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AN ORDINANCE (1) AMENDING ORDINANCE 6PSF-E, ADOPTED ON AUGUST 19, 2020; (2) AUTHORIZING THE EXECUTION OF AN AMENDED AND RESTATED FINANCIAL AGREEMENT BY AND BETWEEN THE CITY OF NEWARK AND 41 19TH AVENUE URBAN RENEWAL, LLC, 61 DEANS LANE, MONMOUTH JUNCTION, NEW JERSEY 08852, IN CONNECTION WITH THE CONSTRUCTION OF EIGHTEEN (18) MARKET RATE RESIDENTIAL UNITS ON THAT PORTION OF THE PROPERTY IDENTIFIED AS BLOCK 364, LOT 1.04 ON THE CITY’S OFFICIAL TAX MAP AND HAVING THE FOLLOWING STREET ADDRESS 712-722 SOUTH 17TH STREET, WHICH IS A PORTION OF THE ORIGINAL REDEVELOPMENT PROJECT CONSISTING OF THE CONSTRUCTION OF SIXTY (60) MARKET RATE RESIDENTIAL UNITS ON PROPERTY LOCATED AT 704-708 SOUTH 17TH STREET, 701-707 SOUTH 16TH STREET, 709-717 SOUTH 16TH STREET, AND 712-722 SOUTH 17TH STREET AND IDENTIFIED AS BLOCK 364, LOTS 1.01, 1.02, 1.03, AND 1.04 ON THE CITY’S OFFICIAL TAX MAP.; AND (3) CONSENTING TO THE ASSIGNMENT OF A PORTION OF THE AFOREMENTIONED REDEVELOPMENT PROJECT CONSISTING OF FORTY-TWO (42) MARKET RATE RESIDENTIAL UNITS AND CERTAIN PROPERTY WHICH THEY ARE SITUATED UPON LOCATED AT 704-708 SOUTH 17TH STREET, 701-707 SOUTH 16TH STREET, 709-717 SOUTH AND IDENTIFIED AS BLOCK 364, LOTS 1.01, 1.02, AND 1.03 ON THE CITY’S OFFICIAL TAX MAP, FROM 41 19TH AVENUE URBAN RENEWAL, LLC TO RISE REO URBAN RENEWAL, LLC, 61 DEANS LANE, MONMOUTH JUNCTION, NEW JERSEY 08852
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WHEREAS, 41 19th Avenue Urban Renewal, LLC, 61 Deans Lane, Monmouth Junction, New Jersey 08852 (the “FNA Entity”), previously filed an application with the Mayor (the “Mayor”) of the City of Newark (the “City”) seeking a long term tax abatement under the Long Term Tax Exemption Law, N.J.S.A. 40A:20-1 et seq. (the “LTTE Law”) for a twenty-five (25) year term for a project consisting of the construction of three (3) buildings consisting of sixty (60) market rate residential units (the “Original Project”) on certain property within the City formerly identified on the City’s Official Tax Map as Block 364, Lots 1, 2, 6, 7, 8, 9, 10, 11, 12, 13, 22, 24, 26, 28, 29 (50% of the property), and 30 and having the following former street addresses of 55 19th Avenue, 47-53 19th Avenue, 45 19th Avenue, 43 19th Avenue, 41 19th Avenue, 709 South 16th Street, 711 South 16th Street, 713 South 16th Street, 715 South 16th Street, 717 South 16th Street, 718-722 South 17th Street, 714-716 South 17th Street, 712 South 17th Street, 708 South 17th Street, 724-726 South 17th Street (50% of the property), and 707 South 16th Street, Newark, New Jersey (the “Original Property”); and
WHEREAS, the Original Property was subsequently consolidated and subdivided and the FNA Entity has since commenced construction of the Original Project on a portion of the Original Property now identified as Block 364, Lots 1.01, 1.02, 1.03, and 1.04 on the City’s official tax map and having the following street addresses 704-708 South 17th Street, 701-707 South 16th Street, 709-717 South 16th Street, and 712-722 South 17th Street, respectively (collectively, the “Property”); and
WHEREAS, on August 19, 2020, the City’s Municipal Council (the “Municipal Council”) adopted Ordinance 6PSF-e granting a twenty-five (25) year Tax Abatement and authorizing the execution of financial agreement with the FNA Entity setting forth terms and conditions of a tax abatement for the Original Project; and
WHEREAS, in furtherance of Ordinance 6PSF-e, the City and the FNA Entity entered in that certain financial agreement, dated April 29, 2021 (the “Original Financial Agreement”), which set forth the terms and conditions of a tax abatement for the Original Project; and
WHEREAS, the FNA Entity has completed construction, and has received a certificate of occupancy, for that portion of the Original Project consisting of forty-two (42) market rate residential units (the “RISE Project”) on a portion of the Property identified as Block 364, Lots 1.01, 1.02, and 1.03 and having the following street addresses of 704-708 South 17th Street, 701-707 South 16th Street, and 709-717 South 16th Street (the “RISE Property”); and
WHEREAS, the FNA Entity has commenced construction on the remaining portion of the Original Project consisting of eighteen (18) market rate residential units (the “FNA Project”) on that portion of the Property identified as Block 364, Lot 1.04 on the City’s official tax map and having the following street address 712-722 South 17th Street (the “FNA Property”), and intends to complete construction on the FNA Project in 2024; and
WHEREAS, the FNA Entity has secured a permanent financing loan (the “Loan”) from CPC Mortgage Company LLC, (together with its successors and assignees the “Lender”) for the RISE Project and the RISE Property; and
WHEREAS, the FNA Entity has informed the City that the Lender requires the borrower under the Loan for the RISE Project to be a single purpose entity owning no other assets other than those included in the RISE Project and, in furtherance thereof, the owners of FNA Entity established a single purpose entity, RISE REO Urban Renewal, LLC, a New Jersey urban renewal limited liability company, with offices at 61 Deans Lane, Monmouth Junction, New Jersey 08852 (the “RISE Entity”), which entity has the same owners and ownership structure as FNA Entity; and
WHEREAS, in order to secure the Loan, the FNA Entity desires to transfer and assign the RISE Project and the RISE Property to the RISE Entity, with the RISE Project and the RISE Property to continue to be operated by the RISE Entity in accordance with the substantially similar terms initially established in the Original Financial Agreement; and
WHEREAS, the Lender further requests that the Original Financial Agreement be bifurcated into two separate financial agreements to apply separately and independently to (a) the FNA Entity as it pertains to the FNA Project and the FNA Property, and (b) the RISE Entity as it pertains to the RISE Project and the RISE Property, respectively, by way of (1) an amendment to the Original Financial Agreement in the form of an amended and restated financial agreement between the City and the FNA Entity in connection with the FNA Project and FNA Property and assigning the FNA Entity’s rights and obligations under the Original Financial Agreement concerning the RISE Project and the RISE Property to the RISE Entity, substantially in the form attached hereto as Exhibit A (the “FNA Financial Agreement”), and (2) a new financial agreement between the City and the RISE Entity in connection with the RISE Project and the RISE Property assuming the rights and obligations of the FNA Entity under the Original Financial Agreement concerning the RISE Project and the RISE Property (the “RISE Financial Agreement”); and
WHEREAS, in furtherance of the foregoing, the FNA Entity has prepared a revised project description and explanation of need (the “FNA Application”) seeking a twenty-five (25) year long term tax abatement under the LTTE Law for the FNA Project and the FNA Property and the Mayor has submitted the FNA Application, a copy of which is annexed hereto as Exhibit B along with the proposed FNA Financial Agreement to the Municipal Council with his recommendation thereof; and
WHEREAS, the City previously determined that the Original Project is of such a significant nature to constitute a Redevelopment Project pursuant to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq., and therefore is eligible for long term tax exemption pursuant to the Long Term Tax Exemption Law, and in accordance with those findings, the City has determined that the FNA Project, which is a portion of the Original Project, is of such a significant nature to constitute a Redevelopment Project pursuant to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq., and therefore is eligible for long term tax exemption pursuant to the Long Term Tax Exemption Law; and
WHEREAS, the Municipal Council previously determined pursuant to N.J.S.A. 40A:20-11 that the relative benefits of the Original Project outweighed any costs associated with the tax abatement granted to the Original Project and that without the tax abatement granted in Ordinance No. 6PSF-e and the Original Financial Agreement, the Original Project would not have been undertaken, and in accordance with those findings, the Municipal Council has determined pursuant to N.J.S.A. 40A:20-11 that the relative benefits of the FNA Project, which is a portion of the Original Project, outweigh any costs associated with this tax abatement and that without the tax abatement granted herein, the FNA Project, which is a portion of the Original Project, would not have been undertaken.
WHEREAS, the tax abatement contemplated in the FNA Financial Agreement and the RISE Financial Agreement, the approval of which is being considered by ordinance of the Municipal Council of even date herewith, collectively, contain substantially the same financial terms, and financial benefit to the City, as the Original Financial Agreement; and
WHEREAS, in furtherance of the foregoing, the Municipal Council now desires to consent to the assignment transfer of the RISE Property and the RISE Project from the FNA Entity to the RISE Entity and to authorize the execution of the FNA Financial Agreement in connection therewith.
NOW, THEREFORE, BE IT ORDAINED BY THE MUNICIPAL COUNCIL OF THE CITY OF NEWARK, NEW JERSEY THAT:
1. The foregoing recitals are incorporated herein as though fully set forth at length.
2. The FNA Application is hereby approved in accordance with the recommendation of the Mayor for the undertaking and operation of the FNA Project.
3. The abatement from taxation on improvements is hereby granted to the FNA Entity for a period of Twenty-Five (25) years from the date of substantial completion of the FNA Project, pursuant to N.J.S.A. 40A:20-12, and only so long as the FNA Entity is subject to and complies with the FNA Financial Agreement substantially in the form attached hereto as Exhibit A and the LTTE Law, as amended and supplemented and upon further condition that the FNA Entity does not file a petition of tax appeal for the FNA Property on which the FNA Project is located.
4. The FNA Entity is hereby authorized to assign and transfer the RISE Property and the undertaking of the RISE Project to the RISE Entity, the City hereby issues its consent in connection with said transfer and assignment, and the FNA Financial Agreement, substantially in the form attached hereto as Exhibit A, is hereby authorized and approved.
5. The Mayor is hereby authorized to enter into and execute, on the City’s behalf, the FNA Financial Agreement substantially in the form attached hereto as Exhibit A.
6. The Deputy Mayor/Director of the Department of Economic and Housing Development shall file a fully executed copy of the FNA Financial Agreement authorized by this Ordinance in the Office of the City Clerk.
7. The FNA Project, when completed, will conform with all State laws and ordinances of the City of Newark relating to its construction and use.
8. The Affirmative Action Program now on file in the Office of the City Clerk is declared to be a material condition of the FNA Financial Agreement authorized by this Ordinance.
9. The FNA Entity shall, in the operation of the FNA Project, comply with all laws so that no person shall be subject to any discrimination because of race, religious principles, color, national origin, or ancestry.
10. The FNA Entity shall file an employment report (herein described below) with the Office of Affirmative Action who shall forthwith after receiving the report send a copy thereof to the Office of the City Clerk and the Office of Affirmative Action shall forthwith investigate the matters contained therein and report its findings to the Municipal Council.
11. The Annual Service Charge for the FNA Project shall be as follows:
(a) For years One (1) through Ten (10) of the FNA Financial Agreement, the Annual Service Charge shall be an amount equal to Ten Percent (10%) of the Annual Gross Revenue.
(b) For years Eleven (11) through Fifteen (15) of the FNA Financial Agreement, the Annual Service Charge shall be an amount equal to Eleven Percent (11%) of the Annual Gross Revenue.
(c) For years Sixteen (16) through Twenty (20) of the FNA Financial Agreement, the Annual Service Charge shall be an amount equal to the greater of (A) Twelve Percent (12%) of the Annual Gross Revenue, or (B) Twenty Percent (20%) of the amount of taxes otherwise due on the value of the Land and Improvements.
(d) For years Twenty-One (21) through Twenty-Three (23) of the FNA Financial Agreement, the Annual Service Charge shall be an amount equal to the greater of (A) Thirteen Percent (13%) of the Annual Gross Revenue, or (B) Forty Percent (40%) of the amount of taxes otherwise due on the value of the Land and Improvements.
(e) For year Twenty-Four (24) of the FNA Financial Agreement, the Annual Service Charge shall be an amount equal to the greater of (A) Thirteen Percent (13%) of the Annual Gross Revenue, or (B) Sixty Percent (60%) of the amount of taxes otherwise due on the value of the Land and Improvements.
(f) For year Twenty-Five (25) of the FNA Financial Agreement, the Annual Service Charge shall be an amount equal to the greater of (A) Thirteen Percent (13%) of the Annual Gross Revenue, or (B) Eighty Percent (80%) of the amount of taxes otherwise due on the value of the Land and Improvements.
12. The FNA Entity shall pay the Minimum Annual Service Charge, as calculated pursuant to N.J.S.A. 40A:20-12(b)(2)(e) and the FNA Financial Agreement, in each year in which the Annual Service Charge, as provided in paragraph 11, would be less than the Minimum Annual Service Charge.
13. The following occurrences and requirements are express conditions of the granting of this tax abatement, to be performed by the FNA Entity, and the failure to comply with these requirements may result in the cancellation of the tax abatement:
(a) The FNA Entity shall not, without prior consent of the Municipal Council, sell, lease, assign, encumber, subordinate, convey, mortgage or transfer all, or any part of the FNA Project, so as to sever, disconnect or divide the improvements from the land embraced within the FNA Project; and
(b) The FNA Entity pursuant to the Revised City Ordinance 10:24-1 et seq., as amended shall be deemed to agree that it will in good faith assist the City of Newark in its goal of having fifty percent (50%) of all new jobs arising out of the businesses conducted on the FNA Project site after the issuance of the Certificate of Occupancy and during the continuation of the tax exemption dedicated to Newark residents, of which twenty-five (25%) of such all new employees shall be minority residents; and
(c) The FNA Entity shall concomitantly, with the submission of the annual report required of it by N.J.S.A. 40A:20-9(d), attach an employment report under oath, with particulars, stating the manner and the extent to which it has complied with paragraph 13(b) above. This employment report shall be filed with the Director of the Department of Finance, the City Clerk, and the Deputy Mayor/Director of the Department of Economic and Housing Development; and
(d) The FNA Entity shall pay all outstanding taxes and all outstanding water and sewer charges within thirty (30) days of the adoption of this Ordinance; and
(e) The FNA Entity shall submit to the City a copy of its formation documents, as approved by the Department of Community Affairs and filed with the Secretary of State; and
(f) The FNA Entity shall receive a favorable review and certification from the appropriate municipal departments and agencies, pursuant to City Ordinance 6S&Fd, adopted on October 21, 1992, as amended; and
(g) The FNA Entity shall pay full taxes on the Land and Improvements of the FNA Project until the Annual Service Charge becomes effective; and
(h) The FNA Entity shall complete the FNA Project within twenty-four (24) months of the effective date of the FNA Financial Agreement provided however, that the Deputy Mayor/Director of the Department of Economic and Housing Development is hereby authorized to enter into a maximum of two (2) six (6) month extensions of the construction schedule deadlines set forth within the FNA Financial Agreement and any other timelines and milestones, provided that such deadlines, timelines and milestones are not extended beyond the two (2) permitted six (6) month extensions, subject to full written disclosure (in the form of a signed Memorandum to be submitted prior to adoption) to the Municipal Council by the Deputy Mayor/Director of the Department of Economic and Housing Development.
14. In any year that the FNA Entity shall fail to make four (4) consecutive land tax payments when due and owing in the manner defined in N.J.S.A. 40A:20-12(b)(2)(e), such delinquency shall render the FNA Entity ineligible for any land tax credits against the Annual Service Charge.
15. The FNA Entity understands and agrees that the revenue projections set forth in the FNA Application are estimates and that the actual payments in lieu of taxes to be paid by the FNA Entity to the City shall be determined pursuant to the FNA Financial Agreement to be executed between the FNA Entity and the City of Newark.
16. The FNA Entity agrees that the FNA Entity shall pay to the City of Newark a fee of two (2%) percent of the Annual Service Charge as an administrative fee to be paid annually for the term of the FNA Financial Agreement.
17. To the extent of any inconsistency with any prior City ordinance and/or Municipal Code provision governing the granting of long-term tax exemptions, including, inter alia, procedures for application, review and approval, required terms of the FNA Financial Agreement, required conditions and covenants, limits on duration, means of enforcement, and all other matters whatsoever, such prior City ordinances and/or Municipal Code provisions are hereby waived, but only with respect to this Ordinance.
18. Within ten (10) calendar days following the later of the effective date of this Ordinance or the execution of the FNA Financial Agreement by the FNA Entity, the Office of the City Clerk shall transmit a certified copy of this Ordinance and the FNA Financial Agreement to the Chief Financial Officer of the County and to the County Counsel for informational purposes.
19. This Ordinance shall take effect upon final passage and publication in accordance with the laws of the State of New Jersey.
STATEMENT
This Ordinance (1) amends Ordinance 6PSF-e, adopted on August 19, 2020, (2) authorizes the execution of an amended and restated financial agreement by and between the City of Newark and 41 19th Avenue Urban Renewal, LLC, 61 Deans Lane, Monmouth, New Jersey 08852 (the “FNA Entity”) under the LTTE Law, , in connection with the construction of eighteen (18) market rate residential units on that portion of the property identified as Block 364, Lot 1.04 on the City’s Official Map and having the following address 712-722 South 17th Street (the “FNA” Property), which is a portion of the original redevelopment project authorized by Ordinance 6PSF-e, and (3) consenting to the assignment of a portion of the property commonly known as Block 364, Lots 1.01, 1.02, and 1.03 on the City’s official tax maps and having the street addresses of 704-708 South 17th Street, 701-707 South 16th Street, and 709-717 South 16th Street (the “Rise Property”) to RISE REO Urban Renewal, LLC, an entity with the same ownership structure as the FNA Entity, solely for the purposes of securing permanent financing.
EXHIBIT A
FNA Financial Agreement
EXHIBIT B
FNA Application