City Council is scheduled to approve a Payment In Lieu of Taxes (PILOT) agreement that would generate more than $26 million over 30 years for a proposed 292-unit mixed use complex across the river from downtown.

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The governing body introduced an ordinance (O-37-22) during a special meeting on Aug. 24 that will come up for a public hearing and final adoption during its meeting tonight at 7 p.m.

Russo Development presented a modified plan to the Redevelopment Agency earlier this summer for what has been called Bridgeview in two previous concepts. The Carlstadt-based firm proposed 292 units on a block surrounded by Clarkson Place, Main, Bridge and Essex streets to be built in two phases. The first phase would encompass 220 units and about half of the nearly 5,000 square feet of retail space. A second phase of 72 units built on the corner where a PSE&G substation currently sits. The project still must go through the Planning Board process.

The PILOT agreement is technically with RDF Urban Renewal, LLC, an entity created by Russo Development for this project. The city typically receives 95 percent of PILOT revenue, with 5 percent going to Union County.

The financial agreement runs 51 pages, with much of it boiler plate ordinance language found in other PILOT agreements. The important sections outline the projected cash flow and PILOT by year (Pages 4-12) and total project costs ($68 million, Page 42)

The costs associated with the tax exemption granted are “minor compared to the estimated total project cost” of $68 million, an estimated 150 construction workers created during construction and “permanent jobs following completion and during the operation of the project,” according to the financial agreement.

Over the course of the 30-year PILOT, the city is projected to receive $26.622 million in annual service charges (ASC), plus an administration fee of $530,550, based on gross revenue of $238 million over that time. The properties as currently constituted would generate $1.437 million in properties, according to the financial agreement. By comparison, a 292-unit apartment complex likely would be assessed for upward of $25 million or more, compared with other recent developments and depending on various factors.

The 11 properties targeted for the project total 3.2 acres and generated property taxes of about $98,000 in 2020, according to the financial agreement. That includes the PSE&G lot, which is exempt from property taxes.

The agreement projects 2024 as Year 1 of the 30-year PILOT and 2053 as Year 30. Year 2 (2025) appears to be the first full year projected, as revenue to the city would jump to almost $500,000, from about $47,000 in Year 1. Revenue to the city is projected to eclipse $1 million in Year 24 (2047).

The Annual Service Charge (ASC) would be adjusted in stages over the course of the 30-year PILOT:

• 10 percent of annual gross revenue for Years 1-15;
• 11 percent of annual gross revenue for Years 16-20;
• 12 percent of annual gross revenue for Years 21-25; and,
• 13 percent of annual gross revenue for Years 26-30.

In addition to the ASC, Russo would pay to the city an annual administrative fee of 2% of the ASC.

In lieu of construction of five affordable housing units as part of the project, Russo would make financial contributions through an ASC and 2 percent administrative fee of $1,500 per unit, according to the agreement. Those per-unit payments would work out to $330,000 for the 220 units in Phase 1 and $108,000 for 72 units as part of Phase 2, for a total $438,000 if all 292 units are completed.

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