WEST ORANGE, NJ — The West Orange Township Council recently approved Phase II of Prism Capital Partners’ redevelopment plan as the Phase I of the Edison Village project nears completion. At its Sept. 19 meeting, the council passed several ordinances that will allow Prism to continue to build its Main Street project, which will ultimately create 252 market-rate residential units and 44 affordable housing units downtown.
The council authorized the redevelopment plan with Prism, in addition to agreeing to the infrastructure construction and approved the tax exemption for the affordable units. Ordinances to adopt financial agreements and non-recourse bond resolutions were also approved, which are needed to help finance the redevelopment project. The cost for Prism Phase II will be $103 million.
Prism’s plan for Phase II is to build two- and three-bedroom apartments that will range in size from 1,160 to 1,860 square feet. Prices will range from $350,000 to $500,000 for each unit, with pool and clubhouse access included. The affordable housing units will be available based on income and family size, and range in price from $47,600 to $68,000 for people with moderate income; from $33,000 to $47,100 for people with low income; and from $19,800 to $28,250 for people with very low income.
Council President Joe Krakoviak cast the sole vote against the resolution to authorize the redevelopment agreement with Prism, after questioning the taxes that people who will live in the new buildings will be paying; 75 percent of conventional taxes will be paid on the housing units.
“If it was an existing property that was worth this value, they would pay as everyone else pays conventionally,” Michael Hanley, a financial adviser for NW Financial Group, which negotiated Prism’s deal, said at the meeting. “These units, when they come online, will initially pay 75 percent of what conventional taxes will be. This is an incentive to do this deal, because without this deal there is insufficient economics for the redeveloper to move forward.”
Councilwoman Michelle Casalino said that the property and tax value of the redevelopment area must be considered before any work is done; she pointed out that a completed site would have a higher property value than a partially completed site.
“You need to really make the comparison to the property now and the tax value that there is today,” Casalino said at the meeting.
Hanley confirmed that Casalino was correct, saying: “That’s why redevelopment exists, they want to take a property that’s not performing and turn it into something that helps the existing taxpayers because the revenue that’s generated here doesn’t have to be raised by the people who currently have homes.”
Councilman Jerry Guarino asked about the township’s financial exposure once the project is completed.
“No more than 45 percent of the revenues that are received are pledged to debt service,” Jennifer Credidio, legal counsel to West Orange for redevelopment, said at the meeting. “If the revenues are not received the township has no obligation to make up that difference or pay over that amount. If the project doesn’t proceed forward there’s no issuance that’s backed by taxpayers here. The bonds are being issued as units come online instead of in the beginning.”
Guarino also asked how the housing units prices were decided. Hanley said Prism provided the projected sale prices, and the financial firm then compared them to other prices in the area to arrive at the final numbers of the project.
“We analyzed existing sale prices in town and this would lean toward the premium end of what these types of units are selling for,” Hanley said. “We believe that’s a reasonable assumption based on the fact that they’re going to be new, they’re going to be paying less in taxes … and if they’re not there the loser is the redeveloper.”
Krakoviak also brought up at the meeting that Prism has not been current on its property taxes in West Orange, another reason he voted against the resolutions to continue with the redevelopment agreements.
“This redeveloper has been chronically in breach, in my opinion, been in breach of the redevelopment agreement that requires them to be current on their property taxes,” he said. “In the last two quarters, every piece of property that the redeveloper owns in the redevelopment area in Phase II was delinquent on their property taxes. The bottom line is they are not following a provision of the contract.”
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