I am a bit lost on this. Isn't this good for the city? The city got to keep almost 18mio more right under PILOTs than it would have otherwise?

if you look at two properties (same zoning/use-type, same part of town) that you estimate should have fairly similar tax bills (assuming there are no PILOTs/abatements) - 1 from the 1990s/2000s and 1 from 2013/2014 - what is the relative difference in the PILOT payments the two properties pay? Does the more recently developed/abated property have a better/worse deal than the older property?

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The Cost of Jersey City Abatements: The $80 Million Question

Over the years, much of the discourse between Jersey City residents and officials has swirled around the use of abatements. However, does anyone know the price tag of what abatements truly cost?

In this report, CivicJC will look for that number and share our findings.


Summary

The total difference in amount between PILOT payment and conventional tax is $80,579,503.

Jersey City receives $17,927,941more in revenue through PILOT payments than it would through conventional tax.

Under conventional taxes, the school system would receive $52,062,566 and the county would receive $46,445,077. Currently, under PILOT payments, the school system receives zero. Properties constructed after 2005/06 now pay 5% to the county.


The purpose of an abatement is to spur development

Abatements can serve as a useful tool by acting as a catalyst. Areas that may be in need of development can use abatements as an incentive to facilitate development that might not otherwise occur. The greater the need for development, the higher the incentive offered in terms of shelf life, or length of the abatement.


Abated properties don?t pay taxes

True, they do not pay taxes under the conventional taxation system, however they do pay into the city coffers through PILOTs, Payment in Lieu of Taxes.

PILOTs differ from conventional taxes in how those monies are allocated. Conventional taxes are divided between the municipality, county and school system. PILOTS go almost entirely to the municipality with a very small portion allocated to the county and zero allocation for schools.

The PILOT fees would come at a lesser cost then if paying conventional taxes with a preset schedule of increases. This is the incentive that attracts would be risk takers in developing areas that may otherwise go untouched. The municipality is then able to receive a higher revenue then they would have had they shared with the county and school or if no development occurred at all.


Cost

CivicJC looked at the total abatement numbers. Not reflected in this report is the worthiness of abatements granted to any particular property.

The total number of abated properties provided to us was 146.

The total amount of PILOT payments in 2014 to Jersey City was $119,230,890.

Properties constructed after2006/06 now pay 5%.

Using the assessed value provided for each property, CivicJC calculated the approximate equivalent that each property would pay under conventional taxes using the 2014 tax rates.

The total amount of what would have been paid under conventional taxes is $199,810,593of which:

$101,302,949 would be allocated to Jersey City

$52,062,566 would be allocated to the school system

$46,445,077 would be allocated to the county

Increased profit to developers $80,579,503 in the year studied.

Overall, Jersey City received $17,927,941 more through the use of PILOTS than it would have using conventional taxes.


Impact on Schools

While many abated properties are residential, communication and long term planning with the local school board to accommodate the rapid growth of student enrollment does not appear to be factored into the abatement process. The current shortfall of $52 million to the Jersey City school system is an indication of the difficulties presented to school board officials as they try to meet the needs of increased enrollment i.e.-tax levies.

Rapid growth in student enrollment within areas that are heavily abated and do not contribute to theschool system puts increased dependency on state aid funding. A decrease instate aid would add an increased weight to the residents.


User Friendly Budget

The Local Finance Board has adopted N.J.A.C. 5:30-3.8, a rule which requires municipalities to incorporate a user-friendly budget into their introduced (approved) and adopted annual municipal budgets. [i]

Included in the User Friendly Budget would be a comparison between PILOT and Conventional Tax amounts for abated properties. Jersey City is expected to have a User Friendly Budget for the 2015 budget. The Jersey City 2015 annual budget has not yet been approved.


Legislation

Currently, other than recommendations and guidelines, there are no state statutes that would dictate the terms of how abatements should be granted. Lack of legislation leaves interpretation of its use wide open and subject to its abuse.

State legislation and oversight is needed to safeguard against negative financial impact to residents in Jersey City and Hudson County in the future.


What you can do

Contact your state representative and ask for sound legislation that would more clearly define the parameters of how abatements are granted and keep within its intended purpose of developing in distressed areas in need of development.

[i] Municipal User Friendly Budget Department Community Affairs NJ http://www.nj.gov/dca/divisions/dlgs/lfns/15/2015-09.pdf

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