Today, Tony F. Mack announced that he wanted to give the Glen Cairn Arms building to Thomas Edison State College (TESC). They want to put a $16.7M nursing school of some sort on the property. Right off the bat, unsophisticated Trentonians started messaging that this was progress.
It’s not progress; it’s more of the same.
Every single politician and activist in Trenton for the last 12 years has complained that the State of New Jersey doesn’t pay its fair share in Trenton. And this deal is simply more untaxed State land. Do we need another tax exempt property?
Let’s do the math
TESC wants to give Trenton a one-time payment in lieu of taxes (PILOT) of $300,000. One time! That’s essentially free.
That $300,000 is to cover taxes for all time on a $16.7M building? Spread over 10 years that’s a 0.2% tax rate. Spread over 20 years that’s 0.1%. Trenton’s tax rate for the rest of us is 5.5%. Put another way, the State would be paying 1/50 of what you and I and every other private property owner pays in taxes. That’s essentially nothing. Many private homeowners in Trenton pay more in taxes than this deal will yield. It comes nowhere near the cost of paying for the police, fire and public works costs to support the building. The new building’s direct support costs for just those services would be around $700K per year.
Trenton’s City Council should NOT approve this.
Instead, City Council should do what Fix Trenton’s Budget recommended two years ago and approve a standard PILOT for all new development in Trenton. That standard PILOT should be based on taxing land at 30% of assessed value and improvements at 1.5% of assessed value. This PILOT should be available to all developers. A standard PILOT like this would be welcome by developers and go a long way to encouraging new taxable investment in Trenton. It would also serve as a reasonable basis for PILOTs for non-profits and eventually for a Land Value Tax for the rest of us. This is important in our effort to have our tax system work for us rather than against us.
“Isn’t something better than nothing?”
It’s true that Glen Cairn Arms has sat vacant for many years. But, as the math above shows, we lose money on this deal. So no, “Something is NOT better than nothing”
Why hasn’t the building sold?
The City of Trenton owns the building and has been unsuccessful in selling it for many reasons:
1) The City has maintained a poor development environment for many years due to crime, ineptitude in city government and lack of a plan to improve.
2) The city always tried to sell it rather than give it away. It’s obvious the building is a mess and therefore has no value and maybe negative value.
3) We don’t have a standard PILOT that makes sense for a developer. I’ve proposed one above.
4) We may have to demolish it ourselves (i.e. because as the building stands it has negative value)
There are several options
- We sell it to TESC using a standard PILOT. The current assessed value of the land is $500K. With a $16.7M improvement and using the suggested standard PILOT rate, we receive $400k/ year in revenue. This is what we should get. It still doesn’t cover all of our direct costs, but it’s closer.
- We sell it to a private developer with a new package. We would spend the ~$1.4M * it would take to demolish the building in anticipation of a private developer putting a $5M building on the land. With the standard PILOT in place that would yield $225K a year in tax revenue. This is a 16% return on investment and a pay-back of 6 years.
- However, we should NEVER approve another tax exempt property deal. Increasing ratables in Trenton should be our #1 priority. This deal with the State of NJ is the opposite of that.
But there’s more
Do we as citizens really want to let Tony Mack negotiate development deals for us? Time and again, we’ve seen in New Jersey that government money is rife with corruption. Tony Mack has provided us a case in point. We have no reason to trust him and every reason not to.
Our Indicted Occupant of the Mayor’s office will do anything to make himself look good to unsophisticated voters. In this case, it appears that he’s working to curry favor with TESC and let that organization’s patina rub off on him. The leadership at TESC should know better. Furthermore TESC and Mack are using State money as part of this scheme.
But I’m really confused about the choice of Glen Cairn Arms?
Trenton has a large unused medical facility with multiple buildings that could certainly be converted into a nursing center. Why not encourage TESC to purchase all or part of the Capital Health Mercer campus. Isn’t this exactly the use we’ve all talked about for that site?
This deal has been presented to citizens without any economic impact assessment. Certainly our City Council has come too far with this corrupt and incompetent Mayor to allow him to get by with this. But more importantly, if you support this deal, then you have no business complaining about the State not paying its fair share in Trenton. This is just making it worse.
* I originally estimated $300K based on numbers from a previous bid, but understand that TESC thinks the cost is $1.4M so I’ll use their number to be conservative.