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Can-do abatement for Canco Lofts
City Council introduces amended tax break for condo
project
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Ricardo Kaulessar
Reporter staff writer
Jersey City Reporter |
06/20/2008 |
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LOOKING WITH INTEREST – Natalya Kasatova,
development associate for the New York-based
development company Coalco (left), and
Coalco President Mikhail Kurnev looked on at
the City Council caucus meeting on June 9.
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What happens if you're not selling enough condos and the
price can't be lowered to entice potential buyers?
If you're the developer of the Canco Lofts, then you
seek a better tax abatement arrangement from the City
Council than the one previously approved by the same
council two yearS earlier.
At a June 11 meeting, the council obliged New York-based
developer Coalco by introducing a new tax abatement deal
for the 551-unit condo complex located at what was once
the old American Can Company building near Journal
Square.
The vote was 6-1-2 vote for the new agreement.
The 30-year arrangement will have the owners of the
condos pay the city 10 percent of the annual gross
revenue for the first 10 years, 12 percent for years 11
through 20, and then 14 percent for the last 10 years.
That contrasts to 2006, when a 30-year abatement was
approved for Canco Lofts in which the owners would pay
16 percent of the annual gross revenue throughout the
abatement period.
The annual gross revenue, in the case of Canco Lofts, is
revenue earned from the sales of the condos before taxes
and other expenses have been deducted.
Better deal for developer
But the vote does not come without some friction, as
City Councilman Bill Gaughan, who along with City
Councilman-at-Large Peter Brennan abstained on their
vote to introduce the abatement, wanted the developer to
pay $150,000 over a three-year period into the city's
job apprenticeship program to train residents to become
construction workers.
The developers said they expect to hire just 10 Jersey
City residents for construction jobs over the next three
years.
Councilwoman-at-Large Willie Flood voted against the
amendment.
The abatement will come up for a final vote at the next
council meeting this coming Wednesday, June 25 at 6 p.m.
at Middle School 4, 107 Bright St.
Incentive to build
A tax abatement is an agreement to exempt a developer
from regular, fluctuating property taxes. Instead,
developers enter into a deal to pay a separate fee to
the city in lieu of taxes, which may sometimes be equal
or nearly equal to the current taxes.
Those payments benefit the city because they go straight
to city coffers rather than into school and county
taxes. However, they are controversial because some
residents believe they help developers and hurt other
taxpayers who must contribute to the schools and county.
In recent years, developers have looked for better
abatement deals such as five-year abatements that
allowed them to pay conventional taxes in increments
over a short period of time, rather than making direct
payments to the city under the long-term arrangement.
Developers cite the economy and the rising cost of
construction as the reason to pursue short-term
abatements.
At a council meeting last August, the city moved toward
a new abatement policy in which developers of rental
housing have the choice of three tax abatement levels: a
10-year term paying 10 percent gross annual revenue to
the city; a 15-year term paying 12 percent, and a
20-year term paying 14 percent.
A variation on this policy is what Coalco President
Mikhail Kurnev is seeking for the Canco Lofts, claiming
that only 60 of 202 condo units are under contract, and
he cannot lower the prices for the condos still on sale.
The condos at Canco Lofts range from studios to
three-bedroom and are currently selling for between
$300,000 and $800,000, according to Coalco.
"Lowering prices is not a reality, as the cost of
construction materials have gone up considerably, and we
have been carrying out a vigorous advertising campaign
to attract more buyers but we need something else to
come here," Kurnev said.
Comments on this story can be sent to rkaulessar@hudsonreporter.com.
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Hudson Reporter 2008
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