NEW BRUNSWICK, NJ—At their 6:30pm meeting tonight, the city council will decide whether or not to grant a six-figure tax break that will excuse Boraie Development from paying some of their property taxes if they go through with plans for a new highrise building at 135 Somerset Street.
The deal, which has already drawn some criticism, would save the powerful developer about $156,800 annually, but would deprive the city's school district of more than twice that amount.
The city's Planning Director Glenn Patterson said that the company will make a payment in leiu of taxes (PILOT) of approximately $588,000 each year. That figure will remain fixed for the life of the agreement, while other taxpayers are likely to see their bills go up.
Patterson said developers usually pay "two-thirds to eighty percent of what the normal taxes would be" as a result of these agreements, formally referred to as long-term tax exemptions.
"In exchange for that, you get development that would probably not otherwise happen, and it's going to have affordable housing," he said hoping to persuade the City Council to move forward with the deal last month.
Currently, Patterson said the existing homes on the site bring in about $65,000 in taxes annually. About half of that goes to the city's schools.
Under the new deal, the city government will get 95% of Boraie's annual payments and, by law, the Middlesex County government will get the other 5%.
However, New Brunswick's struggling school district will get no revenue, even if children who live in the new building end up in the city's public schools.
The New Brunswick public school system could lose out on approximately $375,725 each and every year that the agreement is in effect.
A CITY COUNCIL DIVIDED, AT LEAST MOMENTARILY
After the author of this article raised questions about the abatement at a December 19 City Council meeting, something strange happened: A member of the city council voted against it.
In a rare split vote, the council approved a resolution to accept Boraie Development LLC's application, a preliminary step towards approving the abatement by a vote of 4-1.
New Brunswick's City Council almost always unanimously approves their entire agenda. Rarely is a "no" vote cast.
The surprising vote caused brief confusion as the City Clerk's office tried to record the vote:
"Yes, excepting resolution 121248," Escobar said, causing the Council President Robert Recine to do a double-take.
"Accept them?" asked Deputy City Clerk Leslie Zeledon.
"Except for that one," answered Escobar.
"That's a no or an abstain?" City Clerk Dan Torrisi clarified.
"A no," Escobar responded emphatically.
Just a few weeks after opposing the application, Escobar was selected to become the council's President, replacing a retiring Robert Recine two meetings later.
Since the promotion, Escobar voted in the affirmative to schedule the Boraie abatement application for a final hearing tonight at 6:30pm in City Hall.
Reached yesterday afternoon at her dayjob, Escobar said that she hasn't "recieved any new information," on the financial impacts of the long-term agreement since the she voted no on the acceptance of the application.
Escobar did not say how she would vote tonight.
DETAILS ON TAX BREAK NOT AVAILABLE TO PUBLIC
Most tax abatements last 30 years from the day the project opens, but the length of this particular "long-term" abatement is not mentioned anywhere in the very law that will authorize it.
The vague ordinance also lacks the terms or dollar figure for Boraie's payment in lieu of taxes (PILOT), effectively authorizing the mayor to negotiate whatever terms he decides.
Making matters worse, the city's public information officer Russell Marchetta has not responded to multiple requests for information this week from NewBrunswickToday.com.
The ordinance makes the case for granting the abatement without any details, arguing that the project "would not be feasible" without it.
(D) The City Council of the City of New Brunswick has determined ihat the development of the project will result in the provision of retail as well as residential housing space, including low and moderate income housing, that will benefit the City and its residents when compared to the cost oÍ the tax abatement and that the abatement approved herein is essential to the project which would not be feasible without the tax abatement approved by this Ordinance.
If other abatements are any indication, the tax break will more than likely last 30 years from the date Somerset Mews first opens for business, or 35 years after it is signed, whichever comes first. That means it could be as far off as 2048 before the property owner pays any convential taxes on the coveted block of real estate.
If all goes according to plan, eight houses, four each on Somerset and Condict Streets, will be demolished to make room for the 16-story building, which will include 238 rental apartments, a 248-space parking garage, a health club, and an 8,800 square foot retail store.
The building will tower over the surrounding neighborhood, rising to a height of 159.6 feet, much taller than across-the-street neighbor Robert Wood Johnson Univ. Hospital. All eight of the existing homes are currently owned by Osman and Magda Boraie, of Milltown.
Somerset Mews, as the residences will be marketed, might offer studio apartments for $1,400 per month, one-bedroom units for $1,800, and two-bedroom units for $2,400, according to figures given by Boraie at the March 20, 2012 Planning Board meeting.
Forty-eight of the units, or 20%, would be designated affordable housing. At the March meeting, the Boraies said they hope to start construction in "early 2013" and that it will take 18 months to build the structure.
AGREEMENTS LIKE THESE WERE AN ISSUE IN MAYOR ELECTION
When local attorney Patty Bombelyn challenged the city's longtime mayor in the 2010 primary, she made a big deal about her opponent's reputation for giving away tax abatements left and right.
"There are far too many properties downtown that have been the beneficiaries of 30-year tax abatements," she told PolitickerNJ.com's Max Pizarro.
"Sometimes tax abatements are important, but 30 years for luxury condos in New Brunswick? I don't see that. In Camden, okay. But in a downtown anchored by Johnson and Johnson and other businesses and you're still giving away 30-year tax abatements? It doesn't make sense."
Since winning the election, Mayor Jim Cahill has not signed off on any new tax abatements. Boraie's would be the first since the Gateway Center's abatement was modified in 2009.
Previously, the Cahill administration negotiated an average of more than one long-term abatement every year, with twenty-four approved since he took office.
The buildings exempted from taxes included both highrise and lowrise housing, as well as a privately-owned Rutgers dormitory, office buildings, retail, and even industrial warehouses.
Here's a list of each and every tax abatement awarded since Cahill took office in 1991:
|Year||Project||Address||PILOT Payment||Developer Savings||School Losses|
|1991||Hiram Square||Hiram Square||$119,800||$31,947||$76,551|
|1991||Comstock Court||Remsen & Comstock||$19,512||$5,203||$12,468|
|1993||Providence Square||217 Somerset St.||$57,513||$15,337||$36,750|
|1995||Livingston Manor||116 Livingston Av.||$25,793||$6,878||$16,481|
|1997||Liberty Plaza*||335 George St.||$310,311||$82,750||$198,285|
|2000||Hope Manor||Hope Manor Dr.||$68,000||$18,133||$43,451|
|2001||Skyline Tower||60 Paterson St.||$84,000||$22,400||$53,675|
|2001||Highlands @ Plaza Sq.||1 Richmond St.||$866,000||$230,933||$553,364|
|2002||14 Van Dyke Warehouse||14 Van Dyke Ave.||$9,370||$2,498||$5,987|
|2003||Rockoff Hall||290 George St.||$128,000||$34,133||$81,790|
|2004||Walgreen's/NB Towne Center||20 Jersey Ave.||$120,000||$32,000||$76,679|
|2004||Magyar Bank Headquarters||400 Somerset St.||$280,000||$74,667||$178,917|
|2004||30 Van Dyke Warehouse||30 Van Dyke Ave.||$194,573||$51,886||$124,330|
|2005||Heldrich Hotel & Condos*||10 Livinston Ave.||$1,000,000||$266,667||$638,988|
|2005||Fulton Sq.||325 Commercial Ave.||$628,640||$167,637||$401,693|
|2006||Stirlingside||40 Hassart St.||$35,708||$9,522||$22,817|
|2006||Dornach JKA U.R. LLC||705 Joyce Kilmer Ave.||TBD||?||?|
|2006||Leewood Mt. Zion Homes||Remsen & Baldwin||$66,861||$17,830||$42,723|
|2008||AST Building||10 Plum St.||$440,475||$117,460||$281,458|
|2008||The George||285 George St.||$239,252||$63,801||$152,879|
|2009||Providence Square II||55 Harvey St.||$41,605||$11,094||$26,585|
|2009||One Spring Street (Boraie)||1 Spring St.||$174,140||$46,437||$111,273|
|2009||Gateway Center/The Vue||Easton & Somerset||$1,148,093||$306,158||$733,618|
|2013||Somerset Mews (Boraie)||135 Somerset St.||$588,000||$156,800||$375,725|
Sources: City Clerk's office, Planning Director's estimates, and 2012 municipal and school tax levies. Figures for PILOT payments are exact. Developer savings and school district losses are estimated.
*combined totals for two separate long-term tax exemptions on same property
PARKING AUTHORITY GIVES UP PRIME REAL ESTATE TO BENEFIT BORAIE
Late last year, the New Brunswick Parking Authority's board voted to sell off a piece of prime real estate, an eighteen-space surface parking lot on Easton Avenue.
At the meeting, Executive Director Mitch Karon said Boraie was very interested in scoring a piece of property to connect the new building to Easton, a main thoroughfare.
As such, the authority's board is giving Boraie the piece of land for $750,000, even though it is next to another plot of underdeveloped land, the site of a fire that destroyed two buildings, and could have been a prime candidate itself for redevelopment.
If Somerset Mews moves ahead, the lot will eventually be converted into a driveway leading up to a pedestrian entrance to the tower. Karon said the driveway could be used for loading and unloading or for vehicles to drop off and pick up tenants and their guests.
The sale price may have been steep, but Boraie stands to benefit significantly now that he has the Easton Avenue connection.
Previously, the project was not in New Brunswick's Urban Enterprise Zone, a special area of town where businesses can charge 3.5% tax instead of the full 7% and other programs work to support commercial investment.
With the addition of the Parking Authority's acreage, small as it might be, Boraie's project will now qualify for even more government assistance.
Until then, the NBPA will continue to reap thousands each month from hourly parkers, $1.50 at a time:
"The lot will remain in service up to the point that Boraie needs to have it to begin construction. As of this date I have not been advised of that date by Boraie," said Karon via email on January 7.
THE FAMILY BUSINESS
The Boraie family is well-known for wheeling and dealing from its home base in the City of New Brunswick. Omar immigrated from Egypt in the 1980's and built the family fortune right here in the Hub City, investing wisely in the booming real estate business.
His sons Waseem and Samer both work for the family business, and have supervised development projects that included One Spring Street, a luxury condominium building opened in 2006 that was once the city's tallest structure.
The Boraie family owns at least 72 residential rental units at 22 different addresses in the City of New Brunswick alone.
In addition to the eight homes on the future site of Somerset Mews, the family owns homes on Hamilton, Comstock, Handy, Townsend, Talmadge, Redmond, Harvey, Loretto, and Courtlandt Streets, as well as Livingston and Remsen Avenues.
The company also owns several commercial properties in downtown, including the buildings that house Chipotle and Harvest Moon restaurants on George Street.
Boraie's business has grown exponentially in recent years, shifting from just buying and selling homes, to large-scale redevelopment projects that have in some cases been bolstered by a partnership with retired basketball star Shaquille O'Neal.
Albany Street Plaza, one of Boraie's first major redevelopment projects, is located at 120 Albany Street and consists of two office towers built across from the city's train station. In addition to high-profile office tenants like SmithBarney, the buildings also are home to Finale, a women's clothing store and a Wells Fargo bank branch.
Now, with O'Neal as a partner, Boraie has undertaken on the challenge of navigating the politics of redevelopment in New Jersey's largest city, Newark.
The Boraie family has been one of the New Brunswick's most generous political contributors, and at the same time secured millions in tax credits from the state, as well as a 30-year tax exemption on One Spring Street, a 23-story, 111-unit building in downtown New Brunswick.
In April 2012, NewBrunswickToday.com conducted an in-depth investigation into the political spending of the Boraies, among others involved in a campaign fundraising scandal that centered around Middlesex County.
Our research showed that, since 1981, Omar, Wasseem, Edward, Madiha, and Samer Boraie donated over $117,000 to political candidates and organizations, including gubernatorial candidates in both major parties, and officials in Middlesex County at all levels of government.
While his donations were no secret, some fundraising operations that he gave to operated in a much more secretive fashion.
Here's what we published on April 20, 2012 in Funny Money, Part 3: Mayor Cahill's Campaigns Took In More Than $20K From Questionable Political Groups:
[A]t least one family member was also frequent contributor to several questionable fundraising committees that went by vague, official-sounding names such as "Women For Good Government."
Omar, the patriarch and head of the family real estate business was the twelfth-biggest contributor to the [secret network of political fundraising] committees since 2008, giving a total of $17,700.
And none of this takes into account donations made by one of the firm's subsidiaries, Albany Street Plaza Urban Renewal Development Corporation, an entity created to reap tax breaks on the developer's first major redevelopment project, two office/retail towers at 120 Albany Street.
Albany Street Plaza was also quite active in politics, at least when it came to donations. They gave New Brunswick Mayor James Cahill, who appoints the members of the Planning Board, $750 in 2008 and another $2,000 the following year.
The corporation also gave $4,700 to the New Brunswick Democratic Organization (NBDO) since 2008. And another $25,000 went to the Middlesex County Democratic Organization over a three-year period in the early 2000's.
But the biggest recipient of Albany Street Plaza's generosity was the NJ Democratic State Committee. Since 2001, the company donated $62,000 to help Democrats get elected and re-elected to state offices.
We concluded that "the donations may have paid for themselves, in a manner of speaking," as the company has secured over $40 million in tax credits from a state initative to support transit-oriented development.
At the time, only thirteen projects had been approved for the credits in the entire state, and two of them were Boraie Development's projects.
Last year, Boraie's proposal for a new residential development on Rector Street in Newark was given an even bigger tax credit than before. The credit went up from $13.4 million to $20.7 million.
Boraie was already approved for a $19.9 million credit on the Somerset Mews project.
THREAT TO SUE THIS NEWSPAPER FOR REPORTING ON HIM
Omar Boraie ran into the author of this article at the grand opening of the city's new supermarket and demanded that he remove all articles on NewBrunswickToday.com that included him.
"I'm not a public person," he said, as his son Sam tried to end the conversation and whisk his father away from the confrontation.
Boraie, who has been featured prominently at public events with celebrities like O'Neal and Newark Mayor Cory Booker, insisted it was not acceptable for him, his development projects, or the assistance they get from state and local governments to be discussed on our website.
After being informed of our policy on corrections and modifications to articles, Boraie became irate and repeatedly demanded the author state his home address. This reporter gave our business address on Paterson Street.
Just a few days later, NewBrunswickToday.com recieved our first threatening letter. On the letterhead of the law firm Shamy, Shipers, and Lonski P.C., the one-page note cited unspecified "inaccurate and misleading" references to Boraie and asked us to "remove all references" to Boraie and his companies.
Though it's not clear to us whether it was intentional, both the last name of the letter's recipient ("Charles Kratozil") and the web address of this newspaper ("New Burnswick Today.com") were misspelled. Here's the full text of the letter:
Dear Mr. Kratozil:
Please be advised that this office has been retained by Mr. Omar Boraie and his affiliated companies to protect their respective legal rights and to preserve their respective business reputation in the New Brunswick area.
You are responsible for the content of certain websites, including inter alia, New Burnswick Today.com, in which you are listed as the editor. The vast majority of references to Mr. Boraie and his companies are inaccurate and misleading. Your recitation is meant to cause harm to my clients and their reputation.
My clients have requested that I afford you this final opportunity to remove all references to my clients and their companies from your websites. Failing same, I have been instructed to seek all available legal resources to protect my client's interests and reputation. Your immediate attention to this matter is requested to avoid further legal involvement.
Please be guided accordingly.
Very truly yours,
SHAMY SHIPERS, & LONSKI P.C.
DAVID P. LONSKI
Ironically, the law firm Boraie hired was exposed by NewBrunswickToday.com in part four of the "Funny Money" series as the home base of a network of questionable political fundraising organizations that appeared to be a concerted effort to circumvent state and local laws intended to limit the influence of money on politics.
David Lonski, who signed the letter, is a prosecutor in East Brunswick who also served as the treasurer for the "Raritan Bay Leadership Fund," one of nearly a dozen coordinated campaign slush funds based in central New Jersey.
We have not received any further communication from Mr. Boraie or his attorneys since the above letter, dated November 13, 2012.
A phone message left with a woman who answered the phone at Boraie Development's office was not returned.