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Midland Park

Kentshire Tax Exemption Set To Expire in 2034

02/09/2014 05:57PM ● By Rebecca K. Abma

Of the roughly 60 tax-exempt parcels in Midland Park — worth a combined total of $116 million — the largest by far is the Kentshire at 187 Paterson Ave. The 148-unit senior living facility completed in 2004 is assessed at $28 million and qualifies for tax-exempt status under the urban renewal classification. If not exempt, it would have generated $758,185 in revenue for 2013.

Instead of paying taxes the Kentshire makes Payments In Lieu of Taxes (PILOT) each year. In 2013, it paid $176,598 for the PILOT, which comprises land taxes and an annual service charge. However, borough officials are unsure if the entity is paying its full share under the agreement due to an oversight in paperwork.

Under the Financial Agreement, the annual service charge is the greater of 15% of gross revenue or a base of $134,000, which increases annually along with the tax rate. Kentshire’s management company has not filed annual auditor’s reports since 2006.

When asked why additional auditor’s reports were not included in the more than 600 pages of documents obtained through Open Public Records Act (OPRA) requests, Borough Administrator Adeline Hanna said that she was not aware of the requirement.

“I had no involvement in any of the agreements other than to witness signatures,” Hanna told Midland Park Press. “The amount to be charged to the Kentshire annually instead of taxes is configured by the Deputy Tax Collector as she was shown to do by the prior Tax Collector, Michelle Dugan.”

Mayor Patrick “Bud” O’Hagan, who signed Financial Agreement with the Kentshire in 2001 as Council President, could not recall the details of the arrangement, but stated “I don’t believe that the Kentshire is deliberately withholding funds.”

Hanna said she has submitted a request to the entity to supply the missing auditor reports. In addition to setting the annual service charge based on these documents, the Kentshire is also supposed to make annual payments of excess net profit.

The History

The site of the former F.G. Montabert Label Factory, the property was declared an area in need of redevelopment in 2000 and subsequently rezoned from industrial to age-restricted, multifamily housing. At the time, Montabert paid less than $64,000 in taxes on the vacant factory and officials anticipated a tax appeal, documents show.

In 2001, the borough entered into an agreement with the Kentshire Urban Renewal, LLC, to allow 160 age-restricted units to be built on the site, 20% of which would be set aside as low- to moderate-income housing as required under the state Council on Affordable Housing (COAH). Ultimately, 148 units were built, 32 of which fulfill the borough’s COAH requirements.

Kentshire Urban Renewal is a partnership among F.G. Montabert Company, developer the Ingerman Group, and the Richman Group, which currently manages the property.

As part of the deal, which was made under the tenure of former Mayor Ester Vierheilig, the property was granted a 30-year tax exemption, during which time a payment in lieu of taxes (PILOT) would be made. Without the exemption, officials said, the redevelopment project would not be constructed. 

Tax-exempt properties shift the burden of taxes to residents, however, PILOT plans can be beneficial to a municipality. The total tax bill is typically separated between the municipality, schools, county, library and open space fund, but PILOT payments go entirely to the borough. In 2013, the full tax rate for Midland Park was 2.72, of which the borough’s portion was .610, or 22.4% of the total tax rate. The PILOT payment made in 2013 was 23.3% of what its full tax payment would have been if not for the exemption. 

The Agreement

Under the agreement, the minimum annual service charge would start at $64,000 (slightly more than the factory's annual tax bill) and jump to $134,000 once Certificate of Occupancy’s were granted on all units, which occurred mid-2004. This figure was determined as 15% of the projected gross revenue of the project based on anticipated rents, and increases each year along with the borough’s tax rate. 

Each year, the building’s management company is supposed to file an auditor’s report, however, revenue statements were only filed in 2005 and 2006, at which time, the base payment was greater than a percentage of revenues.

The annual service charge is set in five stages: 

Stage 1: 15 years (2004 to 2019) The annual service charge is the greater of 15% of gross revenue or a base of $134,000, which is prorated to increase along with the tax rate. In addition to a percentage of gross revenue, the agreement states the borough will be paid a portion of excess net profits, based on an allowable net profit rate. 

Stage 2: Six Years (2020 to 2025) The payment is the greater of the annual service charge of 15% of gross revenue or 20% of the amount of taxes otherwise due.

Stage 3: Six Years (2026 to 2031) The payment increases to the greater of 40% of taxes otherwise due, or 15% gross revenue.

Stage 4: Two years (2032 to 2033) The payment increases to the greater of 60% of the taxes or 15% of gross revenue.

Stage 5: One Year (2034) The final stage calls for 80% of the taxes otherwise due or 15% of gross revenue. 

In addition to the annual service charge, the Kentshire pays for its own garbage and recycling, which is handled through a private company, not the borough.

Kentshire also pays for excessive use of emergency services. Based on the number of calls per capita in 2000, they are billed for every EMS call above 29 per year. Initially, the rate was set at $325 per excess call and increased to $500 in 2008 to be inline with neighboring communities. The Kentshire paid $9,500 in 2012 and $8,000 in 2013, which is billed by the borough and funneled to the Midland Park Volunteer Ambulance Corps.

Previous articles on Midland Park property taxes:

How Do MPK Taxes Compare To Other Towns? - 07/22/2013

MPK Tax Bills Up 86% Since 1999 - 08/27/2013

MPK Ranks Third in Region For Tax Exemptions - 08/30/2013

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