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Proposal Would End Sharing of Taxes by Communities in the Meadowlands Region

New scheme would merge two agencies and subsidize environmentally sensitive towns by increasing hotel taxes

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Big changes could be ahead for the Meadowlands District regional planning area if state lawmakers pass a bill to merge two quasi-governmental agencies and redesign the way the district supports its sparsely developed communities.

Under a bill announced yesterday by Assembly Speaker Vincent Prieto (D-Secaucus), the New Jersey Sports and Expo Authority (NJSEA) would effectively be subsumed by the New Jersey Meadowlands Commission.

Hotels in the district would collect an additional 3 percent nightly tax that would allow the district’s densely developed cities and towns to stop sharing their property tax revenue with those zoned for lighter development. The new hotel tax would raise the total to 18 percent, one of the highest rates in the nation.

Prieto says his bill would streamline oversight and ease the property tax burden in the district, which comprises 14 municipalities in Bergen and Hudson counties. The bill would change a tax-sharing system that’s been in place since 1969 and consolidate two independent agencies that have distinct land-use missions generally within the same 30-square-mile territory.

The Assembly established the Meadowlands District to spare the fragile wetlands along the Hackensack River from destruction by overdevelopment. In founding the Meadowlands Commission, lawmakers sought to strategically plan for development by taking a regional approach. They zoned half of the district’s participating municipalities for commercial, industrial, and residential development that produces property tax revenue. The other half was zoned with environmental preservation as the goal.

But the legislators needed to find a way to keep the “environmental” municipalities from suffering from the lack of ratables. Here again, they took a regional approach, devising a system whereby the seven densely developed communities would share tax revenue from post-1970 construction with the seven communities that were prevented from overbuilding. The former were designated as “paying towns” and the latter as “receiving.”

As might be expected, over the years the “paying” communities grew weary of the arrangement.

That’s where the hotel tax designated by Prieto’s bill comes in. The money would be used to subsidize the “receiving” communities. “Paying” communities would no longer have to share property-tax revenue. Hotel in both “paying” and “receiving” communities would charge the higher tax.

“Certain (paying) towns have been burdened by the pain and towns that couldn’t develop need this money to survive,” Prieto said about the tax-sharing plan. “And putting (both agencies) together under one banner is a great thing.” The seven “paying” communities in the district are Carlstadt, Little Ferry, Lyndhurst, Moonachie, South Hackensack, North Bergen, and Secaucus. The “receiving” communities are East Rutherford, North Arlington, Ridgefield, Rutherford, Jersey City, and Kearny.

The yet-to-be-introduced bill also reestablishes the Hackensack Meadowlands Transportation Planning District, which lapsed in 2013. While this will be the first bill to propose merging the NJSEA and the Meadowlands Commission, which handles planning and zoning for the district, the idea for altering the funding formula does have precedent. In June, lawmakers in the Assembly and Senate introduced a series of bills to raise revenue for the less developed municipalities through hotel and gaming taxes, parking fees, and surcharges added to tickets for public events within the district.

It’s a strong indication that some form of the bill will gain traction in both chambers.

“The Speaker and I are going to be on the same page about how best to revamp and reinvigorate those two agencies and make them more efficient,” said Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-Wood-Ridge), whose district includes four “paying” towns and four “receiving” ones. He introduced a bill this spring to impose a 66 percent state tax on any gaming that takes place in the Meadowlands. Ten percent of that would be dedicated to the District’s seven lightly zoned “receiving” communities.

“We have had discussions about it. We have the same concept. His bill will be a good starting point,” he said of Prieto, whose own district covers two “paying” communities and one that “receives.”

Merging the Agencies

“I don’t think it’s a bombshell,” said Sarlo of the proposal to eliminate the NJSEA in its current form. Given its heavy debt load and increasingly limited responsibilities, lawmakers, including Sarlo, have publicly questioned the continuing need for the authority.

“You’ve eliminated most of their facilities,” he said. “They’re more of a landlord of private facilities on state-owned land now.”

The NJSEA was created in 1971 to build and operate Giants Stadium, the Meadowlands Racetrack, and later the Izod Center. Over the years, its holdings grew and dwindled, and today it’s left owning just the Izod Center -- which authority officials say they may be open to selling -- and the land where private developers are building the American Dream retail and entertainment complex. Last year, the authority had some responsibility for coordinating logistics for the Super Bowl.

In a statement, Prieto said the immediate sports complex area has changed much in the way of “infrastructure improvements, transportation, tourism, the completion of the new developments at the sports complex site, the delivery of municipal services, flood control and the improvement of the tax-sharing program,” so that it makes sense to merge the NJSEA into the Meadowlands Commission.

“These two agencies share the common interest of promoting economic growth in the Meadowlands region and northern New Jersey. Consolidating them promotes efficiency of operation, cost effectiveness, and the elimination of unnecessary government bureaucracy.”

In a statement, Jeff Tittle, director of the NJ Sierra Club, agreed.

“The Sports & Exposition Authority has been a rogue agency approving things and trying to force things down the throats of the Meadowlands Commission. They have not been part of any comprehensive plan for the region. They are a fiefdom, doing what they want without regards to the impacts of the surrounding towns and the Meadowlands,” he wrote.

Prieto adds that under his plan, a stronger commission can turn some of its attention to promoting the area for tourism, which had been part of the NJSEA’s mission.

NJSEA President and CEO Wayne Hasenbalg declined to comment before reading the bill, and executives at the Meadowlands Commission did not return a call for comment.

Hotel/Motel Tax

According to Prieto, the “paying” communities have grown increasingly weary of carrying some load for the others. In June, he introduced an earlier version of his bill that tried to then address the problem. That bill called for a 3 percent hotel tax, a $1 Meadowlands sports complex parking fee, and a 5 percent surcharge on district event tickets. The bill contained the following language: “These municipalities have been especially challenged to provide services to municipal residents and contribute to the inter-municipal tax-sharing program, while operating under the significant restrictions of the 2 percent property tax levy cap.”

In fact, in fiscal 2013, the municipalities only covered 20 percent of the approximate $7 million required subsidy, and in fiscal 2014, they didn’t pay at all. In both years, the gap was filled from the state’s general fund. Prieto says he’s simply looking for a sustainable and fair solution, especially given that the 8,000-plus hotel rooms in the district enjoy an occupancy rate that hovers around 90 percent year-round.

Not surprisingly, the Meadowlands Chamber of Commerce, which runs the Meadowlands Convention and Visitors Bureau, doesn’t favor the imposition of a new tax on tourists, especially when it doesn’t currently receive any money directly from hotel taxes already imposed by the state or surrounding localities.

“In the bill there’s no dedication of that revenue,” said President and CEO Jim Kirkos. “You should not add tax or fees to an industry you’re not going to support.”

So how would an 18 percent total tax compare to other markets? A Hotels.com study found that St. Louis’ 18 percent nightly tax is the highest among the 150 largest American cities. Taxes in the top 25 U.S. cities typically range 12 percent to 17 percent, and in New York City, overnight visitors pay 14.75 percent plus a $3.50 nightly fee.

The average New York City room rate, including taxes and fees, amounts to $261, according to Hotels.com. The same study finds the average total room rate across the country was $137 for the first six months of this year. Prieto’s office says the average base rate for a room in the Meadowlands District is $150 per night. With an 18 percent tax rate, that room would cost $27 more.

He doesn’t think this price would deter tourists from booking rooms in the district, even those whose budgetary constraints compel them to stay on the New Jersey side of the Hudson River during a visit to the Big Apple.

“Three percent is not going to make it noncompetitive,” he said. “It’s still going to be way, way below New York City.”

The bill calls for any extra money generated by the new tax to be used by the commission for activities like promoting tourism, improving infrastructure, providing for flood mitigation, and building parks. But should the levy come up short, the state Treasury Department would need to fill the gap. Prieto, however, said the fiscal estimate predicts the tax would more than cover the $7 million annual subsidy.

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