The MC Hotel has paid its delinquent payment in lieu of taxes — an alternative to normal taxes set up when a community wants to encourage development — avoiding a tax lien sale set for November. 

In April, Montclair Local first reported that the hotel had not paid its PILOTs since 2020. It owed $691,003 for 2021 plus interest, and had not paid the first-quarter payment of 2022, according to Montclair Chief Financial Officer Padmaja Rao.

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

The amount paid — $1.24 million — includes the first and second quarter 2022 payments as well, she said. 

If the hotel hadn’t paid by October, it could have faced a tax lien sale in November, Rao said in April.

The interest rates for unpaid PILOTS are the same penalties set for delinquent property taxes: 8% for the first $1,500 owed, and 18% for any amount over $1,500. PILOTs are due Feb. 1, May 1, Aug. 1 and Nov. 1, according to the township’s website. 

PILOT programs are created through an agreement between a municipality and a developer for a predictable schedule of payments, typically significantly less than normal taxes and with amounts tied to a project’s annual gross revenue. Montclair and the hotel entered into the agreement in 2016, and the hotel broke ground that year, opening in 2019

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

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

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

The 2022 budget listed the amount MC Hotel owes for this year because municipal budget law does not allow the township to anticipate in the current year budget more than what was actually realized in the prior year. In 2021, the hotel did not make any payment and therefore it was not included in this year’s budget. But Rao said the amount anticipated from hotel PILOTs this year is $804,000, up from the $691,003 owed 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 PILOTs this year is $4.25 million, not including the payments from the MC Hotel, according to the user-friendly budget.

The MC Hotel is also delinquent on its affordable housing obligation, according to Township Planner Janice Talley. That amount, which will be placed in Montclair’s Housing Trust Fund, is $644,650.

On Friday, July 8, Talley said that payment is expected to be paid as well. After speaking with Brian Stolar, president of the redevelopment company Pinnacle, which partnered with real estate firm Hampshire Companies to build the hotel, that payment is expected “in the next day or so,” she said.

Because the affordable housing payment must be made in full to receive a certificate of occupancy, the hotel has been operating under a temporary certificate of occupancy since it opened, 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 approved 46-unit MC Residences, located in between the hotel and parking garage. Pinnacle and Hampshire also owned the Lackawanna Plaza site before selling it to David Placek last year.

Delinquent PILOTs are treated the same as delinquent 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, instead what is sold is a tax sale certificate — a lien on the property.