PILOT agreement? I just want to be sure. And as far as the 12% annual return, I don't think that the PILOT rules as provided in the N.J. legislation for rental properties were set up for flipping the property. | ||
| mrosner Citizen Username: Mrosner Post Number: 668 Registered: 4-2002 |
They would have negotiate a new PILOT agreement if the property is sold. I am not sure I would consider it flipping when the property has been held for five years. By the way, I said less than a 12% return. I am guessing when you add in all those expenses it comes to closer to 10%. Although that is nothing to sneeze at in this low-interest rate environment, that return is only recognized when and if the property sells. | ||
| Dave Ross Supporter Username: Dave Post Number: 5382 Registered: 5-2001  |
How was the actual construction cost ($25 million) arrived at and by whom? Seems a bit too rounded a number, if you ask me. Does govt. now have access to the books of private corporations? | ||
| mrosner Citizen Username: Mrosner Post Number: 669 Registered: 4-2002 |
Dave: It is rounded. Most seem to think the number was too low as a strategy while negotiating the PILOT. As I said, I do not remember if that included all the property acquistion costs and I do not know if Doublea has the exact number. For purposes of discussion, I do not think exact numbers are needed, especially since we are talking about a rumor. When negotiating a PILOT they had to give financial back-up to the village attorney and village administrator. Local Government does not have access to the books of private Corporations. However, I think Mr. Ashcroft is working on that at a Federal Level. | ||
| woodstock Citizen Username: Woodstock Post Number: 394 Registered: 9-2002  |
Mr. Rosner, I believe during the PILOT discussion that Mssrs. Matthews and Gross did, they indicated that the town has the right to audit (at some level) the books of the building to ascertain the income it generates. They indicated that there is a penalty if the property makes "excessive" income for the developer. I wonder if this is only on regular income, or includes the sale of the property. Waiting For The Electrician, Or Someone Like Him | ||
| mrosner Citizen Username: Mrosner Post Number: 670 Registered: 4-2002 |
Woodstock: I don't see how it could apply to the sale of the property. Of course that raises a different question. If a new owner pays $40,000,000 (sorry for using a round number Dave) what will the new owner use in his argument for a PILOT. Since the rumor about the Gaslight Commons has been out there for over a month now, one would think it might be some truth to it. | ||
| dgm Citizen Username: Dgm Post Number: 146 Registered: 5-2001 |
He will say that his price assumed the PILOT (which his lawyer will discover even if he didn't) and he will say that he will have to fill it with high rent social service cases to make money without the PILOT. | ||
| mary032 Citizen Username: Mary032 Post Number: 14 Registered: 8-2001 |
mrosner, you say "when negotiating a PILOT they (LCOR) had to give financial back-up to the village attorney and village administrator". do you happen to know how much financial backing did the village attorney and village administrator got?  | ||
| Guesswho Citizen Username: Guesswho Post Number: 19 Registered: 9-2003 |
DGM..are you insinuating " Welfare" tenants? | ||
| doublea Citizen Username: Doublea Post Number: 307 Registered: 3-2003 |
The initial payments under the original PILOT agreement were 2% of the construction cost of $25 million, or $500,000. If in fact Gaslight Commons is sold for $40 million, and a new PILOT agreement is executed, shouldn't the new payment be 2% of $40 million or $800,000? The $15 million increase is a 60% increase over the original $25 million, and the new annual payment of $800,000 is 60% more than the original payment of $500,000. If this is the case, the cap on rentals would have to be raised to give the new owner the rate of return provided in the N.J. legislation on PILOTs. And credit where credit is due - if this is the case, and South Orange gets an additional $300,000 in payments, congragulations. If this is not the case, and the new owner pays something closer to the original PILOT payment, then I think LCOR has profited at the expense of the Village. | ||
| Washashore Citizen Username: Washashore Post Number: 79 Registered: 4-2003 |
Since my post of 10/7 under "Budget CUts" has received no response from any BOT, and since Mr. Matthews, and his skills, are being discussed in this thread also, I re-state my concerns and questions here, in hopes that some BOT member will support the public's right to know, and answser the questions asked. Dr. Rosen/Mr. Rosner: We have begun to unravel in this thread how much the Village pays Mr. Matthews in salaried and billable hours, and how we might cut costs so as to reduce the amount of the municipal tax increases in '05 and beyond. We residents need this information so as to know whether to support his retention in a similar contractual relationship as he currently enjoys with the Village, or to support some other form of legal advise for the Village, such as a salaried-only attorney. For example: Mr. Matthews advised the village to condemn the Shop Rite site and then purchase it. It would also have been the attorney's job to make sure that an environmental audit was done to determine the presence of any contamination BEFORE one dime of the Village's money changed hands for this site. Yet, this was not done. In some towns, where contamination was found AFTER the purchase, that alone might be grounds for the attorney's dismissal. In this town, it served only to allow Mr. Matthews additional BILLABLE hours to deal with this contaminated mess, while we, the residents, lost both a food store and a tax ratable in the downtown, and gained a vacant contaminated site from which Mr. Matthews likely CONTINUES to bill the Village for his services to rectify the mess he led us in to. I suspect, Dr. Rosen/Mr. Rosner, that when you purchased your homes, you hired attorneys to advise you on the land transfer issues, including the condition of the house and site. The Village should expect no less from its attorney in land transfer deals. However, when said attorney also has billable hours, then perhaps it is in the attorney's best interest to recommend insufficiently researched Village actions that, once taken, invariably lead to more protracted legal dealings than if he were on straight salary. It would be publicly responsive of you to continue to fill in the blanks about how Mr. Matthews is paid, what his hourly billable rate is, and what his total earnings remuneration from South Orange last year was, rather than having Village residents go through the Open Public Records Act (OPRA)to request public information via a great deal of unnecessary paper work if Village officials were more forthcoming with what is our right to know. The information on Mr. Matthews' contract with the Village, and how much he earned from the Village last year,is public knowledge. Will someone on the BOT please tell us the specifics so we don't have to spend more time and money through OPRA to uncover what a simple post here would resolve? | ||
| mrosner Citizen Username: Mrosner Post Number: 671 Registered: 4-2002 |
Mary: I do not know how much financial backing was given to the village. I saw what was requested and assuming the request was met in full, the information was pretty substantial. doublea: I do not think it works the way you would hope. Also, I would think it would be good if developers see that they can make money in S. Orange. They did not do it on our backs since we received more tax dollars than we would have. Washashore: I have stated on here previously, I will not discuss specific employees in public. You are questioning a person's performance, not just the position, so I am not even sure it would be legal for me to engage in such a discussion. If you want specific information, feel free to put in an OPRA request. It should not take long to gather what you want and this way you can make sure you get whatever information you need. | ||
| doublea Citizen Username: Doublea Post Number: 308 Registered: 3-2003 |
mrosner: You haven't given me a reason why it shouldn't work the way I've described. LCOR negotiated a PILOT with the argument that it was the only way it could make the required return on investment. It was satisfied that it could by making a PILOT payment of $500,000 based on an investment of $25 million. That PILOT payment was supposed to give LCOR its return on investment based on renting the units. Now it turns out that the deal was such a good one for LCOR that it can flip the property for a $15 million profit. Your 12% annual rate of return is probably way low since the $25 million was not spent all in the beginning. I can guess what's going to happen. | ||
| dgm Citizen Username: Dgm Post Number: 148 Registered: 5-2001 |
DoubleA, are you guessing that there will be no benefit to the Village from the sale? Or the opposite? | ||
| woodstock Citizen Username: Woodstock Post Number: 400 Registered: 9-2002 |
Hmm. If the PILOT ends, then the we might lose out on revenue for the town, but overall do much better as taxpayers. I'm making some huge assumptions here, so bear with me. Assumptions: -GC is sold for $40 million -The tax assessor actually fairly values the building at $40 million -The percentage of assessed to actual value is ~63% -SO municipal tax rate is ~1.33% -SO overall tax rate is 5.3% If we use the ~63% rate for adjusting the assessed value of property from the suposed market value, then the assessment on GC should be (gasp!) $25.2 million. That would mean that SO municipal gets $25.2 million x 1.33%, or ~$335k in revenue for the town, down from $500k But overall, revenue from GC would go from $500k to $25.2 million x 5.3%, or ~$1.34 million. So our collective SO municipal taxes would go up by $165k, but our overall taxes would go down by ~$1.15 million. And since my (and doublea's) taxes are such a high percentage of SO's overall tax burden, we'd be glad to get a disproportionate share of the rate reduction  Of course, this is all fantasy. Lower taxes are like the Easter Bunny and Social Security for post-baby boomers - about as likely to show up as the Great Pumpkin. And no, that's not a slam on the BoT, just a sad realization that property taxes will not go down in this state without a taxpayer revolt. Waiting For The Electrician, Or Someone Like Him | ||
| doublea Citizen Username: Doublea Post Number: 309 Registered: 3-2003 |
My guess is that there will be no benefit. I hope I am wrong. This is probably one of the trade-offs involved in granting a PILOT. I guess a lot also depends on the state of the rental market. If the rental market were hotter, and Gaslight could get higher rentals, then the new owner could be asked to make a higher PILOT payment, or even full taxes. | ||
| growler Citizen Username: Growler Post Number: 243 Registered: 11-2001 |
I'm voting for woodstock in the next mayoral election. | ||
| doublea Citizen Username: Doublea Post Number: 310 Registered: 3-2003 |
growler: Even if he's in favor of a revaluation? |
