Tony Mack’s Worst Deal Yet

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?

Finally …

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.

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12 Responses to “Tony Mack’s Worst Deal Yet”

  • Glenn C.:

    Where do you get all these wild numbers? $300k to tear that building down? There’s $300k in asbestos alone.

  • patricia stewart:

    While you and I differ on state responsibility to the city, this current scheme had me on the floor. My first question would be, “Do we need a nursing school?” MCCC and College of NJ have nursing programs both of which are excellent. And considering the size of Glen Cairn – how many nursing students would be required to make full use of the buildings? The Honorable Mayor continues to amaze me. PHS

  • Greg:

    Where do you get your 700k number for service costs for police, fire and public works… Is the incremental cost of adding a school result in that large of an increase in costs?

  • Huh?:

    How is it that you think we can impose a PILOT on a state institution? TESC can buy the campus from Capital Health and never pay a cent of taxes.

  • That’s perhaps true. However, the city has a lot of leverage over any resuse. But even so, reusing the Mercer campus as tax-exempt is a better for the city than using the Glen Cairin arms as tax-exempt.

  • Used the U Penn method for calculating cost to serve. It’s a method for determining the economic impact of a project.

  • From an old proposal on the building.

    I’ve updated the blog with TESC’s estimate however, there is no reason to believe they are correct.

  • David:

    Good job as always, Dan. At first I thought you were over-reacting, but I think I’m coming around to your view. There’s a lot wrong with the city’s proposal. Calhoun & W. State is actually a pretty high-profile site, even given that the access points are somewhat hemmed in by the highway ramps, and putting it into tax-exempt use forever should definitely require proof of economic leverage. For example, are there any taxable nursing-or health-related businesses that we could reasonably think might want to locate near such a nursing education center? Nurses are actually fairly entrepreneurial, so accommodating that kind of parallel growth with a commercial/medical office structure should at least be part of the development dialogue if the give-away cannot be averted. Also, if the exempt institutions are to expand, Trenton should try and concentrate, not disperse. Though I understand your point of no-net-increase in non-taxable property, I’m not sure that the Capital Health Mercer Campus is really any better a choice, since nursing students gain little by being located at a rapidly emptying clinical facility. Really, they might as well have a centrally located office-only HQ for this operation. In that case, why not locate it right near Mercer County Community College, at least trying to build a higher-ed district of critical mass around N. Broad Street. For that matter, I’d forego some taxes if I could attract either Rider or College of New Jersey to return to its Trenton roots and open an extension campus on N. Broad. I understand the point about eatables, but at some level of concentration, even exempt occupancies can drive actual taxable commercial development. Dispersed, they can’t.

  • [...] Dodson yesterday wrote an excellent financial examination of the project on his blog, and why it doesn’t make sense for taxpayers of the city. Let me summarize as [...]

  • Huh?:

    A lot of leverage on state project? Spell that out for me. One of your alternatives is based on this alleged leverage to extort money out of the State. I’m not even sure they have to go in front of zoning or planning — let alone pull permits! Where’s the leverage, Dan?

  • Thank you, Dan for all your efforts in assisting this Capital City in every and any way that you feel that you can contribute to not only the city, but we it’s residents. And, we the residents obviously NEED to continue our dialogues!! And, With all due respect to both you, Dan, and all of you who also continue to assist the rest of us to stay on top of what is really happening to this town and ‘We the People’…If I may…again, with all due respect…I would like to share some comments regarding this new very BAD idea regarding TESC + Mr. Mack’s proposal for that piece of property ( which will also need Police protection around the clock until a lot of other things change there also). I know a little bit about the Nursing Industry from top to bottom i.e., those who administer,propose curriculum, teach, and those who do the challenging and rewarding works within the Industry…again, sooo, if I may…There are definitely more than enough Nurse Educational Systems or Training Schools within this geographical area, AND for the ACTUAL available job opportunites to work after one has completed their ‘Training’…(the truth is the Nursing jobs have greatly diminished in amounts). Also, know that with this continued poor economy even Hospitals are not having the patient ratios they had a few short years ago…and Health Care Facilities WILL replace a ‘Nurse’ with a ‘Technician’ these days every chance they get…Again, diminishing clinical jobs for Nurses, L.P.Ns. or Registered Nurses. Please, Remember to ask someone who may come toward you with a needle or wound care packet what their training capacity actually was/is…e.g., “Are you a Nurse or a Technician?”…as even many Emergency Rooms are now using Technicians to give shots/needles of medicines to people. Regarding the reasons TESC would possibly (beyond the obvious money savings to TESC)want THAT property might be as it would be larger than where they presently are located at the old Kelsey Building which I believe the state owns now…and have everything within walking distance to the State House and many other ‘State Offices’ and it’s very nice parking facility versus the old Mercer Hospital(Capital Health) Units. Also, be informed of this…the TESC training is NOT of the old type of ACTUAL training of Registered Nurses…but of ‘Online Courses’predominantly, NOT a Nurses School/Training Place…which is now a large part of the Future training for ‘Graduate Nurses’ who will want or need to further their Degrees…and ‘Online Nursing Colleges’ are many, and very competitive…and with our lives the way they have become…many a nurse MUST use ‘online courses’ versus go to a Building or Campus. So some of these/those ideas popped into my head in response to my reading the others’ comments…as TESC would probably NOT have a building full of Nursing students at any one time period…possibly only occasionally for meetings as to how one would further educate oneself to meet the new needs of this constantly evolving HealthCare Industry and the ways it will be delivered in the future. So as I perceive the present TESC offices/Nursing Courses that prsently exist in it’s present site…there are only Nursing Administrators and Professors in Offices administering TESC Business…and, of course, with all due respect to them and THAT part of the Nursing Profession…as it has evolved and is definitely doing so constantly. The Affordable Care Act and the Business ‘Coding/Billing’ part of the Industry is now and in 2014 with many other changes there will be ever more ‘evolution to Nurses’ and their Roles yet again.

    I personally TOTALLY back the idea that Trenton MUST obtain more ‘Ratables’…the City Council and whomever else is supposed to be a ‘Marketing Specialist’ for this ‘Capital CIty of Trenton’ MUST As Soon As Possible…get to obtaining ‘Ratables’!! I drive around these 7 square miles…and, it is a SIN what has happened to this town…not only is this Town similar to the old ‘Wild West’ where I am personally daily experiencing, ‘that ANYTHING Goes here’…and in more ways than one…AND, also it is TOO QUICKLY truly becoming a ‘Ghost Town’. I do not say much often, however, I hope I have contributed helpfully somewhat. Again, Dan, great effort and work, and Thank You.

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