City officials are considering two 30-year tax abatement agreements being sought by two large developers who intend to expend almost $60 million to rehabilitate and expand their buildings on Market, Mill, and Godwin Streets.
Cooke Hamilton Associates
The first 30-year tax abatement agreement is being sought by Cooke Hamilton Associates which owns 21 Market Street, 20 Mill Street, and 21 Mill Street, according to city records.
Under the PILOT (payment in lieu of taxes) agreement Cooke Hamilton Associates will pay the city 10-percent of its gross income for the first 10 years. From the 11th year it will increase that rate to 12.5-percent until the 21st year, when that rate will be 15-percent, according to city records.
The city will receive $174,771 annually at the 10-percent agreement from the company’s $1.87 million anticipated rent revenue. However, under full taxation the municipality will collect $347,797 every year, according to city records.
Cooke Hamilton Associates owned by George McLoof is seeking the tax abatement agreement as it plans to undertake a $29 million development project which includes rehabilitation as well as $10.25 million for new construction to upgrade the Cooke Mill Building, 21 Market Street, and the Hamilton Square, 21 Mill Street.
Both the Cooke Mill and Hamilton Square provide housing to middle and low-income individuals and families.
A portion Hamilton Square’s existing commercial space will be vacated to make way for the construction of 33 new residential units, according to city records. 34 residential units at the building will also be rehabilitated.
39 units will be rehabilitated and upgraded at the Cooke Mill Building at 21 Mill Street. One new residential unit will be constructed at 20 Mill Street replacing an existing commercial space; and 29 existing residential units will be rehabilitated and upgraded at the same building.
The entire project which includes all three addresses presently consists of 102 residential units and 39,000 square feet of commercial space, according to city records. In the course of the development 29,000 square feet of commercial space will be converted to 34 residential units and 10,000 square feet will remain as commercial space, according to city records.
100 construction and permanent jobs will be created during the $10 million construction, according to the city’s Economic Development Department.
The development will not be possible without the PILOT agreement, according to city records. McLoof’s company has to obtain financing through the New Jersey Housing and Mortgage Finance Agency, two separate federal HUD/FHA loans, and the New Jersey Economic Development Authority’s Economic Recovery and Growth (ERG) program all of which “require stability in real estate tax expenses” over the term of the financing, according to a memo from the Paterson Economic Development Department.
The Cooke Mill Building has an existing PILOT agreement with the city that expires on 2033, according to city records. The company pays 6.28-percent of its rental income to the city under that agreement, the new accord will replace the existing agreement and increase that percentage to 10-percent.
Colt Arms Apartments
The second 30-year tax abatement is being sought by Colt Arms Preservation which owns the senior housing building called Colt Arms Apartments located at 52 Godwin Street. The 14-story building built in 1975 contains 207 units.
Under a PILOT agreement at 10-percent the city will receive $208,244 in payment annually at the building assessed at $22 million. In year 16 the city will receive 12.5-percent of the building’s income until year 21, in which it will receive 15-percent.
Under full taxation, the city looks to collect $638,000, according to city records. The company is seeking the tax abatement agreement as it looks to spend $30.17 million on the building, $10.90 million of which will be on construction to substantially renovate structure, according to city records.
The Godwin Street building is presently under a tax abatement agreement which expires in 2025, according to city records.
City council discussion
Both agreements were up for discussion on Wednesday evening, but council members asked Ruben Gomez, the city’s economic director, and the developers to come prepared with presentations to make their case for new tax abatement agreements.
“Pilots are very heavy lift in the town,” said council president William McKoy on Tuesday evening to the developers.
Council members briefly discussed the Colt Arms Apartments’ tax abatement agreement. Kenneth Morris, councilman at-large, said the city will lose money in this agreement. “We’re actually taking a $400,000 hit,” said Morris.
Colt Arms Apartments will pay Paterson $287,557 annually under a pilot agreement whereas the city collects $638,000 under regular taxation of which it keeps $401,940 – the rest is split with county and schools.
“It’s not going to make sense,” said Morris. He provided advice to Andres Cavaluzzi of the Colt Arms Preservation to couch their argument in the public good the building will do as it provides low-income housing for the city’s elderly population.
Morris suggested appeal to pathos may overcome the council’s resistance to an agreement where it looks to forgo $200,000 in revenue. He too said tax abatement agreements are a hard sell in the city.
McKoy asked for full presentations for both of the long-term tax abatement agreements, which have become an anathema to local taxpayers who have been subjected to unstable and ever increasing taxation.