Journal Square, Jersey City Redevelopment Case Study

Edward J. Bloustein School of Planning and Public Policy Rutgers University

Jersey City Redevelopment Case Study: Journal Square Urban Redevelopment, Fall 2015

Himadri Kundu

Table of Contents Article No.

Page No.

1.

Executive Summary

2

2.

Overall City and Redevelopment History

5

3.

Socio-Economic Profile of Jersey City

10

4.

Legal, Planning and Redevelopment Framework

19

5.

Business Improvement District

29

6.

Redevelopment Project Analysis

34

7.

Overall Recommendations

50

APPENDIX

51

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1. Executive Summary The Case Study Community paper is a report on the semester long study and research of Jersey City, New Jersey in the broader aspect and redevelopment efforts in particular within the City. The presence of over 50 areas designated as “in need of redevelopment” together with the numerous changes it has undergone over the years, make Jersey City an ideal case study subject for my Urban Redevelopment class as a graduate student at Edward J. Bloustein School for Planning and Public Policy. The following report contains a detailed study of how Jersey City has arrived today in its position situated beside one of the world’s greatest city of New York, and also focusing on one of its major area of redevelopment activity, Journal Square.

The report begins with Chapter 2 outlining Jersey City’s history and the changes it had undergone from the time its original settlements resided in the region. The Dutch were the first among Europeans to set up their colonies in the now Jersey City around 1660s. From then on the populations grew as the settlements became more permanent. The major contributor throughout its history to the growth of the city, its landscape, population, and industry could be attributed to transportation. It began with the Erie and Morris Canals, continuing on with rails and then tunnels, light rail and finally the PATH service.

However, the pattern of changes Jersey City has undergone during its elaborated history; industry and transportation fueling an influx of population, continue to influence the change till today through redevelopment in the city.

An overview of the demographics, and socio-economic character of the City is provided in Chapter 3. The incredible density of Jersey City with a total population of 257,342 people living within the City’s 14.79 square miles has a much skewed spatial distribution across the cityscape. The astonishing rebound of the City’s population from the extensive loss during the 20th century, still pushes it to grow at a steady rate since the early millennium, which is expected to still increase to 24% by 2040 (NJTPA, 2013). The

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ethnic diversity of Jersey City had been another unique character which is very different from the Hudson County and New Jersey State. Without any majority racial group, the city has 37% White, 25% Black/ African American, 28.6% Hispanics and 24% Asian (US Census, American Community Survey, 2013). Jersey City has always been famous for its immigration population, and currently has a 41% “foreign born” population.

Employment has been critical during recent times post-recession, even though Jersey City is an important employment location for many with its proximity to New York and the redevelopment efforts.

However, employment opportunities are growing and projected to grow with new redevelopment plans.

The City’s budget and public finance profile is explained in Chapter 3, regarding the revenue sources and spending patterns, which exceeds both the county and state averages.

The next Chapter, 4, explains in details the legal and planning framework related to redevelopment efforts. In this chapter, Local Housing and Redevelopment Law has been critically reviewed in terms of the use of eminent domain, designation of areas “in need of redevelopment” with recommendation for improvement. An overall analysis of the City’s redevelopment together with a detailed analysis of the Journal Square 2060 Redevelopment Plan is also discussed in this chapter. A base for the redevelopment project analysis done in Chapter 7 has been created in this chapter.

Special Improvement Districts have been an integral part of the City’s economic development opportunities, playing a critically vital role in attracting investment interests for redevelopment projects also. Technical details, scope, and effectiveness of the Journal Square SID has been presented in Chapter 5.

After a thorough understanding of the background, socio-economic, public-finance profile, planning and legal framework for redevelopment, special and economic development tools the Jersey Journal Building has been analyzed in details in Chapter 6. The site of the Jersey Journal Building has 3

historic value attached to it, since the name of the entire area of Journal Square, which is now designated as a redevelopment area, has been derived from the existence of the building as the headquarters of the daily Jersey Journal. Keeping in mind the historic importance of the building site as well as the need to develop affordable and market rate housing in the area to support the growing demand of rental apartments a detailed financial structure for the development of the project and its fiscal impact is analyzed. Overall context of the project and its neighborhood is also presented in this Chapter.

Finally, Chapter 7 provides the overall recommendations regarding the redevelopment efforts in Jersey City. The recommendations has its roots in the results from the research, analysis and the understanding of the redevelopment project under the study area. The major recommendations include, that redevelopment projects should aim to create a mix of mid-rise buildings among the several high-rise sky-scrappers planned and already underway. This was the human scale of the city will be able to create a more inviting appeal to its citizens. Due to the history and dynamics of Jersey City as a major transit hub which had benefited from the transportation driven growth, Transit Oriented Development is recommended to be integrated as an integral part of its redevelopment plans.

This report tries to discuss the intricacies of redevelopment from many different point of views and create a holistically analyzed document regarding a small but important center of Jersey City and how the redevelopment plans must shape up the community’s future for the better.

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2. Overall City and Redevelopment History Jersey had evolved from a complex history of various ethnic settlements over the years and as a result has taken a series of identities on its way of becoming a transit hub, which was reliant on the New York City. The establishment of Jersey City started off as an aggregate of Dutch colonial posts and villages.

Situated on an established transit route with its close proximity to NYC it attracted an influx of immigration thus creating the basis for Jersey City's another important character, its ethnic diversity. But with the decline of railroads and manufacturing, together with political “bossism” Jersey City was transformed into the typical ‘post-industrial bust city.’ However, current burgeoning economic development and population growth have improved and transformed the city’s character earning the city an informal title of a “sixth borough” (of New York City).

2.1 Early History Jersey City is located on the peninsula of “Bergen Neck”, between the Hudson and the Hackensack rivers along the Upper New York Bay, where Algonquian Indians lived historically. A permanent establishment of European colony started only after Henry Hudson’s visit in 1609, when he was commissioned by the Dutch East India Company to explore the area in order to find a western passage to Asia. Due to his encouraging reports on the lands, New Netherlands were established on the east and west sides of the Upper Bay, with its capital on the southern tip of Manhattan Island, then called New Amsterdam. A Dutch official, Michael Pauw was deeded the tracts through the Dutch West India Co., which was the North American arm of the DEI Co., for commercial development of this peninsular area that he named ‘Pavonia.’ But the expectations of the DEI for trade and commercial development was left wanting by Pauw’s work and that led to the transfer of the territory to various other “superintendents” in portions. Later Bergen Township emerged from these villages of Communipaw, Harismus Cove and Paulus Hook to become districts of Jersey City. Ferry routes developed on the Hudson River from early 1660s to serve as a lifeline to these villages, connecting them to the Manhattan Island.

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Even though the entire region of New Amsterdam was taken over by the British in 1664, and the rapid growth of New York City made it the nation’s largest city (surpassing Philadelphia in 1790), the former Pavonia settlements remained sparse and disconnected until the 19th century. The recognition of Jersey City’s location as a prized area dates back to the Revolutionary War, when vital food were supplied from Prior’s Mill located at what is today lower Jersey City. Thus England fought to acquire the Fort of Paulus Hook and Bergen Township during the Revolution.

2.2 1800-1950 In the early 19th century, construction of two canals, Erie Canal coming from the north to the New York Bay and the Morrison Canal from the west through Jersey City, had cemented New York as the primary trade route between United States and Europe. Due to their proximity, Jersey City and New York developed a very healthy symbiotic relationship, which played a major role in Jersey City’s growth. The New Jersey Rail Road Company (NJRRC) was the first with the visions of linking both the Philadelphia and New York markets by building the Camden and Amboy (C&A) Rail Line in 1830, but the NJRRC could only extend the linkage till New Brunswick. The competition with the Delaware and Raritan Canals led to the formation of the New Jersey Railroad and Transportation Company in 1832, which connected Newark and New Brunswick. Further, the Bergen Hill Cut in 1838 by C&A made it easier for trains to pass through the lower palisades and thus providing access to the New York Bay through Jersey City, which created an enormous opportunity for many other railways in the region to flourish and as a result Jersey City emerged as the primary shipping port for goods movement to New York City.

Jersey City evolved through changes in its municipal boundaries and county membership, incorporating surrounding counties within its boundaries until its merger with Hudson City and Bergen County in 1869 to form a bigger Jersey City. Greenville came to be a part of Jersey City in 1873 and the

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larger city was divided into 1,344 lots in a grid pattern with Hudson River as its eastern boundary and the east-side of South Street as its western boundary, which remains till today.

The success of the port supported strong growth of manufacturing industries. These companies included companies such as P.C. Dummer & Company and Colgate as early as 1820s, one of which, Colgate-Palmolive would ultimately grow to Fortune 500 Co. in size. The continued expansion of the rail and port terminals to support the regional trade, together with the city’s incorporated structure made it easier to lure new manufacturers to Jersey City.

During the time of the Civil War, the Jersey City terminal of the Central Railroad of New Jersey (CRRNJ) became critical to transport supplies as well as Union soldiers to the south. The city also harbored safe houses for runaway slaves on the Underground Railroad. The Jersey City CRRNJ terminal, which was extensively opened in 1889 and still stands today, hosted the millions of immigrants coming to the United States during the beginning of the 20th century (1890-1915) and led them to a new life through existing dense transportation networks.

Thus with the dual impetus of industrial growth and developing transportation infrastructures, the population of the city increased exponentially by 123.2%, 326.3% and 182.4% in 1850, 1860 and 1870 respectively. Even though merging of municipal boundaries had its effect on the increase of the city’s population but the European Immigration through Ellis Island (Jersey) also had its share, which is evident from the largest increase of the City’s population in absolute terms that took place during 1900-1910, when there was no jurisdiction changes but the population rose by 60,000 individuals. The incoming immigrant population including Poles, Irish, Italians, and Jews rapidly diversified the Jersey City’s neighborhoods. The enclave of the African Americans (Bergen and Lafayette neighborhoods) formed in the downtown from the descendants of the African slaves of the Dutch farmers, which kept growing as a result of the African Americans migrating north from the south. The tradition of diversity of Jersey City

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continued into the 21st century and the city contains the country’s largest concentration of Asian Indians and Coptic Egyptian populations.

The continued growth of the freight terminals and shipping docks ensured that goods and people arriving at the main rail terminal of the region, Exchange Place in Jersey City had to cross the Hudson by ferry. However, opening of the Hudson Tubes as a part of Hudson and Manhattan Rail Line in 1908 and 1909, which also served the Port-Authority Trans-Hudson (PATH) passenger-line, saw the first transit crossing from New Jersey to New York. But this landmark construction happened almost at the end of the golden age of the rail as shortly thereafter automobile dominated with huge automotive infrastructure projects linking New Jersey and New York. Nothing was more iconic representation of this phenomenon as the opening of the Holland Tunnel, the world’s first underwater tunnel for automobiles in 1927, extending from Jersey City to Manhattan.

The increase in the access to transportation infrastructure led to the spread of art and culture to Jersey City. Various theaters were built like The Stanley Theater and the Loews Jersey Theater and enriching the cultural experience of the city.

For the most of early 20th century, Jersey City was in the negative limelight for its political character. Frank Hague dominated as the Mayor of the city for 30 consecutive years fetching both praise as well as criticism and commanding significant powers both in the state and in Washington. Hague did manage to secure considerable federal funding and with it lots of WPA jobs. One of the most prominent projects under his reign was the construction of a world class Medical Center and later the Roosevelt Stadium. Following his term after the World War II, the city faced sprawling growth to the suburbs, declining railroads and factories bringing the population down with it to the 20th century low of 223,532.

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2.3 1970-Today The scenario of population low and economic decline reversed itself, when the vacant west bank of the Hudson redeveloped to become the luring frontier of people and commerce. Many historic restoration projects in Jersey City were implemented during the late 1970s. Examples include the restoration of the Loews Theater and later in 1976 that of the Liberty Island revitalization and the CRRNJ terminal. These were quickly followed by the redevelopment of the waterfront to a place now sought by new residents and companies involved in finance, commerce and technology. Huge amount of capital investments followed in the next two decades to house the biggest names in the finance sectors like Chase Manhattan Bank, Merrill Lynch, Charles Schwab and Goldman-Sachs. The area now contained the tallest tower in New Jersey, with a high competition to face the New York skyline. This evoked the nickname of “Wall Street West” to the downtown area, now hosting the world’s biggest clock.

More redevelopment projects started to happen like one in Communipaw by the Liberty Science Center and still many more in the pipeline like the $350 million restoration of the Jersey City Hospital complex in Bergen Hill. Even though many of these redevelopments came at the cost of the decline of the shipping and rail industries, still Port Jersey stayed in competition and had recently been adapted to handle post-Panamax shipping vessels. Many freight rail still operate through the city to transport orange juice for the new Tropicana plant and cars from the Port Authority auto port. Moreover, Jersey City still serves to be an important hub for commuter rail with PATH and Hudson-Bergen Light Rail Lines. The turnaround of the city to its old days of glory is evident from the influx of New York residents favoring the “affordable, authentic” neighborhoods offered by Jersey City against the much higher priced Brooklyn apartments.

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3. Socio-Economic Profile of Jersey City 3.1 Population Density and Change in Population Jersey City located within the Hudson County, New Jersey has a very high density of population with 17,399 people per square mile which is almost thirteen times as high as that of the state of New Jersey and 199 times higher than the average U.S. population density.

Even though with a total population of 257,342 people living in a 14.79 square mile boundary, the distribution of Jersey City’s population is far from being uniform with Wards C and E having highest population density (in the city) of 51,000 per square mile and Ward F (comprising industrial/ commercial uses, Liberty Science center and the Liberty State Park) have no population. Thus, Jersey City fails to be city with the highest overall population density in the Hudson County which is itself a very densely populated county in the country. According to the American Community Survey estimate of 2013, the population increase of Jersey City since 2010 has been 3.9% and since 2000 it has been 7.2%, similar to that of Hudson County’s 8.4% increase during the same period but greater than the statewide New Jersey’s increase of only 5.7%. Future estimates of population growth is predicted to continue by North Jersey Transportation Planning Authority to reach 356,250 people for Jersey City with high growth rates of 23.8% in comparison to Hudson County’s 38.4% (NJTPA, 2013).

Journal Square Population of 26, 639 people with a density of 27,642 people / square miles lies in the middle of Jersey City’s range of population density. But when population density is considered as per block group the density, with a range of 93 persons/sq miles to 75,744 persons/sq miles, highest density surpasses that of Jersey City’s most dense ward. The highest density is however occurs for block of Journal Square with a population density of 248,480 people/ sq miles although it has only 163 people in total. But for a larger block having 1405 people the density is 200,780 people/sq miles which is the second highest in the area.

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3.2 Race and Ethnicity Ethnic diversity characterizes Jersey City that there is no race with 50% or higher majority but those identifying as White comes close with the highest population of 37.3%, while the African Americans are 24.9% and the Asians with 24.3%. The Table below shows that the city has a unique racial demographic profile in comparison to Hudson County and the State of New Jersey with nearly twice as much of African Americans than Hudson County and New Jersey. Even the Asian population of the city is approximately 10% and 15% more than that of Hudson County and New Jersey.

The Hispanic/Latino residents of Jersey City also comprises of a large portion of the total population at 28.6%, which is 10% higher than that of the state but is much lower in comparison to Hudson County’s 42.9%. Among the Jersey City’s Hispanics/Latinos more than half identifies as white similar to state and county figures, while those identifying as African Americans among them is small throughout.

Jersey City historically has been home to a large Puerto Rican population, of its Hispanic/Latino population, 38% comprise of Puerto Ricans and less than 10% of Mexicans and Cubans.

The spatial variation of race and ethnicity within the city follows: The White population exclusively dominates the city’s southeast waterfront, while the majority of the Black/African Americans are concentrated in the southern middle portion of the municipality (where there is not much presence of any other racial groups). Although the Asian population is spread over the north and west parts of the city, they also stay isolated as the majority in the northeastern waterfront too, which has the highest density of population among the city.

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3.3 Educational Attainment Jersey City has unique characteristic in terms of educational attainment of its residents, with extremes such as 38.1% of its population having a high school diploma or less, yet 41.8% have at least a Bachelor’s degree and both of these values in numbers are higher than either that of county or State.

3.4 Age and Sex The most interesting aspect of the population distribution by age and sex for Jersey City is the fact that there is a huge bulge at the middle of the population pyramid from the populations of age groups 20 to 34 years which comprises majority of the 62.9% of working population (ages 20-59). The median age of 33 years for both sexes is much younger than that of the State of New Jersey at 39.4 years but almost similar to that of Hudson County at 34.6 years. Aging population (65 years+) of 13.3% of total is quiet small in comparison to New Jersey’s 20.1 % of the total and Hudson County’s 15.2% of total.

The proximity to New York has historically been beneficial for Jersey City in every respect, which makes it one of the most desirable places to live due to the ease of travelling to New York either for workers or non-workers. Jersey City’s location as well as its historic reputation for employment and industry has been the most likely cause of people flocking here from all over the State, country and abroad to create the population bulge of young generations.

3.5 Employment The whole of New Jersey State was hard hit by the Economic Recession of 2008, which caused a higher 5-year unemployment estimate for 16 year olds or above to be 9.5% during the post-recession period of 2008-2012 in the state than national average. For Jersey City it is even higher at 10.6%, with a higher percentage of the population employed or looking for employment (69.2%) than New Jersey (66.9%). Effect of unemployment varies across the demographics for Jersey City, with the highest and 12

second highest percentage of unemployed people belonging to the “16-19 age group” and “20-24 age groups” with 38.2 % and 18% unemployment. The national and statewide trend in unemployment is also visible in Jersey City as well where Black/African Americans have the largest unemployment among all racial groups at 16.5% but with the only exception of Asians having a slightly higher unemployment rate than non-Hispanic Whites, at 7.4% unlike that of the state. Even though there is not as stark a difference in unemployment between the sexes like that between races, still there exists an anomaly to the state and national trends, since in Jersey City the female population faces 11% unemployment in comparison to only 9.1% of males facing unemployment. Level of education even does not serve as a good indicator of employment for Jersey City as employment chances is equally worse for ones with an education of high school degree or higher than a Bachelor’s degree.

3.6 Economic Base The economic shift in the late 1980’s improved employment, undergoing extensive revitalization efforts for the next 20 years, majorly concentrated on the growth along the waterfront. The change in the industry type has made it possible for Jersey City to have a large percentage of its workforce (more than 17%) employed in “management, business and financial” occupation, which is higher by 3% than that of New York. However the sector employing the largest percentage of its residents, 20.3%, is “educational services, healthcare and social assistance”, similar to the State’s 23.1%.

3.7 Household Income The American Community Survey 5 year estimates, reports the Jersey City’ median household income for 2008-2012 as $ 58,308 per year, which is close to Hudson County’s $58,722 but far below (18.6%) of that of New Jersey. Urban sprawl plays an important role in this respect, since higher income households have the means and the tendency to live in suburban neighborhoods and thus increasing the State’s median income value and decreasing that of the City’s. The income profile of the City is positively 13

skewed which is evident from the mean household income of $84, 153 even when a quarter of the households earn lesser than $25,000 a year. 61% of all households being family households have a higher median income than the overall city at $63,557, which is evident from the population bulge due to the 25-34 age groups who are more likely to be young professionals and hence earning lesser than established family households.

3.8 Income Inequalities Drastic differences among income levels of males and females exist in Jersey City with males making 27% more than the females yearly. The percentage of 17.6% population below poverty level for the city is much higher than that of the state at 9.9% but closer to that of the county’s at 15.7%. This becomes more striking due to the fact that the income generating population earns 5.5 times more than the dependent population (receiving social security funds).

Table 2.1: Household Income (source: Statistical Atlas, url- http://statisticalatlas.com/neighborhood/NewJersey/Jersey-City/Journal-Square/Race-and-Ethnicity )

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The

median

household

income of Journal Square residents at $48,123 is much closer to that of Jersey City’s at $58,308 when compared to the gap which exists between the 95th percentile income of Journal Square residents and that of Jersey City’s at $161,171 and $232, 992 respectively (US Census Bureau, 2013). The difference within Journal Square with the 95th percentile income being 335% higher than the Table 2.2: Household Income (source: Statistical Atlas, urlhttp://statisticalatlas.com/neighborhood/New-Jersey/Jersey-City/JournalSquare/Race-and-Ethnicity )

median income of households is even quiet astonishing, which clearly depicts

the

divide

of

income

inequality existing throughout the country and also the city. From the figure below, the range of household income of Journal Square residents as percentage of Jersey City’s clearly shows the area lags behind a lot in terms of household income relative to the City.

The income inequality is more evident from the fact that more than 49% of the total income is concentrated among the top 20th percentile, while even among them the top 5% has almost a 19.2% share of the total household income for the area (Source: Statistical Atlas). The following figure also shows the disparity more clearly, as the distribution of households with income levels below the median value for Journal Square having a higher total count which is greater than that of Jersey City and decreasing with rise of income to the higher ranges ((Source: Statistical Atlas).

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3.9 Households Jersey City reflects a trend of smaller household units, with 61% of the total households being 1 or 2 persons despite the fact that out of the total 93,000 units (approx) of the household stock 91% majority is 4 person or less households, as per the American Community Survey for 2006-2010. There exists a similarity between the county and the city regarding the household size around 2.5 and the also the type with almost 60% of family households even though that of the state is 10% higher. Whereas, single person households and those headed by females are both higher than that of the State but similar to the county’s number. Majority of the households live on rentals without owning houses (only one third own houses) in the city, which might be comparable to the county scenario but is complete opposite to that of the state where two-thirds own houses.

Even though the physical character of the housing stock reflecting old age, with more than a majority (60%) being built before 1960 and 42% being built before 1940s, there have been a whole lot of new developments taking place during the past two decades alone which comprises of over a quarter of the housing stock. Median cost of home ownership is as high as $360,000 in Jersey City with mortgage payments at $2,504 and without mortgage at $878. This high cost of home ownership translates into a high spending of almost more than 35% of the household income as rent for about 40% of households.

The proximity to New York City has its advantages as well as the perils of such high cost of housing due to the demand supply gap and high construction costs.

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3.10 Public Finance Profile A considerable amount of the local revenues comes from general sources other than liquor, insurance trust and utility and among that too property tax accounts for most of it. Currently, all sources of property taxes comprises less than 40% of revenue of the municipalities, which has gone down from the past due to several increases in federal and state funding being increased, thus increasing dependence on state but recent insistence on increasing the property tax revenue aims to self-sustaining cities.

Although there are other sources of own income for the city like sale tax, transfer taxes, taxes on individual incomes or corporations, they are insignificant in comparison to that of the property tax revenue being generated and its potential particularly when the property prices have been growing due to the resurgence of Jersey City as the “sixth borough” with increasing demand for both housing and commercial real estate.

New Jersey State League of Municipalities (NJLM) published a report in 2009-10, which states that out of the local own revenue of the state of $25 billion, 24,7 billion came from the property tax route, which relinquishes the state’s dependency on federal aid. However of the Equalized Property Tax Rate of 2.44% (overall), only 1.22% is for municipal purpose, 0.642% is for school and 0.54% apportioned to county. The total Equalized Property Value for Jersey City is $ 17,770,694,615 with a per capita equalized property value of $69,054 and a Net Equalized Taxable base of $1,326,663,407.

3.11 Municipal Spending for Jersey City Out of Jersey City’s municipal budget for 2013 of $503.3 million, the largest share of 33% is apportioned for public safety (police and fire department’s expenses) due to the city’s large spatial extent, with health insurance coverage of municipal employees a distant second at 14.5% of the budget and a close third of debt service cost at 14% of the budget. Other major expense includes the Government employee’s pension funds at 9.26% and street and sanitation organizations at 8.46% of the budget 17

respectively. Even though there is a lot of opportunity to collect high property taxes, still only 43% of the budget expenses are currently covered by the property tax revenue generated, while the rest are gathered from miscellaneous sources mainly due to a number of property tax exemptions being used to fund the redevelopment projects.

Per capita municipal spending for Jersey City at $1978 is just a bit more than the average municipality spending in Hudson County at $1849, but a considerable amount higher than that of overall average for the State at $1414.

References 1. State of New Jersey, Department of Treasury, url: http://www.state.nj.us/treasury/taxation/lpt/abstractrate.shtml 2. Statistical Atlas, url: http://statisticalatlas.com/neighborhood/New-Jersey/Jersey-City/Journal-Square/Raceand-Ethnicity

3. American Community Survey 2013, 1 year estimates (New Jersey, Hudson County, Jersey City) 4. American Community Survey 2012, 5 year estimates (New Jersey, Hudson County, Jersey City) 5. Department of Labor and Workforce Development, Building Permits, 2013 6.

North Jersey Transportation Planning Authority, 2013

7. US Decennial Census 2000, 2010 (New Jersey, Hudson County, Jersey City)

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4. Legal, Planning and Redevelopment Framework 4.1 Redevelopment In general an area is deemed to be in need of redevelopment when it poses a threat to the health, safety and general welfare of the community arising from disinvestment, decline or stagnation of the area (Slachetka & Roberts, 51). The Section 5 of Local Redevelopment and Housing Law (N.J.S.A 40A:12A-5) in New Jersey provides the criteria for the determination of an area in need of redevelopment. Until recently an area needed to satisfy either one of eight criteria mentioned in this section for the designation of an “area in need of development”, when a “public purpose” has been established for the requirement of development and that gave the power of eminent domain (i.e., through condemnation approach) to the local governing body to acquire private and public properties in exchange of “just compensation.”

However, with amendments to the LRHL in January 2014, in addition to the existing way through condemnation another option of not exercising the power of eminent domain or through noncondemnation approach was created even when an area is designated for in need of development.

Prior to the amendment to include non-condemnation approach for redevelopment, one of the major sources of resistance against local officials undertaking formal redevelopment efforts under the LRHL was the fact that as an inescapable legal part of the statutory process condemnation or eminent domain would have to be enforced, even at times against the will of the municipalities once the state had delegated the powers of eminent domain to them, as they could not change that themselves without legislative authority. The choice of whether the power of eminent domain would be enforced for the project needs to be made at the very beginning of the project even when the scope and the area has not been understood let alone determined. Hence the success of a project crucially hinges on this decision, as even if the government can go back to choosing to enforce the power of condemnation once they find that the non-condemnation approach is not working, the entire process has to start from scratch and that makes 19

the prospects dim indeed. The power of eminent domain has led local governments to accomplish a lot of critical development and redevelopment efforts across the state and country which has transformed the city landscapes and the notion about how a city or neighborhood might look and function. Even though this would not have been possible without the use of condemnation, still the non-condemnation approach can be beneficial for everyone as well. The criterion required to be met for a designation of an area in need of redevelopment is briefly explained below.

A. Deterioration/ Substandard Building Conditions- This criterion focuses on the physical condition of the building or area which when deteriorated to such an extent beyond despair to pose a physical threat to the community in general. Such substandard conditions of buildings can be proved in a variety of ways like from exterior inspections, aerial or exterior photographs, Building code violations and even from interior inspections and photographs if available with supporting evidences from professional experts.

B. Abandoned Commercial or Industrial Buildings- Even though this criterion is similar to the first one, to qualify for this criterion (B) the damage to the property needs to be severe enough so that it can be considered as “untenantable.” The time frame that needs to be established for the property or area to be considered “abandoned” is not set but there must be evidential support to suggest the deterioration of the area has resulted from its vacancy.

C. Public Land and Privately Owned Vacant Land- For lands belonging to a government entity in order to qualify under this criterion (C) there must be evidential support to suggest that the property or area is unlikely to be developed other than through redevelopment efforts because of developmental constraints such as remote location, lack of access to the property, topography, soil conditions or others. Lands which have been vacant and unimproved for more than a period of ten years and privately owned may also qualify for this criterion.

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D. Deleterious Land use, Obsolete Layout and Faulty Design- Criterion D may be related to the first two criterions due to similar effects from property conditions but it also takes site improvements into considerations and it’s functioning to qualify a property or area. This criterion can be applied to property or area already in use and most of which are “used in a manner inconsistent with modern land use planning standards or practices” (Slachetka & Roberts 2011, 60).

E. Title or Property Ownership Issues- For property or areas with stagnation in use or unproductive condition arising from ownership issues or title problems, which then limits the economic development or viability of its surrounding area, can be considered to qualify under this criterion.

But recent court rulings specified there has to a “deleterious effect” associated with the surrounding community and also the conditions specifically stated in criterion E or those with languages similar to the language explicitly stated in LRHL can only be applied for this criterion.

F. Fire and Natural Disasters- An area where fire or natural disasters have occurred and which is minimum 5 acres in area can be designated as an area in need of redevelopment using this criterion.

G. Urban Enterprise Zones- All Urban Enterprise Zones qualify automatically to be designated as an area in need of redevelopment, with the goal of granting short and long term tax abatements. In New Jersey, there is a separate authority New Jersey Urban Enterprise Zone Authority to designate Urban Enterprise Zones. For any property to be redeveloped within an Urban Enterprise Zone by any municipalities, the property or area to be redeveloped must qualify under any one of the other criteria for redevelopment (Slachetka & Roberts, 65).

H. Consistency with Smart Growth Policies as per Law or Regulations- This was a new addition to the list in 2003 to allow municipalities designate areas for redevelopment on the basis of compliance with smart growth plans. This would help them limit sprawl and redirect growth to the areas which can handle growth better. But similarly to criterion E, there must be specific adverse

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conditions on the surrounding community due to the lack of smart growth in an area for this criterion to be applied ( Slachetka & Roberts, 66), and hence as such it is not applied alone.

4.2 Rehabilitation Rehabilitation not being less extreme than redevelopment can be utilized much easily, as the process of designation of an area is simpler in comparison. And two broad requirements are generally used in this regard: 

When a substantial portion of the structures in an area is deteriorated with “a continuing pattern of vacancy, abandonment, or underutilization” (Slachetka & Roberts 2011, 91).



When more than 50% of the housing stock or the sewer infrastructure is at least 50 years old.

The governing body needs to adopt a resolution declaring the “area as in need of rehabilitation”,

after it has submitted the same to the planning board for its recommendations, so that the area can be formally designated as a rehabilitation area. Even though investigation or public hearing is not a part of the required process, still it is encouraged.

Legal disputes and court ruling resulting from a number of controversial scenarios with the use of eminent domain has shaped the current form of redevelopment and rehabilitation uses in the U.S. Some of the major court cases regarding the use of redevelopment powers in the state of New Jersey are outlined in the following section.

4.3 Legal Cases in Redevelopment The early 1920s saw the emergence of the urban “blight” concept come into picture, even though it was not until 1947 that the power of eminent domain was constitutional in New Jersey for redevelopment purposes of blighted areas and this resulted into the adoption of the “Blighted Areas Act” in 1949. After a few years of implementation of this power, Berman v. Parker was the first redevelopment

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case brought in front of the US Supreme Court in 1954, whose decisions would establish the general guidelines regarding the eminent domain powers in the redevelopment process and New Jersey’s Supreme Court would also adopt some of those standards into the redevelopment concept.

New Jersey experienced a lot of important cases from that point till recently, which helped shape the current format of “blight” designation in the form of “area in need of redevelopment”, where different criteria set for the determination and designation of such redevelopment area were challenged by property owners. And none so important than the Gallenthin v. Borough of Paulsboro trial in 2007 involving a 63 acre vacant land being included in the area for redevelopment by the local government as it was considered to be unproductive. The court decided that Paulsboro was too eager for development in an unconstitutional manner as the land’s unproductivity could not only be the basis for it being “blighted”, even though as per the terminology set for “blight” then was being matched by the city’s determination. This led to the amendment in the definition of “blight” by the court, to include conditions resulting in negative impacts to the surrounding community as a whole and presence of substantial evidence in support of such designation. The Gallenthin v. Paulsboro case not only included some of the biggest changes in the redevelopment law, which would result in numerous more litigation throughout the state and country in the following years but it also changed the requirements for redevelopment planning.

Another important and more recent legal dispute to reach the Supreme Court of New Jersey is that of Main Street L.L.C v. Mayor and City of Hackensack, 2013 in which a 2 block area inclusive of 14 individual properties both commercial and residential were determined by the city council to be in need of redevelopment. The plaintiff’s 5 properties among those 14 were designated for redevelopment based on the planning board’s findings and evidential support due to the accounts of the buildings being vacant, in a deteriorated condition, substandard and unsafe for occupancy, un-tenantable, and the entirety of the property including the parking lot, suffering from a faulty arrangement or design. Even though the 23

evidence in support of these conditions met the Legislative definitions of blight according to the Local Redevelopment and Housing Law, the Appellate Div. Court reversed the Trial Court’s ruling of rejecting the plaintiff’s argument of improper classification of their properties as “blighted” according to the definition set forth in Gallentin v. Paulsboro case since there was no established negative impacts on the surrounding properties. But later the Supreme Court reestablished the Trial Court’s judgment that the properties indeed satisfied 3 criteria set forth in LRHL to be defined as blighted which was sufficient. This decision have brought a dissenting opinion from Chief Justice Rabner citing that the right to possess property free from governmental interference is one of the most important and primary fundamental rights as per the Constitution. According to him the majority’ conclusion that when a government body designates an area in need of redevelopment, it need not affirmatively prove both elements set forth in Gallenthin to show that the property is “blighted,” and also have negative impacts on the surrounding areas, thus permitting the government to designate a private property for redevelopment even when they have not shown a decadent effect on the surrounding properties.

Every legal case in New Jersey’s redevelopment history makes it more evident that redevelopment law has undergone continual evolution, which resulted in land designations that were unquestionable for a long time are now being subject to review. Whether this can impact the future of the state’s redevelopment in a negative way remains to be seen, since eminent domain has been a powerful tool for development when used accurately to shape the current and future conditions of the state.

4.4 Journal Square as Jersey City’s Redevelopment District A large chunk of the redevelopment effort in Jersey City until recently had been concentrated along its waterfront districts with multiple high-rise building construction to house multi-industrial office spaces as well residential towers almost in competition to the match up to the famous Manhattan skyline

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by the Hudson River. However, the 57-city block wide Journal Square 2060 Redevelopment zone which encompasses 214.1 acres in north central Jersey City bears testimony to the shift in the redevelopment effort in the city away from the waterfront.

The Journal Square 2060 Redevelopment Plan, with one of the major focus on transforming the NJ Path station corridor which has one of the most important stations for the New Jersey-New York connector, seeks to remedy the underutilization of the neighboring area and reinstating the city’s importance as a transit and commercial center. The Plan involves use of rehabilitation and redevelopment through non-condemnation approach in order to reduce the opposition and legal backlash from property owners.

The transit hub status as per the currently growing “transit village” standards were not applicable to this area due to the underutilization and deteriorating once vibrant commercial center from the outdated parking structures and surface parking lots present for automobile users without any proper facilities towards pedestrians or multimodal transportation support1. Furthermore the presence of vacant areas and general deterioration satisfies the criteria of “pattern of vacancy, abandonment and underutilization” required to designate an area in need of rehabilitation.

The Redevelopment Plan for Journal Square complies with one the objectives listed by the Jersey City Master Plan as: “Develop and implement smart growth strategies that locate new residential development within walking distance of bus stops and passenger rail stations, with the highest density zones located within walking distance of passenger rail stations; that mixes residential land use with commercial land use”, which fulfils criterion (h) for designating an area in need of redevelopment. The transit village is designation is aligned with the Smart Growth policies and practices. The increase in density from a low density residential and commercial center was required to satisfy the requirements of the Master Plans of the City for the transit center.

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Furthermore, the designation of an area in need of redevelopment under criterion (d) of ‘obsolete layout and design’ becomes applicable due to the vast expanse of parking structures and surface parking in the neighboring area, which hinder a proper and effective bicycle circulation and pedestrian accessibility and instead encouraged automobile use evidently against the multimodal transportation factor required for a transit village standard. The improvements in ‘walkability’ will not only ensure the transit village standard but will also infuse new life and vigor in the commercial spaces, thus improving the utilization of the area and helping in remedying for the 3rd criteria of an area in need of rehabilitation.

The LRHL in NJ defines rehabilitation for one criterion as, “undertaking, by means of extensive repair, reconstruction or renovation of existing structures, with or without the introduction of new construction or the enlargement of existing structures, in any area that has been determined to be in need of rehabilitation or redevelopment, to eliminate substandard structural or housing conditions and arrest the deterioration of that area.” Thus the designation of the area in need of rehabilitation provides a lot of authorized scope to residential redevelopment with reduction in parking, which generally constraints most large development projects, and improvements in landscaping to beautify the surroundings and improving the walkability quotient. The long term tax abatements to the developers for the inner city will help in the development of Journal Square too. The increase in the density of residential uses approved by the Plan, through a mix of addition to existing structures as well as constructing new mixed-use high rises on the arterial roads will not only replenish and improve the aging housing stock but will also generate a new multi-modal community to benefit from the proximity to the transit village and its improved commercial and pedestrian friendly environment. Although helping to utilize the true potential of a “transit village” standard, the Journal Square 2060 Redevelopment Plan would prevent the following: o

“Public acquisition or relocation of residents and business,” (Journal 4)

o

“New acquisition or condemnation of private property for private redevelopment purposes.”

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o

Removal of existing affordable housing units

o

No displacement of existing residents through the implementation of this plan through condemnation.

I believe the ground reality in realization of these plans and expectations will be pretty daunting to say the least, as it is visible from the experiences in the past and due to general human nature and the law of probability. Since there “will always be few among the many,� who would want to take advantage of the redevelopment designation, to demand exorbitant compensation during negotiation as the powers of condemnation will not be present with the local governing bodies and the developers. For crucial properties, essential to the implantation of the plan will provide greater leverage to the owners thus making it harder for the project feasibility financially. Even though the retailers are bound to make contributions for improvements to the pedestrian experiences along their storefronts, which most will be likely to cooperate with since they will be the actual beneficiaries, it will be much more difficult to make everyone cooperate for contribution either in the form of negotiations or self relocation. Residential dissonance is bound to occur among the residents who prefer the automobile oriented neighborhood and had chosen the area on that basis and might not favor the development and hence will not cooperate.

So in my opinion, if there was substantial evidence in support of the designation for redevelopment, which is a prerequisite, there could have been a mix of condemnation and non-condemnation approach utilized in acquiring properties to ensure better success rates, rather than just trying to win over the trusts and votes of the residents and property owners. But even if the redevelopment effort might face some difficulty in execution, the novelty of the plan paves the way towards a new future where it might be one day possible to create a system and a plan to redevelop and improve the functionality of the urban centers through public support only instead of any regulatory imposition like the enforcement of eminent domain, which has always been thought to be a necessary evil.

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REFERENCES 1. Legal case documents as provided in sakai site of Rutgers Urban Redevelopment Class for Fall 2015 2. Jersey City Redevelopment Report for Urban Redevelopment Class Fall 2014, pages 48-62

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5. Business Improvement District According to the New Jersey State Legislation N.J.S.A 40:55-65 areas “in which a special assessment on all property within a district shall be imposed for the purpose of promoting the economic and general welfare of the district and the municipality” will be defined to be Business Improvement District (BID) or Special Improvement District (SID). Even though the first SID in the US came into existence in 1975, New Jersey started with SID designation only from 1986. BIDs or SIDs are established through public-private partnerships to improve the overall effectiveness of the businesses by stimulating economic growth in that area or district, which may have gone into a slump due to any number of factors. The important aspect of such a body is the authorization of the municipal bodies and the community’s contribution in forming the SID body, however the stakeholders (owners of businesses or properties) have the responsibilities for maintaining, developing and promoting the SID.

5.1 Special Improvement Districts in Jersey City SIDs have been very popular throughout the country with about 1000 of them across every major city, while New York has the highest number3. Urban Enterprise Zones or UEZs originated in 1992 also with similar motives to improve economic growth and development of the dwindling cities or downtown commerce but have a larger area designated under them2. The UEZ in Jersey City has been the most successful as well as the largest in the state, which now have five SIDs within its areas out of the 80 odd SIDs in New Jersey.

5.2 Journal Square SID (JSSID) Being one of the largest SIDs in the State, Journal Square SID occupies a pivotal role in the growth of the entire city with its location around the transit hub of the Port Authority Trans Hudson (PATH) commuter rail system. The importance of the PATH station hub has been mentioned in the earlier chapters

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as well, with its high volume of 30,000 transit commuters and an additional 26,000 estimated to travel by the local bus system.

Similar to its predecessor Central Avenue SID, the JSSID is also run by a private, not-for–profit corporation Journal Square Restoration Corporation (JSRC), which was founded three years after the CASID. JSSID, containing 300 properties to make up 1200 stores, offices, residences and parking garages, it stretches for a mile from Tonnelle Avenue to Newark Avenue south along the Kennedy Boulevard with side street branches4.

Like most other SIDs collections from tax assessments are used to fund the cleaning and maintenance activities and also to improve the district’s businesses. The transformation of a formerly old and decrepit transit hub into what now most town council people are proud to call the “heart of the city”.

A major reason behind the success of the transformation is through the participation of the local authorities to grant tax exemptions for the businesses of the district to utilize the funds collected for the district’s overall improvement in civic services that was lacking due to the shortage of funds at the municipal level. However, other sources of funds like the UEZ funds approved by the Jersey City Council and other private funding is also available at its disposal. The tax assessment for properties in the JSSID is based on the linear retail store frontage at the rate of $40 per front foot. Further due to its designation under the UEZ, the qualified businesses could extend an economic benefit to its customers by charging them lower sales tax. The annual work plan for JSSID is about 2 million USD on an average, from which they have managed to develop a 5.3 million dollar Capital Improvement Plan. This had brought much required physical improvement of the Square through the combination of federal, state and city funds4.

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5.3 Nationwide comparison of JSSID Even though the SID structure followed nationwide is similar to that of the SIDs in New Jersey, still to understand its operating aspects a general comparison is necessary, which was done in reference to Becker and Grossman’s report that has been included later.

1. Volume of Budget – Even though the highest budget reported nationally was $ 17.95 million the median budget was only $ 342,000 and in comparison the State’s highest budget was in Atlantic City at $ 4.7 million and median of $ 300,000. JSSID had a lot higher average annual budget than the State’s median at $ 2 million.

2. Sources of funding – Both across the nation and state the primary source of funds had been reported to be property assessment amounting to over 95% with other sources like contracts, sponsorships only making up less than 5% of all sources. Major sources for JSSID too had been the property assessment but it was matched by the grant approved by the City Council of Jersey City in the form of UEZ funds, apart from the private funding that was also available.

3. Assessment calculation basis – Most prevalent method nationwide is based on the assessed value of the real estate property taxes (55.9%) which is much higher for the State (84%), while only a small portion of it was based on the assessment of square footage (12.2%) and also even smaller 4.5% on linear front footage. But the least used sales tax (1.8%) for tax assessment. However for the State liner front footage method was seen to be more favored at 16%, which is followed in the JSSID. 4. Capital Improvement by SIDs – Although nationwide a very small fraction of 10% SIDs only used to fund long term capital improvements, New Jersey State has a higher percentage of 31% which is reflective of the JSSID’s investments in a capital improvement plan of $5.3 million.

5. Policy setting ability of BID authority – Majority of SIDs or BIDs in the country and state have a freedom to set their own policy orientation such as fixing the assessment rate for collecting tax 31

revenues, setting up a budget, which services to provide and the level of the service. JSSID in this respect is fully autonomous, however is dependent on the UEZ matching funds for the decision on the budget since it comprises a large portion of their budget.

6. Board Size of SIDs – The size of the boards governing the SIDs vary according to the size of the SID and its complexity, with a nationwide minimum of 3 members to a maximum of 70, while 13 being the median strength, which are similar to the state’s other SID Board numbers excepting the largest one. However the JSSID’s size in 2009 was around 15-16, slightly higher than the national and state median but recent information was not available.

7. Appointment of SID Board member – Majority of the SIDs use direct elections for selection f Board members in the country (42%) and state (57%), which is also true for JSSID. 8. Services provided by SIDs a. Maintenance – Maintenance services is one of the most prevalent services of majority of SIDs across the country and state but the method might vary among the different types.

The highest ranked service was litter and graffiti removal while snow shoveling was the lowest. JSSID also provides similar services cleaning litters, graffiti and maintaining plantation. b. Security – Some sort of minimal security service was reported to be provided by most of the SIDs in the country and also the state, with the largest type being the uniformed ambassador. JSSID also have security workers present in their district. c. Transportation – Transportation services like parking or shuttle is not that popular overall and similarly JSSID do not provide any such service till now. d. Marketing and Hospitality – Due to the higher overall impact from marketing and advertising, most SIDs reported that they were involved in such activities, which generated the highest number of responses. A variety of marketing and promotional

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techniques have been carried out by the JSSID on similar lines, to install banners, celebrating festivities, and advertising through magazines and websites. e. Public Space management – About 33% of all SIDs nationally maintain some sort of façade enforcement, while about 25% of them issue sort of form code for compliance as well.

However JSSID only involves itself through physical improvement along with the capital improvement plan. f.

Business recruitment program – Just like most SIDs both nationally and domestically JSSID uses a financial incentive to attract businesses to their districts by offering a reduced sales tax.

References 1.Bivona, L., Hansen, K., Sik, K.J., McLoughlin, I., Restaino, M., Singh, C., Watson, I., Wu,T.Z. (2014). JERSEY CITY REVELOPMENT REPORT. Rutgers, The State University of New Jersey, New Brunswick, NJ. 2. JCEDC. Retrieved from http://www.jcedc.org/Pages/uez.html 3. Business improvement district. (2015, November 14). Retrieved from https://en.wikipedia.org/wiki/Business_improvement_district 4. Our Mission. Retrieved from http://www.thenewjournalsquare.com/about/mission/ 5. Becker, C.J., Grossman, S.A. and Santos, B.D. (2011, January). BUSINESS IMPROVEMENTS DISTRICTS: CENSUS AND NATIONAL SURVEY. 4-46.

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6. Redevelopment Project Analysis: Jersey Journal Redevelopment Project 6.1 Residential Redevelopment The need to increase the density of land use makes most of the redevelopment in Journal Square to be characterized by new construction of residential mixed-use high rises. In 2013 the Mayor of Jersey City Steven M. Fulop passed its first Tax Abatement Policy to support the redevelopment efforts of Journal Square. This policy had managed to attract the development inlands from the waterfront which had been historically been favored when redevelopment efforts regained. Apart from the residential activities a lot of restoration work is also carried out on “Brownstone” together with new restaurants and cafes being opened throughout the city and the MANA Contemporary actively luring the “priced-out painters, photographers and other ‘makers’” to their massive and increasing compound, which offers huge space at affordable rents.5 The major developments in the area are shown in the map below. The following sections explain them in a bit more detail.

Fig 4.1 1- Journal Squared, 2- 30 Journal Square, 3- 3 Journal Square, 4- 500 Summit Ave. Source:http://ny.curbed.com/archives/2014/04/30/mapping_jersey_citys_towertastic_residential_building _boom.php

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6.1.1 New Building at 3 Journal Square The 3 Journal Square project’s developers have been approved of a 30 year tax abatement for the development of their $73 million residential building, which is already underway. It would house 240 rental units in its 13 stories, located across the street from the PATH station4. There has been also a request from the developer for a 10 year PILOT worth 10% of their gross annual revenue for the first year with the amount increasing over the next decades. The project is going to be an extension on the property built by Hartz Mountain in 1984. 1

Fig 4.2 Source: http://www.nj.com/hudson/index.ssf/2014/10/journal_square_developers_seek_30year_tax_break_from_jersey_city.html#incart_related_stories

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6.1.2 Journal Squared This enormous project with three towers will have the largest residential building in the state of New Jersey. It consists of 3 towers with varying range of heights from 54 storied one to 60 and the tallest at 70 stories high, with an overall total of 1,840 housing units. The project will also have retail outlets on the ground floor2. The expected completion of the first tower is sometime in middle of 2016 with second phase tower in another five years.

Fig 4.3 Source: http://www.nj.com/hudson/index.ssf/2014/08/construction_on_threetower_project_in_jersey_citys_journal_square_takes_off_developer.html

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6.2 Jersey Journal Building Redevelopment Project Even though the major focus in the redevelopment of the Journal Square has been on the newer construction still there are efforts to preserve the historic structures as well and combine the redevelopment with preservation. The “Jersey Journal Building” at 30 Journal Square is a prominent example of that. The building itself has a historic value attached to it, being the headquarters of the news daily from where the square’s name is derived. Due to the locational value of the building together with the historic value a large scale renovation and construction has been proposed as a part of the larger redevelopment project in the area.

6.2.1 Background of Jersey Journal Building The historic headquarter location of the daily newspaper “The Jersey Journal”, in the heart of the then commercially active Jersey City’ center has seen a huge amount of redevelopment activity from the early 19th century. The name of “Journal Square” was given to the city’s plaza by then Mayor Frank Hague due to the importance of the building at that location. The Journal’s headquarters had seen a fair number of changes till it came to this location. The plaza was grabbing the attention for redevelopment prior to that even. The importance of the location as a transit hub, transferring passengers to New York through the PATH station while the local surface trolley system distributed the travelers into the city had transformed the location into a transit oriented development by then. So by the mid-1910’s, the interests in redevelopment efforts in this location increased and by another 10 years a lot of redevelopment had started when the designs for the “Jersey Journal Building” was created in 1921 by John Rowland.

Prior to the 30 Journal Square building, the newspaper headquarter had moved around for a quiet a bit. Initially as an “Evening Journal” in the late 1860’s with a small office space at 13 Exchange Place, the space requirements grew with the growing influence and economic growth of the newspaper. Thus they

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eventually moved to a newly constructed building on Montgomery Street, housing its editorial offices and production facilities and then again in the early 1910’s to Journal Square.

The building at 30 Journal Square, which became an iconic center for the city plaza, housed the main headquarters of the “Jersey Journal” for 87 years before they moved again. Due to the importance and contribution to the society from the newspaper according to Mayor Frank Hague, they were provided a prime location just near to the PATH station and at the heart of the then vibrant commercial center. But even now when the commercial activity has dwindled with new development plans this location is in high demand for redevelopment efforts, mainly due to its proximity to the PATH station and the waterfront. Thus it has become a center of attention and a number of issues regarding historic preservation and redevelopment has come up. The Kushner and Companies proposed to construct a skyscraper on the same location as this historic news building. However, there was no plan to obstruct the old building, which was the major source of concern for most. In fact the “old building” is being kept intact to preserve the “old world” charm of the square. But the 525 apartment residential tower being proposed to increase the density of the area as per the vision to create a more transit oriented development brings concerns of being out of scale to the old, low and narrow neighborhood built form. To address this issue a human scaled development effort is being planned 38

at the site with the main 40 storied tower at the rear of the plot as the increase in elevation is staggered which can be visible from the adjacent figures.

The historic preservation angle in this context is very important with respect to the redevelopment to benefit the community while maintaining its character as well. So, an adaptive re-use of the old building is suggested with a new skyscraper being scaled to match a human level experience at the pavement.

However, the financial as well as the fiscal impacts of such an important and large project also needs to be safe guarded along with the historic angle. The following sections will explain in details the different financing options considered for the proposed skyscraper and its fiscal impacts.

6.2.2 Financial Pro-forma for the Jersey Journal Project A financial pro-forma creates the basis for the understanding of the issues with regards to its financial feasibility and how best to tackle them. A number of different scenarios are considered in the pro-forma to create a financial viability for the project with a description of each below. See Appendix for the full pro-forma.

Scenario 1: Base Case The Land acquisition cost for the project matches the 30% lot size it stands on at $ 1,557,500. The new construction of the residential towers will have its own parking structure as a part of the 40 stories, with 35 stories being dedicated for the apartments. Even though the high rise development proposed by Kusher and Companies might not fit the existing scale of structures a staggered elevation profile is suggested to address the issue of human scale preservation.

There are 525 proposed units with an 80/20 mix of market rate and affordable in both the 1-bedroom and 2-bedroom segments. The market rate 1-bedrooms are to be rented at $1700 per month and the 2bedrooms at $2400 per month. The rents for the affordable units were calculated to be fixed at $862 per

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month for 1-bedrooms and $1035 per month for the 2-bedrooms (from the affordable housing rent and income generator developed by Novogradac and Company LLC) without utilities. There will be 245 market rate 1-bedroom and 175 market rate 2-bedroom apartments and 55 affordable 1-bedrooms and 50 affordable 2-bedroom apartments in the mix. There will 525 parking spots with a rent of $200 per month, one for each unit on the consideration that the new redevelopment plan proposes to reduce the existing surface parking which might create a greater demand for it, even in view of the transit village initiative.

The development budget includes the land cost, hard construction cost for both residential and parking structures, soft costs (as 25% of the total hard costs) including the taxes, maintenances and utilities, and the finance costs (as 15% of the total hard costs).

A senior first mortgage (at 4.5% interest rate p.a.) is the primary option for the project with an 80/20 debt-equity ratio. For this scenario the revenues come to a total of $12,337,320 and a Net Operating Income (NOI) of $ 8,790,341 and still a negative cash flow after debt service thus bringing the levered return on equity to -7%.

Scenario 2: Increase Rent, Decrease Building Size and Expenses For this case the unit sizes were decreased from 750 SF for 1-bedrooms to 700 SF (both market and affordable) and 1100 SF for 2-bedrooms to 1030 SF (both market and affordable). Also the rents were increased by $300 and $700 for one and two bedroom market rate apartments as well the expenses were decreased from 25% of revenues to 22% as a moderately conservative approach. The parking rate was also increased to $300 per spot per month from $200 per spot per month. These changes improve the NOI but still the return on equity is negative at -2%, which requires further adjustments.

Scenario 3: Reduce costs and addition of Mezzanine Debt In this case the hard construction costs are reduced on the basis of a better construction contract from $380 PSF to $330 PSF and an additional debt structure of Mezzanine debt as a second mortgage at 40

6.5% p.a. interest rate amounting to 20% of the total cost and replacing 20% of the first mortgage. There by improving the NOI slightly and making return on equity non-negative.

Scenario 4: ERG Tax Credit as Equity The Economic Redevelopment and Growth (ERG) Program is utilized in this case, where a maximum of $40,000,000 ERG grant is considered based on the 20% equity share being invested and the redevelopment designation of the project, with affordable housing as well. The program supports such projects with funding in the form of foregone tax credits which can be sold in the market to generate additional equity capital. Thus for all the criteria being met the project becomes eligible for a 30% ERG Tax Credit on the eligible basis. But as that value exceeds the grant limit of $40,000,000 the maximum is considered here, which can be traded in the market at 80 cents to the dollar and thus also increasing the financing costs to 17% of the hard construction cost from 15%.

Thus with an additional 15% equity capital from tax credit sale the debt service decreases considerably with mezzanine debt at 5% only, which increases the return on equity to 5.19% Scenario 5: Low Income Housing Tax Credit as Equity This scenario takes advantage of the 4% Low Income Housing Tax Credit (LIHTC) available on the basis of the 20% affordable units provided in the project. The eligible base for the calculations is the residential portion’s construction costs and the floating rate of 3.21%, with 20% of the eligible base used since only 20% are affordable units in the project, but a 130% Basis Boost is also considered. Thus with a $1 for $1 sale of the tax credits, there is an equity infusion available to the amount of 7% of the total project cost. This reduces the debt service for the first mortgage and thus improves the return on equity further more to a respectable 7.59%.

Scenario 6: PILOT as 75% of Property Tax and 75% of Recapture

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The project being a part of the larger redevelopment plan for the area within a critical location and influence on the overall benefit from the development effort was eligible and hopes to be approved for a Payment in Lieu of Taxes (PILOT) scheme. This would allow the developer some fractional exemption (25% here) on the traditional property taxes. The municipality benefits by getting a higher than normal share of the payment at the cost of the school district and the developer can then recapture some of the capital (75% of the PILOT here) through bond sale. A 5% cap rate is considered for the determination of the value of the property from the NOI on the basis of a strong real estate rental market and a steady stream of income being generated from the project. Thus the recaptured amount from the PILOT makes an equity contribution of 1% of the total project cost thus improving the levered Internal Rate of Return or the return on equity invested to a feasible 8.06%.

6.3 Fiscal Impact Analysis The Fiscal benefits from the development of the project to the community and neighborhood can be gauged through the costs it has on the different taxing districts and the amount of revenue the project generates to meet those costs. In addition to the financial benefits to the developer, the project also needs to create value to the community in terms of addition of affordable housing, job creation, municipal tax revenue paid and similar other benefits. So the benefits the projects generate in terms of Fiscal analysis needs to be compared to the costs attached to the development of the project as well the foregone benefits like property taxes in the form of PILOTs in this case.

The following tables and calculations are done using data for multipliers and tax rates from the following sources:



Demographic multipliers were collected from Who Lives in New Jersey (Listokin et al, 2006).

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

Per capita property taxes supported costs were calculated with 2013 parcel counts and values available through NJ Department of Community Affairs (DCA) Property Value Classification tables and 2012 American Communities Survey (ACS) population data



Projected public revenues were constructed by applying Jersey City’s 2014 municipal (excluding library) and school non-equalized tax rates to each property. These are also available through NJ DCA tax tables.



As per Scenario 6, where the PILOT was constructed by assuming a payment of 75% of the revenue which would otherwise be generated by the municipal property tax, plus the revenue generated by applying the school tax rate to each parcel’s land value

Demographic Multipliers Market Rate Apartments Affordable Apartments

Apartment Size

House-hold Size

Public-School Children

Workers

1-bedroom 2-bedroom 1-bedroom 2-bedroom

1.526 2.106 1.61 2.76

0.066 0.206 0.16 0.68

0 0 0 0

No. of residential properties in Jersey City= 36,075 No. of apartment properties in Jersey City = 1,608 No. of commercial properties in Jersey City = 3,485 No. of industrial properties in Jersey City = 578

Total no. of residential, apartment, commercial and industrial properties combined= 41,746 Total no. of residential and apartment properties= 37,683

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Residential share= 90.27%

Total assessed value of residential properties in Jersey City =$ 3,299,371,882 Total assessed value of apartment properties in Jersey City =$ 418,379,430 Total assessed value of commercial properties in Jersey City =$ 1,439,637,425 Total assessed value of industrial properties in Jersey City =$ 388,993,200

Total assessed value of residential and apartment properties combined= $ 3,717,751,312 Total assessed value of residential, apartment, commercial and industrial properties combined= $ 5,546,381,937 Residential share= 67.03%

So, the average residential share= (90.27+67.03) % = 78.65% So, the average non-residential share= 21.35%

Municipal budget for Jersey City (adjusted for BPP) = $ 217,414,170.00 Residential share of municipal budget= $ 170,996,244.70 Non-residential share of municipal budget=$ 46,417,925.30

Budget for Jersey City schools= $ 109,149,375.00

Population of Jersey City= 262,146 (2014 estimate) Estimated employment= 205,265 (2013 estimate) No. of students in Jersey City schools= 29,689 (2011-12 estimate) 44

Property tax-supported cost per person, worker and pupil: Municipal: Per person in-community= $ 625.29 Per worker in-community (all at-place employment) = $ 226.14 School: Per pupil= $ 3,676.42

1. 1-bedroom Apartment Cost (Market-Rate): Municipal Person-related cost Worker-related cost Total Municipal School (District School) PSC-related cost Total (municipal and school)

$ 954.19 0 $ $ 954.19 $ 242.64 $1,196.83

2. 2-bedroom Apartment Cost (Market-Rate): Municipal Person-related cost Worker-related cost Total Municipal School (District School) PSC-related cost Total (municipal and school)

$ 1,316.86 $ 0 $1,316.86 $757.34 $2,074.20

3. 1-bedroom Apartment Cost (Affordable): Municipal Person-related cost Worker-related cost Total Municipal

$ 1006.72 $0 $1006.72 45

School (District School) PSC-related cost Total (municipal and school)

$588.23 $1,594.95

4. 2-bedroom Apartment Cost (Affordable): Municipal Person-related cost Worker-related cost Total Municipal School (District School) PSC-related cost Total (municipal and school)

$ 1,725.80 0 $ $1,725.80 $2,499.96 $4,225.76

Total Cost Calculations: Building

1-BR Market-Rate Apartments

2-BR Market-Rate Apartments

1-BR Affordable Apartments

2-BR Affordable Apartments

Jersey Journal

$ 1,196.83

$ 2,074.20

$ 1,594.95

$ 4,225.76

Number of apartments

245

175

55

50

Total Cost

$293,223.35

$362,985

$87,722.25

$211,288

Total

$955,218.6

Property Value: Scenario

Building

NOI

Cap Rate

6

Jersey Journal

$10,729,176

5%

46

Property Value (NOI/Cap Rate) $214,583,522

Anticipated Annual Property Taxes (2016) for Jersey Journal proposed project Scenario 5: Traditional Property Tax909 Local Public Revenues (Property Tax) Municipal (excluding library)

$_ 214,583,522 X 0.03769 = $8,087,653

School (district school only)

$_214,583,522 X 0.01937 = $4,156,483

Total Local (municipal and school)

$_12,244,136 ________

Scenario 6: PILOT as 75% Property Tax with 75% Recapture for 30 years Local Public Revenues (PILOT) Municipal (excluding library)

$_ 809,677

School (district school only)

$_0

Total Local (municipal and school)

$_809,677________

Comparison of Tax Revenues Governmental Unit

Annual Property Taxes

Annual PILOT

Difference with PILOT

Municipal

$8,087,653

$809,677

-$7,277,976.00

School

$4,156,483

$0

-$4,156,483.00

Net Annual Fiscal Impact for Two Scenarios: Scenario

Building

5 6

Jersey Journal Jersey Journal

Total Revenue $ 12,244,136 $ 809,677

Total Cost $ 955,218 $ 955,218

47

Net Fiscal Impact $11,288,918 -$145,541

6.5 Overall Project Justifications The proposed project of Jersey Journal Building aligns with the vision of Journal Square 2060 Redevelopment Plan to increase the overall density and also with that of redevelopment and rehabilitation. The benefits from the project is not only limited to the fiscal or economic effects but also transcends into the transforming the neighborhood into a vibrant one again. The residential population increase with the supply of both affordable and market rate units will bring in the necessary live into the area which has all the required elements present to support a working class population of renters being a transit hub for decades. This is more important in the context of the present redevelopment efforts to focus on the pedestrian experience to be improved together with emphasis on high density land uses and efficient transit services. But without the residents and without a proper supply to meet the estimates and the demand available to support the infrastructure, the redevelopment plans would not be effective enough. Thus contributing to the residential supply of both affordable and market rates at a critical location and still preserving the historic structure, while generating enough revenues for the local authorities to not only meet the costs associated with the development but to provide a large source of income for them (not with PILOT). This large amount of fiscal benefit is only a fraction of what the actual revenue would become after the exemption period.

Apart from the fiscal benefits and the residential infrastructure, this project with such a high density is going to generate a large workforce for the community and the region. The overall benefit from the redevelopment of this project is going to ensure in a long way that the entire Journal Square 2060 Plan is a success which will have far reaching effects around the country and the world. So even without a positive fiscal impact when a PILOT is approved, the overall benefit do tend to overshadow the fiscal deficit. Thus the benefits of such a project merits a recommendation and is justified in itself.

48

References

1. http://quickfacts.census.gov/qfd/states/34/3436000.html?cssp=SERP 2. http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=CF 3. http://www.novoco.com/products/rentincome.php 4. https://www.njcu.edu/programs/jchistory/pages/J_Pages/Jersey_Journal.htm

49

7. Overall Recommendations The last two decades has seen an incredible transformation of Jersey City, form a once postindustrial town with declining economy to a growing center for technology, finance, and service sectors, which has led developers to capitalize the locational benefits of the city and its infrastructure.

The water front naturally emerged to be the main catalyst around which the redevelopment growth was initially concentrated, due the proximity to New York. High-density development along the Hudson River has shaped what can be expected to follow in the coming decades, due to the rising land costs and demands from the growing population. But will such a high-rise dominated development picture be justified for a place with such historic lineage? Even though current redevelopment plans shows shifting focus towards the inner city, a careful outlook to preserve the historic character of the city and its residents should be considered a priority along with the developmental efforts.

Journal Square has been seen as the “next big” area for redevelopment, and for significant reasons. However, the following elements must be borne in mind when the “heart of the city’s” landscape would be redrawn: 

Balance between high-rise with mid-rise developments



Transit Oriented Development must be an integral part of the focus along with historic preservation



Parking space reduction with pedestrian friendly streetscapes being part of the design



Affordable housing projects



Additional redevelopment designations to focus on population retention with a careful use of eminent domain to ensure feasible relocation programs

50

The redevelopment plans for every area should be in unison with a master plan of the city to preserve Jersey City’s neighborhood characteristics, while the growth of the city can cater to its diverse communities and their needs.

7.1 Mid-rise new developments Mayor Fulop’s revision of the long-term tax abatement policy has played a major role in the shifting focus of the redevelopment projects towards the inner city. Journal Square 2060 plan has made the area more attractive than the Downtown which had been more popular till now to developers due to the tax benefits. However, developers will always look at the most financially lucrative options and considering the high land prices and construction costs, developing mid-rise buildings in Journal Square will never be a financially viable option for developers. As we have seen with the Jersey Journal Building generating only a 7.83% return on equity even after having a wide variety of financing solutions combined with a grand scale of 525 apartment units. So, building small scale structures will be next to impossible without any creative financial solutions like an “affordable Unit Trust Fund” which can provide further subsidies or financing options to offset the losses associated with a smaller scale building. None the less the importance of the scalability for a neighborhood with historic lineage needs to be accounted for, which makes the all high-density development along the Journal Square extremely intimidating to the residents. So as not to lose the neighborhood characteristic while creating a highdensity development concentrated around the transit hub, surrounding areas should balance the development with mid-rise structures to maintain a human level scale factor. To achieve this kind of balanced development it is strongly recommended to create some sort of financing scheme which can support the higher prices associated with such a development.

51

7.2 Integrating Transit Oriented Development and Historic Preservation The importance of Journal Square as a transit hub even though has been mentioned several times throughout this report, still it can never be over emphasized based on the fact that Jersey City’s growth has always been transportation centric. Aligning with the Smart Growth initiatives of highdensity mixed use developments to increase diversity and density around transit stations has been the center of the new redevelopment plans as well. But it is not easy to create such a development around a transit hub without affecting the actual character of the initial neighborhood and it is going to be a challenge to retain the historic values of the sites and still continue with the redevelopment. Thus, an important recommendation for the Journal Square redevelopment plan would be to consider a stepped high-rise development. This can ensure pedestrian experience is not over shadowed by the sky-scrapers.

Instead and integration of the street scale development efforts with the core idea of transit oriented development fostering alternate transportation modes like walking and biking with the high density structures can realize a true TOD which can preserve the vibrancy of the commercial center, Journal Square once used to be.

7.3 Parking Reduction Another important aspect to preserve the historic character and still converting to a transit oriented development require that the parking restrictions or ratios for new developments be reduced further if required. Mostly for older structures, adaptive reuse will never be possible if the high parking ratios are kept. Further the idea of transit oriented development to improve use of public transportation will also not be achieved if parking structures dominate the developments since car use will be encouraged that way. However with reduction in parking requirements, and improvements in pedestrian facilities can go a long way to achieve the dual aim of historic preservation as well as creating a high density transit oriented development but with a balance towards human scale development.

52

Financial Pro-forma for the Jersey Journal Project SCENARIO 1: BASE CASE 1. DEVELOPMENT ASSUMPTIONS Building Size: Market Rate

1 BR Units 2 BR Units 1 BR Units

Affordable

2 BR Units

245 175 55

750 1,100 750

50

1,100

525 Average unit size Grossing factor (hallways, stairs, common) Total residential portion of building

900 1.40 661,500

Total Parking Structure SF

131,250

TOTAL BUILDING SF

792,750

525

Type of Construction: - 40 story, light gauge steel, masonry/glass exterior, through the wall HVAC - Apartment structure above 5 storied parking structure

Revenue and Cost Assumptions: Residential Rent

Market Rate Affordable

1 BR 2 BR 1 BR 2 BR

$1,700 $2,400 $752 $905 $200 25%

Parking Rent Operating costs (rule of thumb) Occupancy Annual income multiplier Annual expense multiplier

/month /month /month /month /spot-monthly of revenues

95% 2% 3%

2. DEVELOPMENT BUDGET $/sf Land Acquisition Costs Residential Hard Construction Costs Parking Structure Construction Costs Total Hard Construction Costs Soft Costs Financing Costs TOTAL PROJECT COST:

25.0% 15.0%

Total Cost

$ $

250.00 130.00

1,557,500 165,375,000 17,062,500

$ $ $

380.00 62.50 37.50

182,437,500 45,609,375 27,365,625

$

480.00

256,970,000

3. FINANCING ASSUMPTIONS First Position Mortgage Mezzanine Financing Equity

80% 0% 20%

205,576,000 51,394,000

TOTAL PROJECT COST:

100%

256,970,000

Mortgage Principal Term Interest Rate Annual D/S

Mezzanine

205,576,000 30 4.5% 12,620,628

0.0% -

4. OPERATING PRO FORMA - Stabilized Year Gross Residential Revenues Gross Paarking Revenues

11,077,320 1,260,000 12,337,320

Less Reserve for Vacancy

5%

(616,866)

Adjusted Gross Revenue/Income Less Operating Expenses

11,720,454 25%

Net Operating Income

(2,930,114) 8,790,341

Less D/S on First Position Mortgage

(12,620,628)

Cash Flow Available for Equity Return

(3,830,287)

DCR

0.70

Return on Equity

-7%

Affordable Unit Rate+utilities Base Rent Utilities 1 BR $ 862

110

Net Rent $

752

2 BR $

130

$

905

1,035

Jersey City Household median income = $ 46,813 Rent Calculator Source: http://www.novoco.com/products/rentincome.php

urnal Project SCENARIO 2: INCREASE RENT, DECREASE BLDG SIZE, & EXPENSES

1. DEVELOPMENT ASSUMPTIONS Building Size: Market Rate Affordable

1 BR Units 2 BR Units 1 BR Units 2 BR Units

245 175 55

700 1,030 700

50

1,030

525

Total No.

Average unit size Grossing factor (hallways, stairs, common) Total residential portion of building

841 1.40 618,450

Total Parking Structure SF

131,250

TOTAL BUILDING SF

749,700

525

Type of Construction: - 40 story, light gauge steel, masonry/glass exterior, through the wall HVAC - Apartment structure above 5 storied parking structure

Revenue and Cost Assumptions: Residential Rent Market Rate Affordable

1 BR 2 BR 1 BR 2 BR

$2,000 $2,700 $752 $905 $300 22%

Parking Rent Operating costs (rule of thumb) Occupancy Annual income multiplier Annual expense multiplier

/month /month /month /month /spot-monthly of revenues

95% 2% 3%

2. DEVELOPMENT BUDGET $/sf Land Acquisition Costs Residential Hard Construction Costs Parking Structure Construction Costs Total Hard Construction Costs Soft Costs Financing Costs TOTAL PROJECT COST:

25.0% 15.0%

Total Cost

$ $

250.00 130.00

1,557,500 154,612,500 17,062,500

$ $ $

380.00 62.50 37.50

171,675,000 42,918,750 25,751,250

$

480.00

241,902,500

3. FINANCING ASSUMPTIONS First Position Mortgage Mezzanine Financing Equity

80% 0% 20%

193,522,000 48,380,500

TOTAL PROJECT COST:

100%

241,902,500

Mortgage Principal Term Interest Rate Annual D/S

Mezzanine

193,522,000 30 4.5% 11,880,614

0.0% -

4. OPERATING PRO FORMA - Stabilized Year Gross Residential Revenues Gross Paarking Revenues

12,589,320 1,890,000 14,479,320

Less Reserve for Vacancy

5%

Adjusted Gross Revenue/Income Less Operating Expenses Net Operating Income Less D/S on First Position Mortgage Cash Flow Available for Equity Return DCR Return on Equity

(723,966) 13,755,354

22%

(3,026,178) 10,729,176 (11,880,614) (1,151,438) 0.90 -2%

SCENARIO 3: REDUCE COSTS AND MEZZANINE DEBT 1. DEVELOPMENT ASSUMPTIONS Building Size: Market Rate Affordable

1 BR Units 2 BR Units 1 BR Units 2 BR Units

245 175 55

700 1,030 700

50

1,030

525 Average unit size Grossing factor (hallways, stairs, common) Total residential portion of building

841 1.40 618,450

Total Parking Structure SF

131,250

TOTAL BUILDING SF

749,700

525

Type of Construction: - 40 story, light gauge steel, masonry/glass exterior, through the wall HVAC - Apartment structure above 5 storied parking structure

Revenue and Cost Assumptions: Residential Rent Market Rate Affordable

1 BR 2 BR 1 BR 2 BR

$2,000 $2,700 $752 $905 $300 22%

Parking Rent Operating costs (rule of thumb) Occupancy Annual income multiplier Annual expense multiplier

/month /month /month /month /spot-monthly of revenues

95% 2% 3%

2. DEVELOPMENT BUDGET $/sf Land Acquisition Costs Residential Hard Construction Costs Parking Structure Construction Costs Total Hard Construction Costs Soft Costs Financing Costs TOTAL PROJECT COST:

22.0% 15.0%

Total Cost

$ $ $ $ $

220.00 110.00 330.00 48.40 33.00

1,557,500 136,059,000 14,437,500 150,496,500 33,109,230 22,574,475

$

411.40

207,737,705

3. FINANCING ASSUMPTIONS First Position Mortgage Mezzanine Financing Equity

60% 20% 20%

124,642,623 41,547,541 41,547,541

TOTAL PROJECT COST: ERG Tax Credit Proceeds as Equity

100%

207,737,705

Mortgage Principal Term Interest Rate Annual D/S

124,642,623 30 4.5% 7,652,003

Mezzanine 41,547,541 30 6.5% 3,181,604

4. OPERATING PRO FORMA - Stabilized Year Gross Residential Revenues Gross Paarking Revenues

12,589,320 1,890,000 14,479,320

Less Reserve for Vacancy

5%

Adjusted Gross Revenue/Income Less Operating Expenses

(723,966) 13,755,354

22%

(3,026,178)

Net Operating Income

10,729,176

Less D/S on First Position Mortgage

(7,652,003)

Cash Flow Available for Equity Return DCR Less D/S on Mezzanine Cash Flow Available for Equity Return DCR Return on Equity

3,077,173 1.40 (3,181,604) (104,431) 0.97 0%

SCENARIO 4: ERG Tax Credit Equity

1. DEVELOPMENT ASSUMPTIONS Building Size: Market Rate Affordable

1 BR Units 2 BR Units 1 BR Units 2 BR Units

245 175 55 50

700 1,030 700 1,030

525 Average unit size Grossing factor (hallways, stairs, common) Total residential portion of building Total Parking Structure SF

841 1.40 618,450 131,250

TOTAL BUILDING SF

749,700

525

Type of Construction: - 40 story, light gauge steel, masonry/glass exterior, through the wall HVAC - Apartment structure above 5 storied parking structure

Revenue and Cost Assumptions: Residential Rent

Market Rate Affordable

1 BR 2 BR 1 BR 2 BR

$2,000 $2,700 $752 $905 $300 22%

Parking Rent Operating costs (rule of thumb) Occupancy Annual income multiplier Annual expense multiplier

/month /month /month /month /spot-monthly of revenues

95% 2% 3%

2. DEVELOPMENT BUDGET $/sf Land Acquisition Costs Residential Hard Construction Costs Parking Structure Construction Costs Total Hard Construction Costs Soft Costs Financing Costs TOTAL PROJECT COST:

22.0% 17.0%

Total Cost

$ $ $ $ $

220.00 110.00 330.00 48.40 37.40

1,557,500 136,059,000 14,437,500 150,496,500 33,109,230 25,584,405

$

415.80

210,747,635

3. FINANCING ASSUMPTIONS First Position Mortgage Mezzanine Financing ERG Tax Credit Proceeds as Equity

60% 5% 15%

126,448,581 10,149,527 32,000,000

Equity TOTAL PROJECT COST:

20% 100%

42,149,527 210,747,635

Mortgage Principal Term Interest Rate Annual D/S

126,448,581 30 4.5% 7,762,873

Mezzanine 10,149,527 30 6.5% 777,225

4. OPERATING PRO FORMA - Stabilized Year Gross Residential Revenues

12,589,320

Gross Paarking Revenues

1,890,000 14,479,320

Less Reserve for Vacancy

5%

Adjusted Gross Revenue/Income Less Operating Expenses

(723,966) 13,755,354

22%

(3,026,178)

Net Operating Income

10,729,176

Less D/S on First Position Mortgage

(7,762,873)

Cash Flow Available for Equity Return DCR

2,966,303 1.38

Less D/S on Mezzanine

(777,225)

Cash Flow Available for Equity Return DCR

2,189,078 3.82

Return on Equity

5.19%

ERG Tax Credit Structure Total Project Cost Less Ineligible capital

241,902,500 50,000,000

Total ERG Eligible Capital 30% ERG Tax Credit Allocated

191,902,500 57,570,750

ERG Grant limit Equity proceeds after selling tax credits

@ 80%

40,000,000 32,000,000

SCENARIO 5: LIHTC as Equity

1. DEVELOPMENT ASSUMPTIONS Building Size: Market Rate

1 BR Units 2 BR Units 1 BR Units 2 BR Units

Affordable

245 175 55 50

700 1,030 700 1,030

525 Average unit size Grossing factor (hallways, stairs, common) Total residential portion of building Total Parking Structure SF

841 1.40 618,450 131,250

TOTAL BUILDING SF

749,700

525

Type of Construction: - 40 story, light gauge steel, masonry/glass exterior, through the wall HVAC - Apartment structure above 5 storied parking structure

Revenue and Cost Assumptions: Residential Rent

Market Rate Affordable

1 BR 2 BR 1 BR 2 BR

$2,000 $2,700 $752 $905 $300 22%

Parking Rent Operating costs (rule of thumb) Occupancy Annual income multiplier Annual expense multiplier

/month /month /month /month /spot-monthly of revenues

95% 2% 3%

2. DEVELOPMENT BUDGET $/sf Land Acquisition Costs Residential Hard Construction Costs Parking Structure Construction Costs Total Hard Construction Costs Soft Costs Financing Costs TOTAL PROJECT COST:

22.0% 17.0%

Total Cost

$ $ $ $ $

220.00 110.00 330.00 48.40 37.40

1,557,500 136,059,000 14,437,500 150,496,500 33,109,230 25,584,405

$

415.80

210,747,635

3. FINANCING ASSUMPTIONS First Position Mortgage

58%

122,635,739

ERG Tax Credit Proceeds as Equity

15%

32,000,000

Low Income Housing Tax Credit Equity

7% 20%

13,962,369 42,149,527

100%

210,747,635

TOTAL PROJECT COST:

Mortgage Principal Term Interest Rate Annual D/S

122,635,739 30 4.5% 7,528,797

4. OPERATING PRO FORMA - Stabilized Year Gross Residential Revenues

12,589,320

Gross Paarking Revenues

1,890,000 14,479,320

Less Reserve for Vacancy

5%

Adjusted Gross Revenue/Income

(723,966) 13,755,354

Less Operating Expenses

22%

(3,026,178)

Net Operating Income

10,729,176

Less D/S on First Position Mortgage

(7,528,797)

Cash Flow Available for Equity Return DCR

3,200,379 1.43

Return on Equity Low Income Housing Tax Credit 4% LIHTC Total Porject Cost

7.59%

$1 for every $1 tax credit 210,747,635

less parking construction cost less financing fee Eligible Basis x20% affordable 130%Basis Boost

14,437,500 25,584,405 170,725,730 34,145,146 44,388,690 Qualified Basis

Current Floating rate 3.21% Annual Tax Credit Qualified Basisx3.21% Total Tax Credit Over 10 years LP Payment Percentage for Equity Fund (99.99%)

14,248,769 14,247,345

Less LIHTC State Fee: 20% ofannual tax credit Total LIHTC Equity

(284,975) 13,962,369

1,424,877

SCENARIO 6: PILOT as 75% of Property Tax and 75% Recapture

1. DEVELOPMENT ASSUMPTIONS Building Size: Market Rate

1 BR Units 2 BR Units 1 BR Units 2 BR Units

Affordable

245 175 55 50

700 1,030 700 1,030

525 Average unit size Grossing factor (hallways, stairs, common) Total residential portion of building Total Parking Structure SF

841 1.40 618,450 131,250

TOTAL BUILDING SF

749,700

525

Type of Construction: - 40 story, light gauge steel, masonry/glass exterior, through the wall HVAC - Apartment structure above 5 storied parking structure

Revenue and Cost Assumptions: Residential Rent

Market Rate Affordable

1 BR 2 BR 1 BR 2 BR

$2,000 $2,700 $752 $905 $300 22%

Parking Rent Operating costs (rule of thumb) Occupancy Annual income multiplier Annual expense multiplier

/month /month /month /month /spot-monthly of revenues

95% 2% 3%

2. DEVELOPMENT BUDGET $/sf Land Acquisition Costs Residential Hard Construction Costs Parking Structure Construction Costs Total Hard Construction Costs Soft Costs Financing Costs TOTAL PROJECT COST:

21.5% 17.0%

Total Cost

$ $ $ $ $

220.00 110.00 330.00 47.30 37.40

1,557,500 136,059,000 14,437,500 150,496,500 32,356,748 25,584,405

$

414.70

209,995,153

3. FINANCING ASSUMPTIONS First Position Mortgage ERG Tax Credit Proceeds as Equity Low Income Housing Tax Credit as Equity

57% 15% 7%

119,604,721 32,000,000 13,962,369

PILOT Bonds as Equity Equity

1% 20%

2,429,032 41,999,031

100%

209,995,153

TOTAL PROJECT COST:

Mortgage Principal Term Interest Rate Annual D/S

119,604,721 30 4.5% 7,342,718

4. OPERATING PRO FORMA - Stabilized Year Gross Residential Revenues

12,589,320

Gross Paarking Revenues

1,890,000 14,479,320

Less Reserve for Vacancy

5%

Adjusted Gross Revenue/Income

(723,966) 13,755,354

Less Operating Expenses

22%

(3,026,178)

Net Operating Income

10,729,176

Less D/S on First Position Mortgage

(7,342,718)

Cash Flow Available for Equity Return DCR

Return on Equity

3,386,458 1.46

8.06%

PILOT as 75% Property Tax NOI/5% cap rate= value Value

214,583,522

Equalized Tax Rate for JC Property Tax PILOT Amount less county portion

2.32% 4,982,629 75% Property Tax 10% Property Tax

Municpal Share 25% Project Equity as Gov. Bonds for rest 75%

3,736,972 (498,263) 3,238,709 809,677 2,429,032