Straight-Forward Math:
Westfield’s Loss of Tax Revenue with One Westfield Place 30 Year PILOT
Westfield Mayor and Town Council approved a 30-Year PILOT for One Westfield Place: the maximum term allowed and most financially uncertain choice for PILOT
Our calculations, based on published projected numbers from Streetworks & Westfield Mayor/Town Council :
1.PILOT Revenue over 30 years projection = $210mm
PILOT is 70-75% of conventional taxes
That implies ~ $270 Million in potential conventional taxes we are forgoing in place of PILOT
That also implies a tax break to the developer (HBC/Streetworks) of $60 Million
2. School taxes are 60% of total conventional taxes
Therefore, with the approved PILOT, lost future school taxes would be ~ $160 Million over the 30 years ($270 * 60%)
3. NO PILOT funds have been allocated to Westfield Schools operating costs.
Other municipalities choosing PILOT programs have dedicated a % of funds to operating costs for their schools. Westfield has not.
Any short-fall in Westfield Public Schools funding for operating costs will reconciled by Westfield tax-paying residents
Finance Information
Unfortunately, we have more questions than answers….
Where is the sensitivity analysis from conservative to aggressive, just as one would study for their own retirement or investment planning?
Regarding the public infrastructure investment of $54.2 million that becomes $73 million including debt service assuming a 4% interest rate: why does the town have to front the expenditure with Redevelopment Area Bonds and be reliant on developer revenue to pay down the bond?
Do we really need 2 new commuter parking garages at $30m? Are all the other public space renovations really necessary at a cost of $24.2 million?
Shouldn’t we prioritize and decide as a community which public space renovations we need, which ones are going to enhance our reputation. Do we have to enhance our reputation —-
Open Finance Questions for Councilwoman Habgood (as of Feb 5, 2023)
Over 30 un-answered questions presented to Councilwoman Habgood & the Town Council, put forth by Finance and Commercial Real Estate professionals in our town
Town Council Approval for Lord & Taylor Redevelopment Plan More Than Doubles Land Value for HBC Overnight
THE VOTE OUR COUNCIL MADE ON FEB 14th IS THE MOST CONSEQUENTIAL DECISION OF THIS COUNCIL IN MY 30 YEARS IN TOWN, IN MY VIEW.
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.
A REVIEW OF THE FINANCIAL IMPACT IS BELOW:
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.
Bill Fitzpatrick
PILOT Information
Important Links and Information
New Jersey School Boards Association: School Finance, An Overview of PILOT Programs
Cranford PILOT Funds to schools: 11% (TAP)
Metuchen - $6M to schools (My Central Jersey)
With the $20 million, the borough is earmarking $6 million for the school district, and using other pilot funds to renovate the Metuchen Public Library, upgrading borough recreational fields, and help provide for the down payment on a new emergency services facility to house the fire department and emergency medical services.
Letters to the Editor from Resident Professionals
01-26-2023:Letter: Unease Over PILOTS & School Funding in Westfield
01-11-2023 Letter: One Westfield Place — PILOT or PLOT? “It must be recognized that PILOT money is not “free.”
01-11-2023 Letter: One Westfield Place Will Impact Taxpayers for Generations, Resident Warns PILOTs bring tax breaks to developers and $0 to schools for 30 years, he writes.
Submitted to Mayor Brindle and Town Council for March 14 Meeting:
One Westfield Place Financial Projections & Nassau Capital Advisors Report Analysis
Can the project be built without PILOT?
Many residents have asked for peer analysis of the OWP financial projections and claim that a tax break to the developer through PILOT is the only way this project is feasible. We disagree.
Bill Fitzpatrick, with 35 years experience in the investment analysis of office, apartment and retail projects has crunched the numbers.
OWP Financials have been released
We continue to have significant concerns about the assumptions made on residential apartment size and rental revenue projections. Both are higher than comparables in our area.
No market research or data has been released to support these assumptions.
These assumptions are baked into the PILOT Revenue projections!