Highlands council adopts tax-exemption deal for 292-unit Scenic Highlands redevelopment

The Borough of Highlands council on Dec. 3 adopted Ordinance O25224, approving a long-term tax-exemption (a payment-in-lieu or "pilot") and a financial agreement to support a 292-unit redevelopment on the former mobile-home site known in project documents as Shadow Lawn and referred to by the mayor as "Scenic Highlands." The ordinance was approved on its second and final reading.

Redevelopment counsel Fran McManaman opened the hearing and said the ordinance implements a previously adopted redevelopment agreement for a mixed market-rate and affordable housing project. Mike Hanley, principal at NW Financial Group, presented the financial analysis, saying the $150 million project includes 292 units (248 market-rate and 44 affordable), roughly 393 parking spaces and an average per-unit construction cost that the presentation placed near $500,000. Hanley said the pilot produces a yield on cost in the low end of market acceptability and that the negotiated revenue-share schedule begins at a lower percentage and steps up over the 30-year pilot term.

Why it matters: Hanley told the council the borough’s municipal share of current taxes is "slightly less than $200,000" and that once the project is built and stabilized that share could rise above $800,000 annually. He said the borough would, over 30 years, receive more than $50 million under the pilot; projected incremental municipal costs for schools and services were presented at roughly $24 million, leaving a modeled net offset in the tens of millions.

Residents pressed for safeguards and details. Dozens of residents questioned the timing, geotechnical protections for adjacent buildings, traffic and the effect on school enrollment and budgets. Don Krueger asked for a clearer walk-through of the financial tables; Robert Monk and other residents sought to know "who will pay for the children" and whether pilot revenue would replace or supplement current school funding. Hanley and borough officials replied that the pilot payments go to the borough and that the board of education’s budget request determines the borough’s school-transfer obligation; they emphasized that planning-board site plans, traffic studies and geotechnical reports will be required and will be public before planning-board votes.

Council action and next steps: After the public comment period the council voted in favor of adopting O25224. The redevelopment agreement and financial agreement are intended to allow the developer to proceed to planning-board reviews, where site plans, geotechnical analyses and traffic studies will be considered. Hanley said the pilot payments would be audited annually and remitted to the borough on a schedule described in the financial agreement.

Quotes: Mike Hanley, NW Financial Group, on the pilot and financing: "People don't invest in projects that are less valuable than the money that's being invested" and the negotiated pilot "produces 6.3%" yield on cost in the presented scenario. Resident Robert Monk asked, "Who is going to be paying for the children?" and council staff explained that school costs are set by the board of education and funded through the borough's budget process.

The council approved the ordinance with recorded affirmative votes from Council member Svantes, Council member Chalac, Councelor Melnik, Council President Shepsky and Mayor Bulan. The developer must next submit detailed site plans and required studies to the planning board for public hearings before any construction begins.