Audit report: Jersey City, BOE lost out on millions due to inaccurate PILOT billings

The City of Jersey City and the local Board of Education both missed out on millions of dollars due to inaccurate billings on at least 19 different projects receiving payment in lieu of taxes agreements dating back to 2016, according to a report that is part of an operational efficiency audit.

Photo via PinInterest.

By John Heinis/Hudson County View

“The audit reviews 19 different PILOT agreements previously approved by the council and says that since they are paying below their fully assessed tax value, the school district lost out on approximately $10,348,000 annually,” an October 2nd report obtained by HCV that hasn’t been made public yet.

The accounting firm says that they evaluated 179 PILOT agreements the city had entered into since 2016, opting to then take a look at 19 that had “the largest difference between the PILOT Billing and the fully assessed tax.”

“The variance for the top 19 properties selected indicated that the PILOT billing was below the fully assessed tax by $41,395,000 per year which represented 63% of the total variances for all 179 PILOTs,” the report says.

The issue at hand, based on the report, is that the developers in question have been reporting the same tax figures to the city since at least 2016.

Specifically, the 19 developments analyzed are not in compliance with municipal code for not having submitted audited financial statements since 2016, which could technically allow for the cancellation of any of the PILOT agreements in question.

Based on the aforementioned figure, the city lost out on at least $165,580,000 to date since at least some developers were not paying their taxes in full, the report states.

Five projects do not have their “affiliates” identified, four projects are identified as LeFrak Organization projects, and three are Mack-Cali Realty Corp. developments.

The other seven projects are being built by Alpert, Panepinto, Kushner Real Estate (KRE), Goldman Sachs, Peter Mangrin, Filopoulos and the Toll Brothers, respectively.

For example, the most egregious property listed is the Portside Urban Renewal, which doesn’t have an address listed, has a tax PILOT variance – the difference of the PILOT billing versus the total tax rate – of $5,920,001, according to the audit report.

The least egregious property listed is James Monroe, located at 45 River Drive St., a LeFrak development which has a PILOT variance that comes out to $1,134,246 – though the total variance between their four reviewed properties comes out to $6,415,002.

In 2016, then-Tax Assessor Maureen Cosgrave was instrumental in performing a tax abatement audit for the city, which ended up with LeFrak paying approximately an additional $6 million.

Overall, the largest variance belongs to Mack Cali, with a combined figure among three assessed properties coming out to $9,440,665 – with about half of that coming at the Monaco South building located at 465 Washington Blvd. ($4,783,980 variance).

Furthermore, the accounting firm says that they had difficulty obtaining documents from the city: with only 11 property auditor reports out of 19 obtained through an Open Public Records Act request, and one of the 19 PILOT requests not being answered in full.

Subsequent visits in person to the city Tax Collector’s Office, Clerk’s Office and Legal Department did not yield either of the requests being answered in full, the CPA wrote.

“As a result of the questions raised, and in order to ensure the accuracy of the preliminary areas of non-compliance, we recommend a meeting between representatives of the Jersey City School District and the city to discuss the issues and determine the accuracy of the PILOT Billings,” the report concludes.

“This meeting could resolve any outstanding questions or issues concerning compliance by the entities with their PILOT Agreements with the city.”

A city spokeswoman simply said “we intend to review the report” when HCV reached out for comment, while a district spokesman declined to comment.

A source, who spoke under the condition of anonymity since they were not authorized to speak on the matter, said that the U.S. Attorney’s Office and the New Jersey Attorney’s General’s Office would be contacted to see if any malfeasance took place.

Five days after this story was initially published, LeFrak Organization Senior Director Jeremy Farrell said that the audit contained a number of errors, for example, two of the four properties – the Monroe and the NOC V – had been sold in the 1980s and 2014, respectively.

The audit also failed to mention a PILOT agreement affiliated with their NOC 100 property, which “provides hundreds of units of affordable housing.” Additionally, these three properties paid $3,135,827 in land taxes since 2016, according to Farrell.

He also asserted that accurate, timely tax financial reports and audits were submitted to the city, which can be proven via certified mail receipts.

Finally, Farrell said that the NOC IV LeFrak property actually ended up paying $472,689 more in PILOT taxes than they would have in conventional taxes last year. The same scenario played out with the NOC VII project, which ended up paying over a $1 million more due to their PILOT.

“PILOTs give the City of Jersey City almost double the amount of money that it would normally receive under conventional taxation. The City decided to grant the PILOT agreements identified in the Memo in part to support and augment its budget,” he concluded.


Editor’s Note: This story was updated with comment from the LeFrak Organization. 

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