ICYMI: Merck buyer backs out… no more ‘sigh of relief’

During the 2014 election, former Readington Committeeman Frank Gatti penned a letter to the Hunterdon Democrat titled the “Sky is not Falling”. In that letter, Committeeman Gatti wrote that while the county’s largest ratable, Merck, was leaving the sky was not falling because “…the building remains and the taxes will be paid.” In other words,he assured us our tax revenue from Merck was still safe and sound. Whew!

But seven months later, another letter to the Hunterdon Democrat was written by our current Mayor Fort titled “A sigh of relief now that Merck property is under contract”. In that letter, Mayor Fort wrote “Readington residents can breathe a sigh of relief now that the Merck property is under contract… With the reuse of the Merck property, our ratable base should once again rise and our taxes remain stable.”

Why should we breathe a ‘sigh of relief’ when Frank Gatti told us there was nothing to worry about? Was Mayor Fort suggesting that the sky had been falling all along?

To answer that question, we can simply compare the 2014 Merck property tax revenue to 2016. Prior to abandonment, the main Merck building and 62 acres was assessed at $127 million paying a yearly property tax of $3,465,378. Two years after abandonment in 2016, the property assessment has dropped to $85 million and property taxes were down to $2,380,000.  That is a $1.1 million loss.

Another Merck property on Halls Mill Rd dropped even more significantly. In 2014 it was assessed at $53 million. By 2016, the assessment had dropped way down to just $14 million. Property taxes for that lot went from $1,453,226 to just $392,000.   Another $1 million loss.

So just looking at those two properties alone, Readington is receiving $2,146,604 less in tax revenue per year.

But will assessments and property tax revenue continue to drop for Readington?  Unfortunately, it will because that appears to be the ‘de-evolution’ of all palatial office space complexes in New Jersey. Their assessments drop year after year until they bottom out after a 5-6 year period.

For example, in 2013 the NYTimes wrote an article titled “Future takes place for Bell Labs Site”. In that article, the NYTimes found that the huge Bell Labs building in Holmdel generated $5 million in tax revenue just prior to being abandoned in 2007. By 2013, Bell Labs was only paying $475 thousand in property tax on the Holmdel site. A 90% drop in tax revenue over a 6 year period! And many other office complexes such as BASF in Mt. Olive went through similar declines.

Bill Dressel, former director of the New Jersey League of Municipalities said at a meeting regarding large empty office complexes, “I think the worst news in the world you get as a mayor is notice from one of your largest corporations that they’re going to be moving out. The implications of those decisions have a direct impact on not only your tax base but the quality of life in your community.”

So to answer our question, Mayor Fort was correct: before we had a buyer the sky was indeed falling.

While this is all fascinating why bring it up now? Merck is under contract, right?

Unfortunately, Mayor Fort’s sigh of relief letter was a bit premature. The Mayor recently reported at a September meeting that Merck was no longer under contract and was back up for sale.

So what does that mean for Readington’s immediate future?

Think back to Mayor Fort’s letter. She said that with a Merck buyer “our ratable base should once again rise and our taxes remain stable”. So what does that mean without a buyer?  Well her letter suggests it means just the opposite will happen: our ratable base will continue to drop and our taxes will not remain stable.

And if you live in Readington, you might not want to look up at the sky either.

4 thoughts on “ICYMI: Merck buyer backs out… no more ‘sigh of relief’

  1. BASF left its corporate campus at 3000 Continental Dr (Block 200 lot 1) in Mt Olive back in 2004. It’s property tax was similar to what Merck’s tax is currently (over $4 million).

    In 2004 when BASF vacated the facility, their property tax was $4,536,000. Within 4 years it had dropped 77% to $1,791,000.

    2004 $4,536,000
    2005 $3,540,000
    2006 $2,823,550
    2007 $1,791,000
    2008 $1,046,430

    In 2014, the tax on the property is $765,250.

    Here is an article on BASF from 2013 to get an idea of what to expect.
    http://www.nj.com/morris/index.ssf/2013/01/mount_olive_hopes_to_fill_larg.html

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  2. Rutgers Business School Professor Mahmud Hassan asked the question “Who’s going to buy Whitehouse Station at this time?”

    From http://www.nj.com/business/index.ssf/2013/10/mercks_reshuffling_of_nj_campu.html

    But Rutgers Business School professor Mahmud Hassan wondered what took so long. “Merck’s been limping along for the last several years, relying on one drug, Januvia,” he said. Sales of that blockbuster diabetes medication are now being threatened as several new competitors are in the final stages of development or scheduled to debut their own versions in the next two years.

    Hassan added that Merck’s decision to lay off thousands of workers was a short-term fix, and that trying to sell off properties will be a difficult proposition in the current economy.

    “Who’s going to buy Whitehouse Station at this time?” Hassan said. “It’s massive.”

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