Wednesday, July 29, 2009
To Abate or Not to Abate...
Laurence Olivier as the eponymous hero in my favorite film version of Hamlet (dir. by Olivier in 1948).
For me, there is no question about this proposed residential tax abatement ordinance. As far as I can tell, it’s not necessary. The dozens of citizens who have weighed in on it are against it and, as other bloggers have noted, the administration has offered no reason to grant it, except that the developer wants it. My email was burning up with angry comments about this residential abatement business until the “Corruption Thursday” political scandal broke. Since no Union County politicians have been indicted as yet, the email discussion has turned back to the abatement ordinance proposed by Sharon Robinson-Briggs. Several of my contacts feel that this administration is acting far too quickly, even “stupidly” (to borrow a word from our president) to appease this developer in the absence of any REAL data or facts about whether this abatement is necessary or desirable. There is evidence, though, as other local bloggers have noted, that the housing market is slowly improving nationwide. Even in New Jersey, home sales are turning around a bit. There are already plenty of tax incentives in place from the federal government—a good real estate attorney and/or accountant would make sure that all buyers are aware of them.
Given that the condos have only been on the market for a short time, it simply doesn’t make sense to offer a tax abatement as the first incentive to a prospective homeowner. The incentive that works BEST in virtually any selling situation is to lower the price of the units. That’s pretty attractive. Next, offer to assist with closing costs—that is something that many first-time homebuyers need help with. Since the developer of "The Monarch at Plainfield" received the land from the city of Plainfield for a single dollar, he stands to make a great deal of money off the sale of the units—several million dollars, as a matter of fact. What is his profit margin? I would venture to say that it is probably pretty high, although it’s unlikely that he would share that information with me. This developer also has a project in Rahway. What’s to stop him from using a Plainfield abatement ordinance to use in negotiating with Rahway for one there? I am of the notion that developers, as capitalists, are in business to make as much money as they can—and many will do whatever they can (including creating a sense of hysteria over units possibly becoming yet more rentals--something many Plainfielders feel concern about) to get what they want.
As far as I can see, the sky is not falling. This developer knows the risks of the real estate market (even in boom times), yet he went ahead with the project because he got the land for $1, and he stands to make several million dollars in profit without an abatement. Now, if the market rises, what’s to stop the developer from raising the price of the condos as the housing market improves? Is the proposed abatement only for units that stay below a certain ceiling? I do not think that abatements are “the devil”—tax abatements for commercial properties may be needed to help with commercial development, but residential tax abatements to a developer who got the land for free are unfair to the rest of us.
All best, Rebecca