Passaic Council approves 30-year PILOT for Spear Village rehabilitation after extended public questions

The Passaic City Council voted unanimously May 19 to adopt ordinance 2529‑26, authorizing a payment‑in‑lieu‑of‑taxes (PILOT) agreement aimed at financing a multi‑phase rehabilitation of Spear Village public housing.

The vote clears a financing path the city and the project team say is necessary to secure HMFA (New Jersey Housing and Mortgage Finance Agency) financing and federal low‑income housing tax credits. John Cortell, principal of Cortell Development Group, told the council his team — in partnership with L&M Development and the Passaic Housing Authority — will perform a gut rehabilitation of four rear buildings that will remain 100% affordable under the terms presented. “My name is John Cortell and I’m the principal of Cortell Development Group,” Cortell said during the public hearing, outlining the proposal to modernize existing units and leverage tax‑credit proceeds.

Why it matters: Sponsors said the PILOT unlocks roughly $200,000‑per‑unit hard‑cost investment (the developer characterized the per‑unit rehabilitation hard costs at about $200,000 while noting higher headline numbers that include land valuation and financing). Officials said the approach avoids an upfront city subsidy by using federal tax credits and HMFA financing, but residents and some council members asked whether a 3% PILOT and a 30‑year compliance window provide sufficient long‑term taxpayer protection and whether the city is forgoing future revenue.

What was decided: The ordinance authorizes the PILOT and the related ground‑lease structure. City staff described the phase under consideration as rehabilitation of four buildings in the rear of the Spear Village complex; the housing authority will retain underlying fee interest while the development partner will hold a ground lease to complete and manage improvements. Mr. Fernandez, the city’s business administrator, said the 3% PILOT estimate was driven by HMFA and tax‑credit investor underwriting rules tied to this financing product. He told the council the negotiated structure also shifts certain costs — security, trash, maintenance — from the city to the property manager going forward.

Tenant protections and relocation: Council members repeatedly pressed developers and housing authority staff on tenant protections. Officials said HUD requires a relocation plan; tenants will be offered temporary accommodations (vacant units on‑site or short‑term hoteling where necessary) and will have priority to return under the compliance plan. Cortell and city staff said the intention is that residents will not be permanently displaced and that the compliance and regulatory agreements attached to tax credits and HMFA financing will enforce rehousing and affordability requirements.

Concerns raised: Public speakers and a resident who identified himself as an advocate questioned the overall fiscal trade‑offs, warning that student‑population increases, school costs and social services could offset some city revenue. One audience member cited developer fees reported in project documents and said the city would receive about $165,000 a year from the PILOT while developers could realize large fees. City staff replied that the phase‑one PILOT must sit within the tax‑credit finance model and that later phases are expected to include market‑rate or workforce components that would generate materially higher tax flows to the city.

Oversight and performance guarantees: Council members asked how the city can ensure long‑term maintenance and quality. The administration and the developer said multiple oversight layers will apply — HMFA underwriting, tax‑credit investor monitoring (including deferred fee arrangements tied to long‑term performance), routine code inspections and contractual obligations in the ground‑lease and redevelopment agreements. The developer said some portion of its fee is deferred and collected over years as a performance incentive.

Vote and next steps: The ordinance passed on a unanimous roll call (Councilmen/women Monk, Love, Melo, Mayor, Garcia, Colonz and Council President Sher voted yes). Staff said the developer seeks to close HMFA financing this calendar year and begin the initial rehabilitation; additional site plans and financing for later phases were described as under active preparation and subject to separate approvals.

Sources and context: City staff repeatedly referenced HMFA and HUD regulatory requirements as the factors shaping the PILOT structure and the 30‑year compliance period. The housing authority will administer vouchers and is expected to continue involvement in long‑term property oversight. Council President Sher characterized the approval as a major step for the city’s gateway area and thanked staff, the housing authority and the developer for their work.

What’s next: The rehabilitation phase will proceed into design and construction pending HMFA financing closing and HUD approvals; the council and administration indicated they will return to the council for separate approvals on subsequent phases (redeveloping the office and State Street front parcels) and for additional details on mix, site plans and mitigation measures.