The Lumberyard project on Haddon Avenue in Collingswood was supposed to help encourage downtown revitalization by infusing the downtown with high end residential units and the consumers that come with them, but nearly a decade later, in a much different economy, The Lumberyard’s original purpose has yet to be realized.
A group of residents is so disillusioned by The Lumberyard that they recently petitioned the state for a referendum allowing the borough’s voters to decide the project’s future. The petition was denied in Camden’s Superior Court last month, but their frustration remains as construction the next phase of the project is set to begin in the spring.
Joe Dinella, a lifetime Collingswood resident who led the petition effort still believes the borough needs to rethink the project, which allows the developer to pay reduced taxes through a PILOT (Payment in Lieu of Taxes) abatement for 25-years.
“The borough is never going to recoup the costs,” said Dinella. “It hasn’t paid out in seven years” since the Lumberyard redevelopment began. And the costs to the borough have been extensive. In 2005, Collingswood floated $9 million in bonds to pay for the infrastructure improvements necessary for a developer to build residential units on the old Peter Lumber site. The plan was for the project to be built in phases, with each subsequent phase funded by the sale of units in the previous phase. With the easy credit of a pre-recession economy, this seemed like an inspired use for the land which would recoup the bond expenses quickly through the PILOT.
When the housing bubble burst, the plan was forced to change. Unit sales slowed, stalling construction when the developer ran out of money. Collingswood borrowed additional millions to provide “bridge loans” to the developer to keep the project moving.
Dinella claims this debt nearly crippled Collingswood financially as in September 2011, Moody’s downgraded the borough’s credit to junk status. Mayor Jim Maley notes, however, that eight months later, the credit agency restored their credit status to investment grade with few changes to the borough’s financial situation.
With sales slowed to a crawl and one lender demanding repayment, Collingswood purchased the thirteen remaining unsold units for over $4 million to provide revenue that would help offset the debt servicing.
Now, Phase III is set to begin this winter as construction on the existing buildings is completed, followed by the construction of a five story apartment building, which will house offices for the new developer, additional retail spaces and luxury apartments.
“When you’re in a hole, you get out. You don’t keep digging,” said Dinella. The way he sees it Collingswood has got itself into a bad deal. Those who purchase units at the Lumberyard, he said, get to “live in market rate publicly subsidized housing.” Dinella said.
The length of the developer’s tax abatement is also a concern. Most PILOTs last for 5-10 years but under the Lumberyard’s PILOT, a new baby recently born on Dinella’s block could conceivably grow up, go to college and have a baby before the tax break expires.
Maley contends that the PILOT (Payment in Lieu of Taxes) program is necessary to help project go forward, especially to get a $15 million investment in this economy. Many people think the borough is giving the developer a 30 year “free ride,” he continued, but the PILOT is actually an incentive to encourage the venture in the project.
Collingswood Mayor Maley said normally when a developer pays the local property tax, about 30 percent of it goes to Camden County. Under the PILOT program being used here, Maley said a developer pays only 80 percent of the normal rate. That’s the incentive part to build in the borough.
But Collingswood gets to keep 95 percent of the property tax revenue and only 5 percent goes to the county. Maley says in the end Collingswood is getting about the same about of revenue as it did before.
However, the country is not the only administration cut out of its full share of the tax. Collingswood’s schools have yet to see any money from the PILOT, although Maley has said revenues will be shared will the school district eventually.
Maley conceded that he regrets that the Lumberyard was not built quicker. Before the real estate bubble burst, in the first phase of the project, the first 50 units sold in just six months.
Despite the challenges, he contends that the Lumberyard will be “a great asset to the community,” for which there is a “great need and market.”
Increasing the density on Haddon Avenue will help businesses, increase ratables and generate tax revenue for the borough for the next 50-100 years, said Maley. “This is more housing than in the last 60 years combined. You can’t judge it as good or bad over a year, you have to look at the overall benefit.”