I have been a resident in BH for over 15 years and I have done my best to keep abreast of all town matters. I have watched many meetings/presentations about the redevelopment of the municipal building and view live-streamed town council meetings via BH Township. When I started hearing claims about enormous tax increases associated with the municipal complex, it seemed inconsistent with the prior presentations by the Township. So, last week I went directly to the source—our Township CFO, to clarify and obtain the real scoop on the project and related financing. Here are the FACTS from the Township CFO.
Accurate information is important to good planning, policy development, and financial decision making. Equally important is the context in which they are presented. Flyer fiction cannot begin to explain financial facts. Such efforts are designed to scare and mislead our residents and seniors to gain political office. Please vote for Jeanne Kingsley and Marc Faecher on June 6th in the Republican Primary Column E.
Below is the actual email I received from Mr. Michael Marceau, Berkeley Heights CFO.
The email exchange relates to the CFO’s presentation during one of the public meetings that were held to discuss the Municipal Complex project. http://www.berkeleyheightstwpnj.gov/notices/Municipal-Redevelopment-Presentation-Overview-011017-Part3.pdf
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I’ll do my best answer these as succinctly as possible even though this is a complicated issue.
Q1. There are a lot of questions about the bonding process, are we bonding the whole amount all at once? can you explain the "ladder" approach that has been mentioned?
A1. The town is NOT bonding all at once. That would not make sense financially. The town is starting the process with one year notes and will sell long-term bonds at the appropriate time(s). The laddering involves just what was mentioned above. One year notes are used to start the project. Bonds can be sold at a later date(s) and you could even have both instruments at the same time. The town will constantly evaluate the market as well as the project status to make smart choices when it comes to financing.
Q2. For scenario #1, can the bond process start after the sale of the Hamilton ave. property so we don't have to borrow the full amount?
A2. YES. That is one of the reasons that the town is starting the process with one year notes. We can pay off as much possible prior to moving into long-term bonds. Bonds typically have a higher interest rate than the notes so this will result in a substantial savings.
Q3. How are the factors of 0.00025 and 0.00083 derived?
A3. As explained in the presentation, these factors were provided so residents would have an easy way to see what type of effect the project would have on their specific property. Under Scenario #1, the average tax impact was $78 per household with an average assessed value of $308,100. Thus, $78/$308,100 = 0.00025. Under scenario #2, the average tax impact was $255 per household. Thus, $255/$308,100 = 0.00083. So, a resident who feels there property has a Fair Market Value of $600,000 can multiple that value by 56% (our ratio of FMV to assessed value) = $336,000 and then multiple that by the two factors. Thus, $336,000 x 0.00025 = $84 and $336,000 x 0.00083 = $279.
Q4. There seems to be a discrepancy between the 2 scenarios. In scenario #2, we're borrowing 30% more money, but the tax levy is 300% more. Additional details from the person who asked this: In the redevelopment overview Part 3, under scenario #1, the professionals claim that if you multiply your assessed value by 0.00025 that you will obtain your annual tax increase under that scenario. In 2015, the projected Total Assessed Value of the entire Township was $1,769,461,250. Multiply that by 0.00025 and you get $442,365.31. That is what the annual cost of the bond has to be to yield a simple $78 per year tax increase. In their own presentation (aside from 2016) the bond is Never that small. In fact, once the township clears the first few years the steady state cost of the bond is close to triple that, which, ostensibly, would triple the impact to the tax payer. This is of Scenario 1 only, the same analysis of Scenario 2 yields an annual bond cost of $1,468,652.84, which is more in line with that scenario. My only point is that Scenario 1 is not significantly more advantageous to the tax payer than Scenario 2. In their scenarios they are paying the bond off through property taxes. I am simply pointing out that based on their own calculation and methodology their tax increase for Scenario 1 is misleading. It works for 2017 only, not for any other year. The tax increase for 2019 all the way through 2043 will be closer to $210 per average household, based on their own methodology.
A4. I’m not sure I understand the question, but I will do my best to explain why this individual is incorrect. Basically, they are mixing two concepts (residential and commercial). The 0.00025 factor is for an average assessed RESIDENCE. This individual is forgetting all of the COMMERCIAL properties which are also paying taxes. $1,769,461,250 is the total assessed value of the town. You can’t apply 0.00025 (residential only factor) to all of the residences and commercial properties. Additionally, they are leaving out all of the tax revenue generated by the new properties on Hamilton Ave. There is no “discrepancy”. Under both scenarios the town gets tax revenue from both the residential and commercial properties. However, under Scenario #1, the town gets additional tax revenue from Hamilton Ave. Under Scenario #2, nothing happens with Hamilton Ave so there is no anticipated revenue. That is precisely why Scenario #1 is so much more affordable.
Q5. What's the basis for the 10M valuation of the Hamilton Ave. property? Here's more detail from the person asking. As an aside, the $10-million Hamilton Ave sale would appear to place a value of $100,000 per townhouse unit. With 100 units that would yield the purchase price. However, the conceptual plan only shows 80 townhouse units and, I would assume, 20 COAH units to be built in the condo building in the NE corner of the property. COAH units are not valued at the same price as market rate units. That would drop the valuation of the project by an additional $2-million and bring the two scenarios even closer together.
A5. Again, this individual is mixing two separate concepts. The $100,000 per unit value was based on conversations that the Township Planner had with various developers on what they would be willing to pay for this type of property. Obviously, they are taking into account that the COAH units would be valued differently upon sale or rental. Again, per conversations with various developers, the SALE prices once the units are built range from $500K to $1M per unit.
The “back of the envelope” way to look at it is as follows: (please keep in mind that these are approximations and do not represent an exact accounting)
$78 per average assessed residential property ($78 x 4,535 = $353,730 x 27 years = $9,550,710) $9,550,710
$600 per average assessed commercial property ($600 x 153 = $91,800 x 27 years = $2,478,600) $2,478,600
Anticipated tax revenue from Hamilton Ave property ($360,000 x 27 years = $9,720,000) $9,720,000
As a side note, I think it should be noted that the information above, as well as the information available on the Township website has been compiled by the municipal auditors, township attorneys, financial advisors, bond attorneys, redevelopment attorneys, valuation experts, planners, and several township employees, all with the appropriate educational back grounds, degrees of higher education, state licenses and certifications, etc. who have all participated in this process, questioned and tested one another, and contributed to the information above. Their expertise should not be trivialized. I urge you, or anyone else with questions, to continue to OPRA questions of myself or any of the Township’s professionals should clarification be needed on anything.
I hope these responses make sense. If you have any further questions or need clarification on any of my responses, just let me know. Thank you.
Michel D. Marceau
Chief Financial Officer
Township of Berkeley Heights
(P) 908-464-2700 ext 2221
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Here are some additional links to the Township Website presentations discussed above:
Katherine B. Matfes