EGG HARBOR CITY - A company that wants to build 100 units of low-income senior rental housing at the site of the former Fanny D. Rittenberg Middle School will pay $1 for the two-acre parcel of ground, rather than the $800,000 it agreed to pay in 2011, if City Council adopts an ordinance after a public hearing May 23.

The ordinance also commits the city to accepting 10 percent of gross rental revenue as payment in lieu of taxes for 30 years, instead of higher rates initially discussed. The builder, Rittenberg Urban Renewal Associates (RURA) LLC, estimates the payments will start at about $61,000 annually and rise to $108,000 by the end of the 30 years.

City Council members say the changes were necessary for the company to have a better shot at qualifying for federal Low Income Housing Tax Credits through the New Jersey Housing and Mortgage Finance Agency. The company has already applied twice for the credits for the $17 million project, and finished just out of the running each time, Councilwoman Hazel Mueller said.

RURA, associated with Conifer Realty LLC of Mount Laurel, Burlington County, also has agreed to provide about $500,000 in sidewalks and curbing improvements on both sides of the 500 block of Philadelphia Avenue, in front of its site. That was not part of the original deal, Council President Ed Dennis said.

"They are going to improve Philadelphia Avenue to look like the first few blocks," Dennis said.

Dennis said he always thought the $800,000 payment was unrealistic. But he said the deal was changed because the state wants municipalities to be participants in such deals, by providing land or making other contributions.

He also said the state looks more favorably on deals that give towns no more than 10 percent of gross rental receipts as payments in lieu of taxes.

The tax credit program awards federal tax credits to developers, which they sell to fund 70 percent of the cost of constructing low-income housing. It is administered in New Jersey by the state Housing and Mortgage Finance Agency, of the Department of Community Affairs.

Rules are set by the IRS, said Lisa Ryan, director of communications for the state Department of Community Affairs, in an email response to questions.

"The Low Income Housing Tax Credit Program is governed by Section 42 of the Internal Revenue Code ... (and) tax credit properties generally must complete construction within two years of funding," Ryan wrote. "Evidence of such support provides HMFA with a level of comfort that such projects will be able to complete construction within the prescribed timeframe."

She said the HMFA's ranking process provides points for various forms of municipal support, including if a town is willing to contribute land to the project or if the town is willing to provide a payment in lieu of taxes.

"HMFA's ranking system further distinguishes between projects that receive a tax abatement at a higher rate (e.g. 15%) versus those at a lower rate (e.g. 10%). This distinction is not to give the developer a 'better deal,' but rather to provide a greater level of financial stability to properties that by virtue of their lower rents have limited cash flow," Ryan wrote.

She said the awards process is highly competitive and "typically there are three applications for every project funded."

Conifer has successfully developed similar projects in other South Jersey towns. One of them - a 90-unit, $19 million affordable housing development for senior citizens - opened in Lower Township in the fall of 2010.

Mayor Lisa Jiampetti said the four-story building will rent only to senior citizens and the disabled who meet income requirements, and that the city will receive all of the funds paid in lieu of taxes.

The property would probably hold only eight traditional homes, she said. And if each paid $7,000 per year in taxes, only about 43 percent of that $56,000 would come to the city. The rest would go to schools and the county, she said.

So even with a 10 percent payment in lieu of taxes, "We're still making money," Jiampetti said.

The project will not add children to the school district, but will add shoppers to the downtown, Mueller said.

"When will another developer come to Egg Harbor with a $17 million project?" Mueller said.

She said the complex will include laundry rooms, a computer room, space for doctors and hairdressers to have offices, and several rental units for use by visiting family members.

A representative of RURA did not return calls for comment.

Contact Michelle Brunetti Post:

609-272-7219