MC Hotel pays offending PILOTS; should also provide funds for affordable housing

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The MC Hotel paid its overdue payment in lieu of taxes – an alternative to normal taxes put in place when a community wants to encourage development – ​​avoiding a tax lien sale scheduled for November.

In April, Montclair Local reported for the first time that the hotel had not paid its PILOTS since 2020. It owed $691,003 for 2021 plus interest and had not paid payment for the first quarter of 2022, according to Montclair’s chief financial officer, Padmaja Rao.

“They paid all outstanding PILOT payments, late interest and penalties yesterday,” Rao said Friday, July 8.

The amount paid — $1.24 million — also includes payments for the first and second quarters of 2022, she said.

Had the hotel not paid in October, it could have faced a tax lien sale in November, Rao said in April.

Interest rates for unpaid PILOTS are the same penalties set for overdue property taxes: 8% for the first $1,500 due and 18% for any amount over $1,500. Pilots are due February 1, May 1, August 1, and November 1. according to the city’s website.

PILOT programs are created through an agreement between a municipality and a developer for a predictable payment schedule, usually significantly lower than normal taxes and with amounts tied to a project’s annual gross revenues. Montclair and the hotel entered into the agreement in 2016, and the hotel opened that year, opening in 2019.

The agreement lasts for 30 years, after which the hotel will begin paying property taxes.

In April, Rao attributed the hotel’s overdue PILOT payments to its declining gross revenue during the pandemic.

The user-friendly annual municipal budget lists expected payments for each development based on the previous year’s gross revenue for each property, but year-end audits submitted by developers may alter that amount, Rao said.

The 2022 budget indicated the amount that MC Hotel owes for this year because the municipal finance law does not allow the municipality to anticipate in the budget of the current year more than what was actually carried out the previous year . In 2021, the hotel made no payments and therefore was not included in this year’s budget. But Rao said the amount expected from hotel pilots this year is $804,000, up from $691,003 due in 2021.

The 14 properties paying pilots in 2022 are Montclair Senior Housing on Orange Road, First Montclair Housing Corp. on Walnut Street, Lackawanna Plaza, Union Gardens, PineRidge, Valley and Bloom, Orange Road Garage, The Siena, 11 Pine St., Herod Redevelopment, 55 Glenridge, MC Hotel, Wellmont East and Wellmont West. The total amount the township is expected to receive in PILOT this year is $4.25 million, not including payments from the MC Hotel, according to the friendly budget.

The MC Hotel is also failing in its obligation to provide affordable housing, according to township planner Janice Talley. This amount, which will be placed in the Montclair Housing Trust Fund, is $644,650.

On Friday, July 8, Talley said the payment should also be paid. After speaking with Brian Stolar, chairman of redevelopment firm Pinnacle, which partnered with property firm Hampshire Companies to build the hotel, that payment is expected “in the coming days”, she said.

Because payment for affordable housing must be made in full to receive a certificate of occupancy, the hotel has operated under a temporary certificate of occupancy since opening, Talley said.

Pinnacle, along with real estate and development company LCOR, built Valley & Bloom and the Orange Road garage. Pinnacle and Brookfield Properties developed the Seymour Street development. Pinnacle will also build the 46 approved MC residences, located between the hotel and the parking lot. Pinnacle and Hampshire also owned the Lackawanna Plaza site before selling it to David Placek last year.

Overdue PILOTs are treated the same as overdue taxes. A public tax lien sale is held by the township, usually at the end of the year, Rao said. The deed or title is not sold, but what is sold is a tax sale certificate – a lien on the property.

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