City Council extended a Payment In Lieu Of Taxes (PILOT) from 15 to 30 years for Metro Rahway, a 116-unit building on Campbell Street.

The ordinance (O-3-20) will extend the original 15-year PILOT with Metro Rahway for another 15 years, until 2045. The second amendment to the financial agreement, which amended the original agreement and was included as an exhibit in the ordinance, can be found here. The measure passed by a vote of 7-0-1. Fifth Ward Councilwoman Danni Newbury abstained. “In the moment it was the right thing to do,” she said when asked after the meeting why she abstained.

During the public comment portion of the meeting, Andrew Garcia Phillips of Campbell Street raised concerns about the school district not being represented in financial agreements with developers. Under a PILOT, the city receives 95 percent of the payment, with the remaining 5 percent going to the county.

PILOTs in the early phases of downtown redevelopment were five, 10 or 15 years in length but now are routinely 30 years long — “the best deal allowed” under the state law, Philips said. “I will have grandchildren before” these developers will pay their full share of taxes, he said. “Don’t let them tell you their struggles are more important than the schools’ struggles.”

The only question from council members came from 4th Ward Councilman David Brown who asked whether what Phillips said was accurate. Chief Financial Officer Frank Ruggiero countered that the city is not negatively impacted by PILOTs and the school district receives 100 percent of the budget that is requested.

City Administrator Robert Landolfi interjected amid the roll call vote that there had been a misrepresentation of the facts and a misunderstanding. “I felt an obligation to clarify that. It’s important that it be on the record,” he said.

In an interview after tonight’s Redevelopment Agency meeting, Landolfi said Metro Rahway should never have been structured as a 15-year PILOT given the debt service, expenses and revenues projected. If a project goes in the red, or too close to it, that “isn’t good for anybody,” he said. The city negotiated an increase in the PILOT from 10 to 11 percent of gross revenue, starting in the sixth year of the agreement.

Metro Rahway is a 116-unit building on Campbell Street between Elm Avenue and West Cherry Street, completed in 2014 on the site of the former A&M Industrial Supply Co. property. Metro Rahway Urban Renewal, LLC, is a partnership between AST Development, the developer of REVA Rahway on Main Street, and East Hanover-based Heartstone Development.

The original 15-year PILOT was approved in 2013. The ordinance (O-35-13) anticipated annual service charge of $265,000, based on 10 percent of Metro Rahway’s annual gross revenue. In the first year of the PILOT in 2016, Metro Rahway paid $231,015, followed by $160,169 in 2017 and $155,535 in 2018. Metro Rahway’s PILOT was slated to be $155,000 in the 2019 municipal budget, one of nine PILOTs scheduled to pay total of almost $1.4 million.