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AN ORDINANCE (1) AMENDING ORDINANCE 6PSF-E, ADOPTED ON AUGUST 19, 2020; (2) ASSIGNING THE RIGHTS AND OBLIGATIONS UNDER A TWENTY-FIVE (25) YEAR TAX ABATEMENT FOR A PORTION OF THE PROJECT BETWEEN THE CITY AND 41 19TH AVENUE URBAN RENEWAL, LLC TO RISE REO URBAN RENEWAL, LLC; AND (3) AUTHORIZING THE EXECUTION OF A NEW FINANCIAL AGREEMENT BETWEEN THE CITY AND RISE REO URBAN RENEWAL, LLC, 61 DEANS LANE, MONMOUTH JUNCTION, NEW JERSEY 08852 IN CONNECTION WITH A 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, 1.03 ON THE CITY’S TAX MAP, WHICH REDEVELOPMENT PROJECT IS A PORTION OF A OF A PREVIOUSLY APPROVED REDEVELOPMENT PROJECT CURRENTLY UNDER CONSTRUCTION BY 41 19TH AVENUE URBAN RENEWAL, LLC
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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 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 a 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 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 (the “FNA Financial Agreement”) 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, and (2) a new proposed 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, substantially in the form attached hereto as Exhibit A (the “RISE Financial Agreement”); and
WHEREAS, in furtherance of the foregoing, the RISE Entity has prepared a revised project description and explanation of need (the “RISE Application”) seeking a twenty-five (25) year long term tax abatement under the LTTE Law for the RISE Project and the RISE Property and the Mayor has submitted the RISE Application, a copy of which is annexed hereto as Exhibit B along with the proposed RISE Financial Agreement to the Municipal Council with his recommendation thereof; and
WHEREAS, in accordance with Ordinance 6PSF-a adopted on May 4, 2011, the RISE Entity has filed with the City a sworn statement that it has not made any contribution in violation of said ordinance; 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 RISE 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 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 RISE 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 RISE 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 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 desires to consent to the transfer of the RISE Property to the RISE Entity and assumption of the RISE Project, along with the FNA Entity’s rights and obligations under the Original Financial Agreement with respect to the RISE Property and RISE Project as set forth in the RISE Financial Agreement, by the RISE Entity and to authorize the execution of the RISE 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 RISE Application is hereby approved in accordance with the recommendation of the Mayor for the undertaking and operation of the RISE Project.
3. The abatement from taxation on improvements is hereby granted to the RISE Entity for a period of Twenty-Five (25) years from the date of substantial completion of the RISE Project, pursuant to N.J.S.A. 40A:20-12, and only so long as the RISE Entity is subject to and complies with the RISE 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 RISE Entity does not file a petition of tax appeal for the RISE Property on which the RISE Project is located.
4. The RISE Entity accepts the transfer of the RISE Property from the FNA Entity and assumes the undertaking of the RISE Project, along with the FNA Entity’s rights and obligations under the Original Financial Agreement with respect to the RISE Property and RISE Project as set forth in the RISE 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 RISE 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 RISE Financial Agreement authorized by this Ordinance in the Office of the City Clerk.
7. The RISE Project, previously being a portion of the FNA Project, is now complete and conforms with all State laws and ordinances of the City of Newark relating to its construction and use as evidenced by certificates of occupancy issued by the City for 704-708 South 17th Street (Block 364, Lot 1.01) on July 20, 2022, 701-707 South 16th Street (Block 364, Lot 1.02) on June 15, 2023, and for 709-717 South 16th Street (Block 364, Lot 1.03) on July 7, 2023, respectively, a copy of which are attached hereto as Exhibit C.
8. The Affirmative Action Program now on file in the Office of the City Clerk is declared to be a material condition of the RISE Financial Agreement authorized by this Ordinance.
9. The RISE Entity shall, in the operation of the RISE 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 RISE 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 RISE Project shall be as follows:
(a) For years One (1) through Ten (10) of the RISE 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 RISE 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 RISE 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 RISE 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 RISE 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 RISE 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 RISE Entity shall pay the Minimum Annual Service Charge, as calculated pursuant to N.J.S.A. 40A:20-12(b)(2)(e) and the RISE 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 RISE Entity, and the failure to comply with these requirements may result in the cancellation of the tax abatement:
(a) The RISE 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 RISE Project, so as to sever, disconnect or divide the improvements from the land embraced within the RISE Project; and
(b) The RISE 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 RISE 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 RISE 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 RISE 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 RISE 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 RISE 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 RISE Entity shall pay full taxes on the Land and Improvements of the RISE Project until the Annual Service Charge becomes effective; and
(h) Construction of the RISE Project was completed, as evidenced by certificates of occupancy issued by the City for 704-708 South 17th Street (Block 364, Lot 1.01) on July 20, 2022, 701-707 South 16th Street (Block 364, Lot 1.02) on June 15, 2023, and for 709-717 South 16th Street (Block 364, Lot 1.03) on July 7, 2023, a copy of which are attached hereto as Exhibit C.
14. In any year that the RISE 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 RISE Entity ineligible for any land tax credits against the Annual Service Charge.
15. The RISE Entity understands and agrees that the revenue projections set forth in the RISE Application are estimates and that the actual payments in lieu of taxes to be paid by the RISE Entity to the City shall be determined pursuant to the RISE Financial Agreement to be executed between the RISE Entity and the City of Newark.
16. The RISE Entity agrees that the RISE 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 RISE 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 RISE 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 RISE Financial Agreement by the RISE Entity, the Office of the City Clerk shall transmit a certified copy of this Ordinance and the RISE 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) assigns the rights and obligations under a twenty-five (25) year tax abatement for a portion of the project between the City and 41 19th Avenue Urban Renewal, LLC, and (3) authorizes the execution of a Financial Agreement by and between the City of Newark and RISE REO Urban Renewal, LLC, 61 Deans Lane, Monmouth Junction, New Jersey 08852 in connection with a 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 tax map, which redevelopment project is a portion of a of a previously approved redevelopment project currently under construction by 41 19th Avenue Urban Renewal, LLC, solely, for the purposes of securing permanent financing.
EXHIBIT A
RISE FINANCIAL AGREEMENT
EXHIBIT B
RISE APPLICATION
EXHIBIT C
CERTIFICATE OF OCCUPANCY FOR RISE PROPERTY