PATERSON —Amid a massive building boomthatthe mayor says has produced $1.5 billion innewinvestmentin Paterson, cityofficials are projecting that the municipal tax basewilldecline in 2023 for the third straight year.
The seemingly incongruous situationof new construction rising while the city’s ratables are falling comes at a time when several hundred developments in Paterson have gottentaxbreaks, many under the state’s 2013 “Growth Zone” law, designed to spur investments in some of the state’s struggling urban areas.
Paterson has more than 425 developments on the books with abatements, which allow those property owners to avoid paying full or partial taxes on new construction, according to lists contained in the city’s annual state aid application.
Those projects include more than 120 with 20-year abatements and about 290 with five-year tax breaks. The city also has 19 developments mostly built many years ago that have longer-term tax deals known as PILOTs, or payments in lieu of taxes.
Properties in Paterson’s 4thWard that had vacant lots and abandoned buildings now have new apartment buildings.
“This was a stagnant city when I took office,” said Sayegh, who was the 6thWard councilman before he won the 2018 mayoral election.
“I vowed to do what I did in the 6thWard as a councilman for all sixwards relative to development,” Sayegh added. “We’ve restored integrity and stability in City Hall, and, as a result, record-level investment has materialized.”
No one questions whether Sayegh has delivered on his “growth mode” promises. But people are expressing doubts about whether all that new construction has been good for the city.
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'Overdevelopment'?
“If you drive around Paterson, everywhere you look, something new is popping up,” said Assemblyman Benjie Wimberly of Paterson. “We are busting at the seams. Obviously, the need for services has to be increasing.”
The Rev. John Algera, a longtime resident of the city’s 4thWard, said Paterson is suffering from “overdevelopment.”
“They’re building large apartment buildings from lot line to lot line without any open space,” Algera said, “and it’s creating an increased need for services, for police, for fire, for garbage disposal. If it’s a state law, then the state law should be changed.”
In 2013, the state Legislature did change the Growth Zone law allowing for 20-year tax abatements. Among the revisions was a provision that allows developers to get their 20-year tax deals extended to 30 years.
Paterson is struggling with an $18.6 million budget deficit. Instead of getting an infusion of tax revenue from all the new development, Paterson is asking Gov. Phil Murphy’s administration for a 40% increase in aid.
The city’s application for that extra state funding — along with its applications from previous years — provides numbers showing the decline in the municipal tax base.The total assessed value of propertyin Patersonwas $6.375 billion in 2020, $6.121 billion in 2021, $6.078 billion in 2022, and $6.074 billion in 2023, according to thestate aid applications.
Those declines followed increases in the city tax base during Sayegh’s first two years as mayor, when he inherited a tax base of $5,686 million.
The Sayegh administration is asking for patience.
“Rebuilding Paterson's tax base doesn't happen overnight,” said Michael Powell, the mayor’s economic development director.
Powell said Paterson and the other cities included in the Growth Zone tax abatement program —Atlantic Cityand Trenton — received theeconomic incentives“because we need more support financially.”
Powell said projects recently built with the tax abatements will start producing full property taxes for the city in six to 10years.
“These future ratables, coupled with things like cannabis taxation and redevelopment, will help tackle the city's structural deficit over time,” Powell said. “The city has made enormous strides in fostering investment and turning derelict land into productive public use, but unfortunately stabilizing the tax base takes time and ongoing state and national support.”
Wimberly was one of the sponsors of the 2013 Growth Zone law, as well as a 2019 revision that allowed developers to apply to have their 20-year abatements extended to 30 years. The assemblyman said the Growth Zone law was designed to create jobs. He said the city needs a plan for addressing the consequences of the new construction.
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Sayegh said his administration is expecting incremental increases in the city’s tax base starting in the year 2031.
“Since entering office, my administration has prioritized finding efficiencies, lowering costs and increasing revenue where we can,” the mayor said. “We will continue to work closely with our [Department of Community Affairs] monitor to establish best practices and find ways to improve our financial standing.”
Sayegh said the city’s recent growth spurt eventually will pay dividends.
“For several decades, Paterson has struggled to pay for its most basic operating costs,” the mayor said. “Although new development doesn’t immediately increase our property tax revenue, it allows our city to be put on a path towards self-sufficiency after years of neglect.”
Sayegh also noted that Paterson doesn’t have any control over which developments qualify for the Growth Zone tax abatements. But the mayor’s critics have pointed out that he does have influence over the city’s Planning Board, which approved many of the projects that eventually got the tax breaks.
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A downturn afoot?
Paterson’s most prolific developer, Charles Florio, has received more than 100 of the 20-year and five-year abatements. A longtime Sayegh supporter, Florio warned in an interview on Friday that Paterson’s tax base may be facing even larger reductions in upcoming years because of a downturn in the country’s real estate market.
Florio predicted that Paterson’s tax base could drop by as much as 10%, which he said is partly because property owners will be filing an increasing number of tax appeals. The developer said he personally had not filed any appeals in recent years but would submit between 100 and 200 in the next appeal cycle.
“The honeymoon is over,” Florio said of the recent years of development growth.
Joe Malinconico is editor of Paterson Press.
Email: editor@patersonpress.com
