Town Council Approval of Redevelopment Plan instantly increases property value for HBC and decreases Westfield tax revenue by $80M
THE VOTE THIS COUNCIL TOOK TONIGHT IS THE MOST CONSEQUENTIAL DECISION OF THIS COUNCIL IN MY 30 YEARS IN TOWN.
CHANGING THE ALLOWABLE BUILDING HEIGHT FROM 40 TO 75 FEET ON THE LORD AND TAYLOR AND SOUTH AVENUE PARCELS WILL FOREVER CHANGE THIS TOWN FROM SUBURBAN TO URBAN. CHANGING THE HEIGHT IN THE CBD FROM 40 TO 55 FEET COULD RESULT IN AN ACCELERATION OF KNOCKDOWNS OF SINGLE STORY BUILDINGS REPLACED BY 55 FEET BUILDINGS AND THE RESULT: A HODGE PODGE OF BUILDINGS OF VARYING HEIGHTS.
THE PEOPLE IN THIS TOWN DO NOT WANT 75 FEET, SIX-STORY BUILDINGS AND THIS IS NOT JUST A SMALL GROUP OF PARTISAN YAPPERS AS THEY HAVE BEEN CALLED. NEARLY 2300 RESIDENTS HAVE SIGNED THE PETITION TO STOP AND RE-THINK THE PLAN, AND IN THE RECENT TAP SURVEY, 849 RESIDENTS SAID THEY DO NOT APPROVE OF THE PLAN. YOU CAN ARGUE THAT 70% MAY NOT BE THE PRECISE PERCENT BUT 849 RESPONSES IN ONE WEEK IS SIGNIFICANT. I CAN ALSO SAY THAT AS PEOPLE UNDERSTAND THESE PROPOSED HEIGHTS NOW FOR THE FIRST TIME, MANY ARE VERY UNHAPPY.
I WANT TO REVIEW THE FINANCIAL IMPACT OF THE VOTE TONIGHT.
ZONING CHANGES OFTEN RESULT IN BIG WINNERS DUE TO NEW ALLOWED USES, INCREASED BUILDING HEIGHTS AND HIGHER BUILDING DENSITY. IT’S VERY SIMPLE MATH. MORE BUILDABLE SQ. FT. EQUALS HIGHER LAND VALUE. CHANGING THE ALLOWED USE TO A MORE VALUABLE PROPERTY TYPE, SUCH AS APARTMENTS IN TODAY’S MARKET, RESULTS IN HIGHER LAND VALUE.
UNDER EXISTING ZONING, THE LORD & TAYLOR PARCELS WOULD PROVIDE FOR ABOUT 200,000 SF OF RENTABLE AREA. WITH PROPOSED DENSITY INCREASING FROM 40 TO 70%, THAT’S A 75% INCREASE IN SIZE. SO, RENTABLE AREA INCREASES FROM 200,000 SF TO 350,000 SF, THE AMOUNT SPECIFIED IN THE REDEVELOPMENT PLAN. AT A CONSERVATIVE $40 PSF, LAND VALUE WOULD INCREASE TONIGHT FROM $8 MILLION TO $14 MILLION, A $6 MILLION INCREASE.
NEXT, THE CHANGE IN USE TO RESIDENTIAL ADDS A LOT OF VALUE. IF THE VALUE OF PRIME RESIDENTIAL LAND GOES FROM $40 FOR BUSINESS/RETAIL USE TO $80 PSF, THAT’S A DOUBLING OF VALUE FOR THE 235,000 SF OF RESIDENTIAL AREA. SO, A $40 PSF INCREASE EQUATES TO $9 MILLION IN INCREASED VALUE.
COMBINED, THIS ZONING CHANGE TONIGHT WILL INCREASE THEIR LAND VALUE BY AS MUCH AS $15 MILLION, FROM $8 MILLION TO $23 MILLION. NUMBERS MIGHT BE MORE OR LESS BUT A $15 MILLION INCREASE IS IN THE RNAGEM IN MY VIEW. THE HBC TEAM WILL BE VERY PLEASED WITH THIS RESULT.
IN THE COMING MONTHS, THE COUNCIL WILL VOTE ON AWARDING A 30 YEAR TAX BREAK TO THIS DEVELOPER THROUGH A PILOT PROGRAM. THE COUNCIL’S PROJECTION SHOW PILOT REVENUES OF $213 MILLION OVER 30 YEARS, AND THAT THESE REPRESENT BETWEEN 70 AND 80% OF ESTIMATED CONVENTIONAL TAX. DO THE MATH AND THAT EQUATES TO NEARLY $275 MILLION OF CONVENTIONAL PROPERTY TAX. THE DIFFERENCE NETWEEM $213 MILLION AND $275 MILLION REPRESENTS A $60 MILLION TAX BREAK TO THE DEVELOPER ON TOP OF THE $15 MILLION INCREASE IN LAND VALUE JUST MENTIONED. COMBINED, THAT’S $75 MILLION OF VALUE.
MOST OF THE APARTMENT PROJECTS BUILT IN NEW JERSEY HAVE BEEN BUILT WITHOUT PILOT TAX BREAKS BECAUSE OF HIGH PROFITABILITY. THIS BEGS THE QUESTION, ARE THERE DEVELOPERS IN NEW JERSEY WHO WOULD BUILD THIS RESIDENTIAL WITHOUT A 30 YEAR TAX BREAK? I CERTAINLY THINK SO. WESTFIELD TAXPAYERS SHOULD GET THE BENEFIT OF ALL RESIDENTIAL DEVELOPMENT IN THEIR REGULAR TAX BASE.
OVER HALF OF THE $213 MILLION IN PILOT REVENUES ARE SHOWN TO BE FROM RESIDENTIAL PROPERTIES. THAT WOULD BE $135 MILLION OF PILOT REVENUES OR $173 MILLION OF CONVENTIONAL TAX. SINCE SCHOOL OPERATING COSTS ARE 60% OF THE CONVENTIONAL TAX BILL, THE DECISION TO USE THE PILOT FOR THESE RESIDENTIAL PROJECT WILL DEPRIVE OUR SCHOOL OPERATING BUDGET BY OVER $80 MILLION. THAT $80 MILLION BILL WILL FALL TO THE RESIDENTS.
IN SUMMARY, THE FINAL SCORE I ESTIMATE FROM THIS IS:
PLUS $75 MILLION FOR THE DEVELOPER.
MINUS $80 MILLION FOR THE RESIDENTIAL TAXPAYERS.
YOU MAY ARGUE THE EXACT NUMBERS OF THIS BUT I THINK IT’S CLEAR WHO IS THE WINNER AND THE LOSER TONIGHT.
Written by Bill Fitzpatrick, Feb 14, 2023
