The Great Tax Abatement Debate

“I shall never use profanity except in discussing house rent and taxes.” - Mark Twain

I have received many phone calls and emails over the past two weeks regarding the proposed Monarch tax abatement. Justifiably, many people are alarmed to think that we might lose potential tax money at a time when residents are suffering from job losses and a depressed market. I was not on the Council in 2005 when the Monarch development was put into motion. Was this development the best option at the time that it was created and approved? My father did not think so. Councilman Mapp clearly did not think so (read his blog for details). Given the outcome, it seems that they were right. Unfortunately I can’t go back in time and sell the land at fair market value or approve a project that would serve a better purpose. That time has come and gone. What I can do, however, is understand what choices need to be made now, given the circumstances.

My thought process so far has been:
1) What is our reality given the real estate market?
2) Let’s say the tax abatement is approved. What is the best that can happen? What is the worst that can happen?
3) Let’s say the tax abatement is not approved. What is the best that can happen? What is the worst that can happen?

It is important to examine Plainfield’s real estate reality. I’ve analyzed information on the average absorption rate over the past 3 months (May-July) for Plainfield and 17 nearby municipalities.

The absorption rate is a key measurement of the real estate market in a given community. It measures how much time, in months, it would take for all of the current inventory (multi-family, single family, condos, coops, etc) to sell. The rate is based on the supply of units available for purchase and the demand for those units.

• 0-4 months is considered a “seller’s market” which means that the demand for homes is greater than the supply


• 5-6 months absorption is considered a “normal, balanced market”. In a normal market the supply of and demand for homes is balanced


• 7+ months is a “buyer’s market” which means that the supply of homes is greater that the demand

Take a look at Plainfield’s absorption rate as compared to other markets. It is debatable to say that anyone is experiencing a true seller’s market with no one below 4 months. Agents who work the municipalities with the lowest absorption rate have told me that those units are being sold far below asking price. According to these figures, some communities are in a normal market. Like Plainfield, however, many communities are still in a buyer’s market.

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Plainfield’s absorption rate is 12 months. This means that at the current rate that units are selling, it would take 12 months (1 full year) to sell everything - and that’s if no other units are put on the market. Since the real estate bubble burst no municipality has been safe from unbalanced markets. At one point it was not unheard of that the absorption rate was peaking at 20+ months in municipalities including Watchung and Warren. Rates as high as 50+ months have not been unheard of across the state. Historically, when the market drops Plainfield is one of the first communities affected and one of the last to recover. This trend has improved somewhat over the last decade.

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Although Plainfield’s current absorption rate is still fairly high, the good news is that the rate has been trending down in recent months. This is consistent with what some real estate experts have been predicting. Jeff Otteau, a trusted real estate analyst and head of the Otteau Valuation Group, believes that the market will bottom out in the 2nd half of 2009 (May 27, Star Ledger). As noted in other blogs the many incentives that have been put in place at the state and national level have contributed to this balancing of the supply and demand for real estate.

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So, what does this mean for the Monarch? Well these numbers show that Plainfield’s market is still not a balanced market. There is too much supply and too little demand. Ideally all 63 units at the Monarch would be sold quickly, be 100% owner-occupied and be fully-taxed (no abatement). Based on the above figures, I have to question if this is realistic.

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I’d prefer to leave gut-feelings out of the decision-making process and focus only on the numbers from both a short-term and long-term standpoint. In a later post I will share my thoughts on how the City will be affected should the abatement be approved or rejected.

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Thoughts on Plainfield’s Branding Challenge

Anyone who knows my family and me knows how much we love Plainfield. There are not many places where you can find a diverse community, beautiful homes, talented residents and many other assets all within 6 square miles. Furthermore, like you, I know that Plainfield has the potential to be even better. Our 2 train stations, rich housing stock, fascinating history and close proximity to major highways make us a “sleeping giant”. Unfortunately, the problem is that we are, well, asleep.

In order to wake up the Queen City, Plainfield’s leadership must address what I will call our “Branding Challenge”. I am not the first to say it and I won’t be the last: Beyond our city limits live many people who think of Plainfield as dirty, unsafe, difficult to do business with, poorly managed and stagnant. In general it is not seen as the most attractive place to live, work or shop. Re-branding Plainfield as a safe, clean, developing city with a wide appeal to a diverse group of people must be our long-term goal.

Furthermore, we don’t have to be a Westfield or a Summit or a Princeton to develop a valuable brand. We can create our own appealing brand that builds on the assets that we already have. For example, there are a number of talented professionals in the arts and entertainment industries that hail from Plainfield. Alonzo Adams, Indira Bailey, Chanj and Alrick Brown come to mind. Could the Plainfield name attract art, music and film aficionados to the Queen City? We could also focus on the richness of our diversity. We have a number of restaurants that serve different ethnic foods. Events like EthFest have been successful in the past. Could Plainfield’s brand be “The Melting Pot”?

I firmly believe that the Queen City has the potential to grow into something truly special. As my father used to say, Plainfield is “a very manageable city.” By setting the right goals, working with the administration to develop a vision for the City and ensuring that the basic foundations of safety, cleanliness and efficiency are in place, we can clean up Plainfield’s image and develop a brand that entices people to live, work and spend their hard-earned money right here.

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An Apology

I am quite behind in posts! Mea culpa! Between work, attending meeting after meeting, strategizing for the City and travelling, I have simply not given this blog the attention that it deserves. That’s the bad news. The good news is that I have been hard at work for Plainfield residents in an effort to bring about the positive change that I promised in last year’s election. I have been working on a number of initiatives that I believe will benefit the City. I will be posting more regularly on the plans that have been put in place and on progress made in several areas. Stay tuned for more.

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