Three ordinances that were presented at Wednesday night’s Jersey City Council meeting which all ostensibly had a similar goal: bolstering affordable housing in the city. Is this an indicator of political infighting between the mayor and a developer? It depends who you ask.
By Corey McDonald/Hudson County View
Two ordinances up for introduction were put forward by the LeFrak Organization, one of the most prominent development companies in the city.
The proposals asked for two 30-year tax abatements that would allow them to rehabilitate four Newport resident towers and preserve current affordable housing units, as well as create 30 new affordable housing units.
Another ordinance, put forth by Mayor Steven Fulop, would have eliminated an exemption from the city’s rent control law for “newly constructed dwellings with 25 or more … units.”
But both pieces of legislation, despite appearances, represented significant political jabs in an ongoing feud between Fulop and LeFrak, sources who spoke on the condition of anonymity told Hudson County View.
The relationship between Fulop and the company – one of the city’s biggest developers who was critical in developing the Newport area more than three decades ago ago – turned sour after the city passed its payroll tax following a contentious legal battle that the city won, sources said.
The matter remains in the courts on appeal.
Despite what many insiders are calling obvious friction between Fulop and LeFrak, the mayor’s office maintains that they still have a great relationship.
“The Mayor and Jamie Lefrak have known each other for over 15 years and continue to have a good personal relationship. Over that span of time, they have agreed on some issues and disagreed on some issues,” said city spokeswoman Ashley Manz.
“Any broader negative characterization of their relationship is false. From the Mayor’s standpoint, he feels that the Lefrak’s have been very important to the renaissance of Jersey City. He appreciates all that they have done and continue to do to revitalize what was once abandoned train yards.”
Despite those comments, many others in the political arena believe that a bridge was burned once the payroll tax was implemented.
“They were expecting a degree of compromise, and the mayor basically just said no,” one source in City Hall said.
The tax added a one percent levy on businesses in the city in order to offset cuts to state education aid. This represented a significant loss in revenue for major developers, sources said, which was the catalyst for LeFrak getting involved in this year’s board of education race.
Fairer NJ is a super PAC being chaired by Jeremy Farrell, the Lefrak senior director and former city corporation counsel, and they are backing the “Change for Children” slate opposing the “Education Matters” team – the latter which is backed by the teachers union.
“That’s where the battle really stems from … this payroll tax really hurts them,” one source said. “Now they’re both using ordinances and regulations to fight this battle: that’s where it’s being waged.”
Fairer NJ’s first digital ad aired this month and attacked the BOE over its financial shortcomings.
Pumping money into the race could establish allies on the board, giving them leverage in the school district where a superintendent search is underway and taxes are likely to rise, sources said.
“Even if they lose, these are potential candidates they can work with in the 2021 election,” one source added, when the city council and Fulop will be facing reelection.
In a statement, Farrell said that LeFrak’s involvement in the school board race, where they have indicated they expect to spend $250,000, has to do strictly with improving the school district, nothing more.
“Regarding Jersey City’s Schools, we, along with many other stakeholders who aren’t politicians, including building owners, parents, and residents are excited about the School board race because we believe leadership on the board is important and that a change is needed,” he said.
“Being a responsible partner with the City is the reason for our continued involvement. Any other reason ‘sources’ might give is absurd innuendo.”
Fulop previously told HCV that he was not getting involved in this year’s BOE election, noting that he didn’t feel comfortable supporting a slate backed by developers, also stating that questions regarding Board President Sudhan Thomas’ tenure as the acting director of the Jersey City Employment and Training Program remain unanswered.
In December, several months before the city school district’s harrowing funding crisis reached a boiling point, a tax abatement application was submitted by a corporate entity controlled by LeFrak that would have sent 100 percent of the revenue to the Jersey City BOE.
Tax abatements granted to private companies avoid typical taxation and instead send payments directly to the municipality over a predetermined period of time. Municipalities then decide how to allocate the money.
But the application stalled.
Fulop, in a letter to the city council in May, shot down the application after reviewing it, writing that the city “could not support the proposal” because it would “actually cost the city money over the term of the tax exemption — approximately $2.9 million.”
A lawsuit was filed in June by the corporate entity owned by Lefrak, claiming the abatement was improperly withdrawn without proper consideration. A judge in July then forced the city to consider the tax break.
Nowadays, tax abatement applications are a stretch in Jersey City, where a market rate tax break has not been granted for nearly three years.
However, at the time, there was a significant push by city officials to direct more of the revenue the city holds from abatements towards the schools. This added a political slant to the application, sources said, but the city council ultimately voted it down.
Fast forward to this month, when Fulop appeared to fire a warning shot at LeFrak when he put forth a proposal that would have removed a component of the city’s rent control law: the exemption for “newly constructed dwellings with 25 or more dwelling units located within a redevelopment area.”
On its face, the ordinance doesn’t appear to do much. Most new development in the city is protected by a state law that prohibits rent control on any newly constructed properties for 30 years.
Nevertheless, developments built before the 30 year provision would have been hit hard, sources said, particularly developments built in Newport, property LeFrak purchased and developed in the 1980’s.
LeFrak was one of the first major developers to invest in Jersey City’s waterfront — when you were likely to find tumbleweeds, and packs of wild dogs roaming the area, long before skyscrapers lined the property.
Fulop’s proposal was a surprise to some council members, given that a committee had been formed in May to put forth a comprehensive plan.
Council members on Wednesday called it “a worthwhile proposal,” but tabled it.
“We’re looking at it comprehensively, that’s how policy making in an ideal world should work,” Ward E Councilman James Solomon said at the meeting.
Meanwhile, the two abatements presented this week, much like LeFrak’s school funding abatement, were intended to “needle” the mayor, one source said, and try and put him in a position to come out against a proposal that would include affordable housing provisions.
Fulop, in a statement, came out against the abatements, saying that the “need for affordable housing in Jersey City is a growing concern, but the need for low income housing in downtown is particularly acute and the entity’s application doesn’t address it.”
The ordinances were tabled. Council President Rolando Lavarro said he was concerned that tenants renting luxury apartments after the rehabilitation would be paying rent control rates if the abatements were approved.
“We would essentially be giving rental control to renters in luxury apartments,” Lavarro said.
Follow Corey McDonald on Twitter @cwmcdonald_