Stahl: Golden Triangle revenue will be crucial

As public concern lingers over East Brunswick’s proposed settlement with Toll Brothers, officials say the new state cap on property tax increases makes the Golden Triangle redevelopment plan even more of a priority.

On July 13, Gov. Chris Christie signed a law that requires towns and school boards to keep tax hikes below 2 percent per year and that closes several loopholes in the prior cap law. Municipalities would have to receive permission from voters via a referendum in order to increase taxes beyond the cap.

East Brunswick officials are concerned the lower cap will exacerbate existing financial strains and negatively impact the 2011 municipal budget. Due to these circumstances, Mayor David Stahl has deemed the Golden Triangle redevelopment, which remains stalled due to litigation, even more of a priority now since the project would generate a significant amount of money for the revenue-starved municipality.

“A 2 percent tax cap makes next year’s budget more difficult,” Stahl said. “That’s why it is very important that the Golden Triangle deal is completed as soon as possible.”

In 2005, Toll Brothers agreed to buy the 32-acre Route 18 property, which the township owned and leased to Sam’s Club and other businesses, for $35 million. The builder later received approval to build 402 residential units and more than 180,000 square feet of retail space. Toll Brothers had made five annual payments of $4.5 million for a total of $22.5 million before the agreement stalled. The developer announced in 2008 that the project was no longer viable due to changes in market conditions, and proposed major revisions, including the elimination of the residential component and an expansion of the commercial uses.

East Brunswick officials’ hopes of negotiations did not come to fruition, and in early 2009, both Toll Brothers and the township filed breach-of-contract lawsuits against each other. State Superior Court Judge Diane Pincus denied the township’s motion for a partial summary judgment in January. The motion would have expedited the return of the property to the township.

East Brunswick officials renewed negotiations with Toll Brothers and on May 24 received a letter stipulating the terms of an agreement that would potentially end the yearlong legal dispute. The Township Council granted preliminary approvals for the settlement, which include acceptance of the letter and a request that the Planning Board recommend amendments to the redevelopment plan, in a 4-1 vote on June 14.

The settlement letter from Toll Brothers indicates that the purchase price would be reduced to $22.5 million as the final cost of the property, so the builder would not be required to make any further payments. The developer would construct between 200 and 400 residential units along with a large-scale retail store, and eliminate the office space and the strip mall portions of the site plan.

Toll Brothers would drop its litigation against East Brunswick, should the Township Council amend its ordinances and allow the revised project to move forward. In addition to dropping the lawsuit, Toll Brothers would abandon the property tax appeals it filed over the past two years.

The condition that would potentially ameliorate the future financial problems East Brunswick will face with the lowered tax cap is the implementation of a PILOT program. Toll Brothers agreed to make a payment in lieu of taxes (PILOT) to the township annually, starting at $550,000 in 2011. The municipality would receive 95 percent of the PILOT fees due to the way the long-term tax- exemption law is written. Middlesex County would receive the other 5 percent.

Stahl said the actual amount that the township would receive in the future would be dictated by the square footage of the commercial and residential development. He noted that East Brunswick is looking at a minimum of $1.1 million annually between apartment rentals and the commercial portion as taxes and fees increase.

While Stahl said that PILOT fees would be used for tax relief for the 16,000 households in East Brunswick, he also noted that the fees would help fill a $750,000 void already projected in the 2011 municipal budget.

Stahl provided a rough analysis of the budget situation using 2010 numbers: He said that $34 million out of the $56.5 million budget is being raised through taxes. Of that $34 million, the township could only raise taxes next year by 2 percent, or approximately $680,000.

But that won’t do much to close the deficit.

“We’ve taken a lot of hits recently — every municipality in the state has lost tax appeals that have shrunk the tax base,” he said, noting that tax appeal refunds must be paid entirely by the township, which collects only 18 percent of the total tax bill.

“When you factor in health care and pension costs that are constantly on the rise, that .5 percent reduction to the tax cap makes a big difference.”

The mayor said the taxes raised would be consumed by these factors, and would not be enough to mitigate the township’s drop in revenue.

“In order to balance the budget, we would need to raise $22 million in outside revenue, but it doesn’t look like we have that. We need to grow our revenue somehow — new developments are on the decline, as well as revenue from the state,” Stahl said “But if we could get the Golden Triangle deal set and the PILOT program up and running, we could increase revenue to the township.”

Stahl said that township and redevelopment lawyers are currently working on a formal settlement and redevelopment plan for the Golden Triangle.

In addition to the project, Stahl said he is looking into re-examining municipal user fees to make sure they accurately reflect the service that is given, as a means of bringing more revenue into East Brunswick. However, the mayor noted that such changes would generate only a small amount of revenue, and he stressed that the fees would not be arbitrarily increased.