In Any Language, It Screws Trenton

Wikipedia describes the phrase “pig in a poke” as “something is sold or bought without the buyer knowing its true nature or value, especially when buying without inspecting the item beforehand.”

It’s a concept that’s very easy to grasp. In fact, as the article goes on to explain, the English phrase dating from the Late Middle Ages has equivalents in several other languages around the world. For example,

Language Local Expression Translation to English
Irish ceannaigh muc i mála buying a pig in a bag
Latvian pirkt kaķi maisā to buy a cat in a sack
Lithuanian pirkti katę maiše to buy a cat in a sack
Luxembourgish d’Kaz am Sak kafen to buy the cat in a sack
Macedonian да купиш мачка во вреќа to buy the cat in the sack
New Jersey pass a pro-developer law to screw urban taxpayers
Norwegian kjøpe katta i sekken to buy the cat in the sack
Polish kupić kota w worku to buy a cat in a sack
Portuguese comprar gato por lebre to buy a cat instead of a hare

Oh, are you unfamiliar with that New Jersey vernacular above? Let me explain.

About ten days ago, Trenton’s City Council unanimously passed Ordinance 13-58, which can be found here. I think it is a bad ordinance, poorly considered and adopted for reasons I will explain below. There is a petition being circulated at the initiative of Hiltonia resident Michael McGrath which calls for its repeal. It can be found here. I have signed it, and ask you to do the same.

Ordinance 13-58 signed the City of Trenton on to the terms contained in a new State law, titled “The New Jersey Economic Opportunity Act of 2013;” you can find a copy of that law here.

According to the Trenton Times account, by Jenna Pizzi, of the Council session in which the bill was passed, the City’s Director of Economic Development Walter Denson told Council that they had only a few days to meet a State deadline to sign on to the new state law and therefore had to pass the Ordinance immediately. Even though, well, how can I put this gently? there were “still some gray areas in the law and there are unanswered questions regarding the city’s oversight of the projects.”

Other than that, things were just dandy and good to go!!

So, what does this new law do? Well, it Promotes Development. How? The law  “would give automatic approval for developers building projects in Trenton, which create urban development entities, to qualify for a 10-year tax freeze. The freeze would begin when the developers receive their certificate of occupancy for the building. Denson said the developer would continue to pay taxes on the property, but not on any improvements made to the land.” [Emphasis mine – KM]

The 10-year tax freeze in question, in case you were wondering, is a freeze on any new city property taxes on new developments. That means, Trenton doesn’t get any taxes from new development! After the 10th year, property taxes would start to come in: 10% of what the applicable tax rate would have been during the 11th year; 20% the 12th, and so on to Year 20, when 100% of the applicable rate would be paid by the owner.  In addition, there are multi-year exemptions from state taxes that would otherwise be due from the businesses undertaking these developments. More on that below.

Did you notice how I emphasized the phrase “automatic approval” above? Does that mean that the City of Trenton would have no way to block a project that a developer proposed for the City, if for whatever reason the City thought it might not be a net benefit for the city and its residents?

Maybe, maybe not. According to the Times, Director “Denson said the project will still have to go through the usual planning and zoning approval process in the city, but if the program stays as it is, the city will not be able to pick and choose which projects to subsidize.” [Emphasis mine – KM]  But he also did say “that there are amendments being made to the state law that could mean changes to the program.” And, according to Denson, Council could always repeal the ordinance if it turned out not to be such a great idea.

Could. Mean changes. If the amendments are passed. And that’s only if those amendments end up improving the law for Trenton and similar cities, and not make it worse. If.

Right now, according to the official analysis done by the state’s Office of Legislative Services (OLS) prior to the adoption of this new bill,

The Garden State Growth Zone (GSGZ) property valuation exemption will result in significantly reduced property tax revenues for the cities of Paterson, Passaic, Trenton and Camden to encourage potential development which may not occur without GSGZ incentives. [Emphasis mine – KM]

Significantly reduced property tax revenues. Will result. For Trenton.

That sounds like a real horrible outcome for the City. Surely there is an upside to this deal, statewide, right? Surely even if cities such as Trenton will lose money on this deal. there’s bound to be a big return for the state overall, right? Right?

In that same analysis OLS says, Maybe.

The law’s intent is that to qualify for the tax credits eligible under this program, an analysis would be done by the State to show that a proposed project would over the course of its life bring in in new tax revenues 110% of the amount of the tax credits, making the whole thing worthwhile by earning a 10% return for the State. From the way it looks, that’s 110% of state tax revenues; the eventual return for cities like Trenton isn’t directly considered.

Overall, this is not a small program. According to the analysis, this new law is intended to replace current tax programs that cost the state $1 Billion in tax credits in 2012. Under this new law, the program would annually cost the state $1 Billion in tax credits, while seeking to bring in new tax revenues of $1.1 Billion.

But (and you knew there was a but), the OLS concludes,

Due to these uncertainties in what impact these programs have on the larger economy and related businesses, as well as the possibility that a company will relocate or close operations before the State fully realizes benefits from the incentive programs, there are downside risks that make net revenue losses under the program possible, despite a net benefits test [that 110% measurement, from above – KM]

The Office of Legislative Services finds that the revenue impact of the substitute is indeterminate with certain losses due to tax incentive agreements which may or may not be fully offset by revenue increases from expanded business activity. The magnitude of the revenue losses from tax incentive agreements cannot be known because [earlier programs had no caps on the amount of tax credits.] – [Emphasis mine – KM]

So, with guaranteed losses in property tax revenues to the City of Trenton, and possible losses statewide from this program, why in the world did we sign on to this, especially since there were so many “grey areas and unanswered questions”?

A few Council members raised some objections. Kathy McBride was described as finding it “difficult to approve the ordinance because there was still some questions unanswered. ‘That makes it real sticky for me because what they are asking us to do is jump into this project without clarity,’ McBride said.”

As to repealing the city’s ordinance and pulling out of the program at a later date, Marge Caldwell-Wilson noted the city’s famed short attention span and suggested if the City’s experience turned sour, no one in the City would notice. “My concern is that nobody is going to be looking into this and pushing [for improvements].

Despite their misgivings, McBride and Caldwell-Wilson ended up voting for the measure anyway. Remember, the ordinance passed Unanimously.

City Council bought a pig in a poke. The members signed on to a big new bill that has a lot of “unanswered questions,” “gray areas,” and which “will result in significantly reduced property tax revenues”  for Trenton, as well as the possibility of “net revenue losses” for the State of New Jersey.

So, one would be excused for asking, who would possibly favor this?

Find out in Part 2, after Christmas. In the meantime, sign the Petition, here.

Merry Christmas to all the readers of this space. And to all a good night!

2 comments to In Any Language, It Screws Trenton

  • Joey de Maistre

    Toute nation a le gouvernement qu’elle merit.

  • ed w

    With the above in mind, did you perchance read the recent article(s) regarding a recycling plant that was lovingly placed in Trenton by the county freeholders.

    Trenton Biogas LLC will open the facility on Lamberton Road where over 2000 tons of solid food and organic material will be recycled, weekly.

    can you imagine the smell, and not even a dime in tax ratables.