I have been asked how the township would handle issues associated with the 350-acre redevelopment area in its implementation stage after a plan is adopted. First, I’d like to make it clear — not a single penny of taxpayers’ money will be used for it. This principle applies to all amenities including a parking garage for West Windsor residents, main street beautification, an emergency substation, etc.
It is critical to point out the difference between having a redevelopment plan and not having a plan. With a redevelopment plan, the state statute allows the Township to be in the position to manage and negotiate for the selection of developers, phasing the development over time, and the financial arrangements of all development in the area. The law also permits the Township to amend the redevelopment plan as circumstances merit.
The questions submitted to me and my answers are summarized as follows:
How is the Township going to actually control development activity? There is a sense that once we change the rules, developers will take up only the most financially attractive projects permitted under the plan. Then, if they get into trouble, the Township will be bearing the risks.
Having a redevelopment plan allows the Township to require developers to enter into a redevelopment agreement that binds the developers to a schedule. That schedule consists of performance requirements and phasing which is negotiated in advance and is binding upon the developers. We know certain portions of the redevelopment are more financially attractive than others and a redevelopment plan allows us to require developers to undertake those less attractive components as a requirement to develop the more desirable portions. The developers will be required to post performance guarantees. This would be analogous to bonding for site plan improvements in a conventional project.
The whole question of economics seems unclear. You indicated that precise estimates can’t be made until detailed proposals come in from developers. The impression a lot of people have is that West Windsor is going to take on the financial responsibility for the project, meaning accepting the bulk of the risk. As the former Mayor pointed out, this can get expensive — witness the bankruptcy of the Carnegie Center developers.
West Windsor does not need to bond for any of the public improvements required. Through the use of tax increment financing (TIF), the state issues the bonds on the project’s behalf. The state does not guarantee the bonds nor does the Township. For this reason, investors in these bonds receive a higher rate of interest because repayment of the bonds and interest on them comes from the tax revenues generated by the project. This tool is used throughout the United States to fund large development projects. If for some reason the project failed to generate the revenues projected to meet debt service on the bonds, there is no impact to West Windsor (since it did not issue the bonds and is not guaranteeing them). The investors in those bonds would bear that loss of repayment but West Windsor would already have those improvements fully completed.
The state did not come through on promises of funding infrastructure in the Washington Township case. There is a degree of distrust that the state will make investments here.
What the state indicated was that if we approved a comprehensive redevelopment plan, they would give a funding priority for a portion of the Vaughn Drive extension. You are correct in that we need to insist on and have a binding legal commitment from the State that if we proceed along the lines agreed upon they are legally obligated to fund the improvements. But we must also realize that it is likely that the State will also specifically stipulate in an agreement that they will only fund the Vaughn Drive extension if the redevelopment plan meets the conditions they stipulate.
The parking authority president has said they can build resident parking near the train station without the project, which undermines the argument that we need it for new parking.
My understanding is that if the authority was to build a 1,"000 car parking structure for West Windsor residents, without requiring bonding guaranteed by the Township, the monthly cost for a resident would be $175, far above the $40 or so people are now accustomed to paying. Assuming that residents without a parking spot would be willing to pay $100 a month, then the Township would have to bond for approximately $14 million to cover the shortfall in construction costs. This would immediately increase our taxes for all residents to cover the debt service on this bond. By using tax increment financing, and revenues generated by the new construction in a redevelopment plan, we could have the new development pay for the parking structure without the necessity for any bonding by the Township or any increase in taxes for current residents.
This also does not speak to the property upon which the garage would be built. The only available Township property is the compost station, which is a brownfield. We have already met with the State Brownfield Redevelopment Interagency Team (BRIT) that is willing to work with West Windsor, as part of a redevelopment plan, to address the brownfields within the redevelopment area.
How will this project interact with the new hospital (which will certainly require major transportation changes in the Harrison Street/Route 1 intersection) and with the redevelopment of the old American Cyanamid site.
The new hospital will be built in Plainsboro and therefore its impact upon municipal services will affect that township, not West Windsor. From a traffic perspective, those traveling to Princeton Medical Center at its current location are already traversing West Windsor’s roadways. The new location will not change that. Instead of crossing Route 1 at the intersection of Washington Road, people will turn right and head northbound for a short distance. No increase in traffic is anticipated in West Windsor as a result of the hospital’s relocation.
Regarding the American Cyanamid (General Growth) site: At the time the developers of that site make an application to the Township, they will be required to submit all appropriate traffic impact studies to demonstrate that their project will not negatively affect the Township. They will need to incorporate, at that time, the impacts from the redevelopment project as well as the Quakerbridge Mall expansion that will precede it.
How has the sub-prime mortgage meltdown and resulting changes in investment climate changed the economics of development?
What has changed is that only the strongest developers are able to obtain financing and move forward with projects. The benefit to West Windsor is that we will end up with developers who are the most strongly capitalized because the weaker developers will be unable to obtain financing. The design and all of the required state approvals for a project of this magnitude will take several years and by the time the project is ready to be built, most economists estimate we will be coming out of whatever economic downturn we might be facing in the near future.
How will the project affect the thousands of square feet of office space that is currently vacant? A a recent Rutgers study suggests that the greater Princeton area is overbuilt by speculative construction and that this situation is likely to persist for some time.
This project will have no immediate effect on the vacant office space currently available in West Windsor because prospective tenants interested in this location are looking for something unique. In talking to developers and real estate brokers, the tenants looking for office space adjacent to train stations need that adjacency because the nature of their business requires frequent intraday travel back and forth by their employees to New York City.
Secondly, they are not relocating their facilities from New York but expanding and therefore, while they may be hiring many new employees from West Windsor to meet their growth, many of their existing employees will be commuting from New York to West Windsor.
They want their employees to be able to do this without a car so they can literally step off the train and walk to their offices. It is not possible for them to do this with existing office buildings located along Route 1. I’ve been told that the companies looking at train station locations throughout New Jersey have no interest whatsoever in highway office buildings.
The Rutgers study to which you refer looked at the office buildings located along the Route 1 corridor. Again, the market we are discussing is a new and emerging market driven by rents in New York City averaging $80 per square foot and estimated to go to $125 to $150 per square foot in the next three to five years.
In comparison, Class “A” rents in West Windsor are in the $32-$35 per square foot range. That means that a tenant looking to lease 250,"000 square feet could save nearly $170 million over the course of a 15 year lease, based on a difference of $45 per square foot in rent. The same real estate experts go on to say that once the transit-oriented office space is occupied, it will be a catalyst for the space along Route 1 to be leased by companies that will be servicing the tenants in the transit-oriented location.
Additionally, Hillier architecture also recommended that with the redevelopment authority, the Township can require that a pre-lease be secured before construction of the office building is permitted. This authority does not exist under the Municipal Land use statute.
Hsueh is mayor of West Windsor. For the laatest update on redevelopment see story page 1.