Developer seeks 30‑year tax‑exemption deal for 413‑unit Grand Street project that includes 62 affordable units

On Monday the council heard first‑reading testimony on a requested long‑term tax exemption for a mixed‑use redevelopment at 177 Grand Street and 193–195 Grand Street in the Paulus Hook neighborhood. The applicant, Sussex Street Associates (represented by attorney James McCann), described a proposed 413‑unit building that would include 62 affordable units, a 7,500‑square‑foot nursery school space dedicated to the OLC school and about 7,500 square feet of retail with roughly 70 parking spaces.

McCann and financial advisor Dan Marinello of NW Financial Group said the financial feasibility of a project that includes the city’s inclusionary‑zoning affordable set‑aside depends on long‑term tax relief. Marinello said their independent analysis found that the conventional tax projection for a completed project would be in the roughly $3.5 million per year range, while a negotiated PILOT tied to gross revenues would yield roughly $2.5 million annually to the city (before county share and administrative fees). He described a negotiated PILOT term of 30 years with payments set at 12% of gross revenues for the first 15 years and 13% for the second 15 years, phased toward conventional taxes in the final years as required by state law.

Marinello said the underwriting tests used by lenders — debt‑service coverage ratios and yield‑on‑cost expectations — would not be met under conventional taxes because below‑market rents for affordable units lower overall revenue but do not lower construction costs. He told the council that under the proposed PILOT the project would be financeable and meet lender coverage expectations, while also delivering the 62 affordable units the city’s inclusionary zoning requires. The financial memorandum in the council packet also proposes a phase‑in in the final years so the tax payment approaches regular tax levels by the end of the term, consistent with state law.

Councilmembers asked for additional analyses: what the numbers would look like if the inclusionary requirement were 20% instead of 15%, and whether comparable downtown projects have been built without PILOTs. NW Financial said some projects are proceeding without PILOT requests but many developers have indicated they require long‑term tax treatment to attract financing. Councilmembers also asked whether construction and permanent workforce commitments (wages, local hiring) are part of the proposed agreement; the administration said the tax‑exemption packet includes a living‑wage compliance requirement and a project employment contract (PECA) and that staff would discuss workforce outreach and bidding opportunities with the developer.

The council did not take a final vote; the item was presented as a first‑reading ordinance and staff said they would provide supplemental materials, including an analysis showing alternate affordability mixes and additional details on projected tax revenue under different scenarios.