EGG HARBOR CITY - Councilman Clifford Mays Jr. and some residents are opposing an ordinance to drop the sales price of city-owned land so a developer can better qualify for tax credits to build affordable senior rental housing there.
The price of the two-acre Fanny D. Rittenberg Middle School site on Philadelphia Avenue, set at $800,000 in 2011, would be changed to $1 under an ordinance up for public hearing May 23.
Mays opposes lowering the price for Conifer Realty LLC, and its Rittenberg Urban Renewal Associates. He would rather see what the city can get for the empty lot on Philadelphia Avenue on the open market, he said.
"My position is, let's start at $1 million and let the ball bounce where it falls," Mays said. He also said the city isn't getting enough in payments in lieu of taxes from the deal.
The lot is assessed at $140,500, said Tax Assessor Bill Johnson.
Recent changes in the way the New Jersey Housing and Mortgage Finance Agency scores applications for Low Income Housing Tax Credits mean the city now must contribute at least 5 percent of the project's cost to get a perfect score, said Charles Lewis, senior vice president at Conifer, of Mount Laurel, Burlington County.
A perfect score will be necessary for the application to succeed, he said, because of stiff competition. Using the original agreement, Conifer failed to secure tax credits in 2011 and 2012.
The ordinance also changes the project's payments in lieu of taxes, capping them at 10 percent of rental revenues for a 30-year term. A 2012 agreement had them increasing from 10 percent over time. Conifer estimates payments will start at about $61,000 the first year and rise to $108,000 in the 30th year.
The Rittenberg school was demolished and the site prepared for redevelopment in 2011 at a cost of $250,000, paid by the Egg Harbor City School District.
Projects that are awarded tax credits can also qualify for some of $179 million in Hurricane Sandy relief funds coming to the state for multifamily housing this year, Lewis said.
Conifer is hoping to get $1.4 million in tax credits to sell to investors, to raise about $13 million; and another $5 million in zero percent soft loans from the Sandy funds, to be paid back based on income from the property, he said. That would leave $2 million to be financed through a mortgage.
The city must move quickly to amend the agreements with Conifer in order to make the deadline for the next round of tax-credit applications, which is May 31. Changes in the scoring system only became final this month, Lewis said.
Some residents oppose the project, including real estate agent Manya Medrala, who lives on Campe Street, a block from the site.
Medrala said the planned four-story building is too big and questioned how the cost can be financially feasible for the developer once the mortgage, insurance, maintenance, salaries and utilities are paid, she said.
If the developer fails, Medrala said, she is afraid the city will be left with bills instead of payments.
Conifer's Lewis said the state and investors step in if there are problems with the developer, and he knows of no liability for the city. Conifer has been in the business of building affordable housing for 35 years, and working with the tax-credit program since 1986, so residents should feel confident it knows how to manage the property, he said.
It has 60 senior affordable housing projects nationwide, including 16 in New Jersey, Lewis said.
"The tax credit covers 70 to 80 percent (of the cost of a project), and with Sandy money we're closer to 90 percent, so we only have to cover a very small mortgage and operating costs," Lewis said. He estimated operating costs at $5,300 per unit, or a total of $530,000 per year. That would cover a $57,000 management fee to Conifer, office payroll, gas and electric in common areas, water and sewer, insurance, contributions to a maintenance fund, and payments in lieu of taxes.
Conifer estimates gross rental revenues at $613,075 per year, and after paying debt service, expects a profit of about $55,000, Lewis said.
The company would also be paid a development fee of 15 percent of the total cost, minus some charges, when construction is complete. Lewis said Conifer expects that fee to be about $2.5 million, but about $1.2 million must be put back into the project.
Supporters Mayor Lisa Jiampetti, Council President Ed Dennis and Councilwoman Hazel Mueller said the city chose Conifer because of its proven track record building similar complexes, such as one in Lower Township. They visited that development, and were impressed by its quality, they said.
Council held an executive session May 2 to discuss proposed changes in the deal. Then it briefly went into a public session and voted 4-1 to introduce an ordinance to amend the agreement with Conifer. Voting in favor were Dennis, Mueller, Ina Duran, and Albert "Pat" Moran. Mays was the only member voting no.
Jiampetti was present, but only votes when there is a tie. Four council members were absent: Douglas Dickinson, Elizabeth (Betty) Schoenstein, Mason Wright and Joseph Speyerer.
Medrala questioned whether seniors living at the Rittenberg site would benefit the town by shopping downtown. She said they would probably shop at places such as Wal-Mart.
Jiampetti said residents will have the means to shop downtown. She said rents will average around $700 per month.
"This is not one of those low-income properties, and never will be," she said. "Senior citizens are key here."
Ninety percent of the units would be for people making 50 percent to 60 percent of median income for the region, Lewis said. Only 10 percent would be for those making 30 percent of median income.
At 60 percent of median income, a single person would have an income of $28,800, and a couple an income of $32,880, Lewis said. At 30 percent of median income, a single person would have an income of $14,400 and a couple $16,440, he said.
Mays said he does not support giving tax abatements for new developments in town, saying longtime residents pay high taxes and should not be asked to subsidize newcomers.
"Thirty years is way out of line, and $61,000 a year is way out of line," said Mays of the proposed payments.
Contact Michelle Brunetti Post:
To attend the hearing on the project
Public hearing on the new agreement for redeveloping the Fanny D. Rittenberg Middle School property, at 7 p.m. May 23 in City Hall.