Sunday, August 05, 2007

Redevelopment - Courier - Somerville revises deal with Jack Morris

Published in the Courier News, Friday, July 13, 2007

Somerville revises deal with developer

Staff Writer

SOMERVILLE -- Municipal revenue from a redevelopment project at the Downtown Somerville Shopping Center -- touted as a way to ease the tax burden on residents -- will be tied to its financial success, under a new agreement between the borough and its developer.

During a special meeting Thursday, the Borough Council unanimously approved a "memorandum of understanding" with developer JSM spelling out several points as the two parties prepare to redraft a 2-year-old redevelopment agreement over the project to reflect what officials called a changed economic climate.

Among the revisions:

  • Instead of the borough collecting regular property taxes, JSM -- owned by real estate developer Jack Morris -- will pay the borough 15 percent of its annual gross revenues for the residential component of the project for 10 years, and 15 percent of its annual gross revenues for office and retail elements of the project for five years. Borough officials had said previously the project would generate $2.1 million in annual property tax revenues. At Thursday's meeting, officials did not announce the anticipated revenue from the new agreement.
  • JSM will be able to construct more residential units, retail space and office space.
  • JSM will construct a planned extension of Davenport Street at no cost to the borough and dedicate it to the municipality when finished. The borough was originally going to pay for the extension.
  • The borough will build, own and manage a South Street parking deck with a minimum of 440 spaces. Originally, JSM was going to build the structure, but the borough was going to pay for it upon its completion.

Meanwhile, a supermarket chain fighting the redevelopment plans is appealing a Superior Court ruling in June denying it millions of additional dollars in compensation if the borough condemns its lease.

But the challenge lodged by Pathmark in the state's appellate court division won't stop the borough from seizing the lease and, if it chooses, evicting the supermarket from the center.

Pathmark Spokesman Rich Savner said the supermarket isn't asking the court to block the borough from exercising its powers of eminent domain, adding that he's not sure if it can legally make that request.

"They've had that option to invoke that declaration of taking all along," Savner said. "We're as concerned as we always have been, and there's nothing we can do about it. If that's what the town decides, that's their discretion."

The redevelopment plans are under a court injunction pending the use of eminent domain by the borough.

The appeal seeks to reverse a decision by Assignment Judge Yolanda Ciccone that, if Pathmark's lease is seized by the borough, the supermarket is only entitled to the cost of store fixtures and relocating, not the value of the unexpired term of the lease.

"We believe our position has merit, so we're taking it to a higher authority," Savner said.

A borough appraisal based on that formula valued the lease at $1.6 million. Pathmark argued in Superior Court that the appraisal should have included the cost of a new, market-rate lease versus the cheaper rate the supermarket is now paying, bringing the appraisal to $5 million.

How the lease should be valued was a key question in the case. To file a "declaration of taking" and actually seize the lease, the borough is required to place its appraised value in an escrow account.

Ciccone ruled earlier this year that the borough has the right to take the lease through eminent domain.

Under the agreement Thursday, JSM -- named as the site's redeveloper in 2003 -- is still responsible for the borough's professional and legal costs, Mayor Brian Gallagher said.

Borough Director of Economic Development Colin Driver said the reconfigured system under which the borough will collect revenue from the project is typically used to help developers kickstart their projects and recover costs in a shorter period of time.

"Time takes its toll on any agreement," Gallagher said. "Obviously, the market has softened a little bit in regard to residential and at the same time construction costs have skyrocketed. There needs to be a little bit of a give and take."

Driver said that the borough will take in less money in the short run, but long-term revenue projections remain largely the same.

The planned payments in lieu of taxes will go directly to the borough, but Driver said the municipality could choose to allocate a portion to local schools -- the prime recipient of real estate taxes in most municipalities. The site will be taxed regularly once the five-year and 10-year periods are over, Driver added.

Driver also said the borough will maintain at least the current "dollar volume" generated by the site now throughout the life of the project for normal distribution to public entities.

"The schools will never be in a worse situation than what they are now," Driver said.

While the borough council vote on the 13-page document was unanimous, Councilman Thompson Mitchell expressed concerns over the changed funding formula.

"I'm sorry to see that, but it was the best deal we could get at the time," Mitchell said.

The original agreement called for 136,000 square feet of retail space, 73,000 square feet of office space and 265 luxury apartments, according to published reports.

Now, JSM can construct a maximum of 350 residential units, 150,000 square feet of retail space and 80,000 square feet of office space.

But before any shovels break ground to begin that construction, the borough and JSM still must resolve their legal troubles with Pathmark.

Asked if the borough plans to file a declaration of taking, Gallagher said talks continue with the municipality's attorneys and JSM.

"We've taken a very careful, considered approach, and we don't act hastily," Gallagher said. "We will take our time in making these decisions."

Ruling on a lawsuit brought by Pathmark against JSM, a Superior Court judge in Warren County placed an injunction on the plans in May until the borough seizes the lease.

Martin C. Bricketto can be reached at (908) 707-3176 or"

Link to online story.

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Plainfield resident since 1983. Retired as the city's Public Information Officer in 2006; prior to that Community Programs Coordinator for the Plainfield Public Library. Founding member and past president of: Faith, Bricks & Mortar; Residents Supporting Victorian Plainfield; and PCO (the outreach nonprofit of Grace Episcopal Church). Supporter of the Library, Symphony and Historic Society as well as other community groups, and active in Democratic politics.