On February 5, the Senate Community and Urban Affairs Committee amended and released S-1807, which requires municipalities to share PILOT funds with school districts and inform counties, school districts, and the Department of Community Affairs (DCA) of certain information related to property tax exemptions and abatements. The bill has been referred to the Senate Budget and Appropriations Committee. The League opposes S-1807. 

As amended, the bill would require that any revenue received from a PILOT’s annual service charge be used solely and exclusively by the municipality, county, or school district for the purpose of reducing the amount that is required to be raised through the local property tax levy.  

In addition, the bill would require: 

• The urban renewal entity provides copies of their applications for informational purposes to the County Executive, County Commissioners, School Superintendent, and Board of Education. If the municipality is in a regional school district, copies must be provided to the regional School Superintendent and Board of Education. 
• The urban renewal entity must also provide the Division of Local Government Services with a copy of the application, which will then be posted on the Division’s website. 
• The Mayor or the municipality’s Chief Executive Officer and the urban renewal entity, within five business days of receipt of a PILOT application, must notify the school district(s) Board of Education and School Superintendent of the application and the urban renewal entity and municipality’s desire to enter into good faith negotiations for an agreement. 
• The Superintendent(s) will lead the negotiations on behalf of the board(s) concerning the agreement with the municipality and urban renewal entity. The board(s) must approve by resolution within 90 days to enter into an agreement. If an agreement is not entered into within 90 days, the municipality must continue to process the application.  
• The municipality must copy the county and school(s) of the Mayor’s recommendations to the governing body on the application simultaneously. The county and school(s) will have 10 days to submit recommendations to the agreement. The municipality is required to give “due consideration” to the submitted recommendations.  
• Requires the urban renewal entity, within 90 days of the close of its fiscal year, to certify to the municipality the number of school-age children residing in the approved project who are attending a public school. Copies of this certification must be submitted to the DCA, which must post the certification on its website.  
• Provides the Commissioner of Education, in consultation with the Division of Local Government Services, with rulemaking authority for the calculation and distribution of PILOT funds to the schools. 

If the school does not enter into an agreement with the urban renewal entity, the amount of the PILOT funds to be given to the school(s) for non-residential projects or mixed-use projects will be 5% of the annual service charge. For residential projects, the amount owed to school(s) is based on the following formula: number of school-age children attending public school that reside in the project multiplied by the base per pupil amount determined by the Commissioner of Education for the previous school year. The payment received by the school district(s) cannot exceed the percentage of the amount of property taxes. The remittance requirements pertaining to school districts will not be applicable to a 100% low- and moderate-income housing project dedicated to housing 100% senior citizen occupants, age 62 years or older, and who qualify as low- and moderate-income households. 

While the League continues to oppose S-1807, we would like to thank the sponsor, Senator Singleton, for continuing to work with us to make the process more workable.  

Payments in lieu of taxes (PILOTs) are the single-most powerful tool available to municipalities to encourage businesses and developers to make improvements to property or to locate a project in a distressed or blighted area.  

The requirements proposed in S-1807 will significantly weaken the ability of municipalities to spur redevelopment in blighted areas through the use of PILOTs. Reallocating the PILOTs will require an increase in total PILOT payments so that the municipality, which provides the bulk of public services, can maintain services.  

This will have a critical adverse impact on the economics of redevelopment projects, and most especially those projects that require greater assistance due to environmental contamination, site conditions, or extreme blight, or which have smaller returns, for example, the construction of affordable housing.  

In authorizing PILOT agreements, municipalities determine that a project would not be built without the PILOT. A significant increase in the amount of PILOT a project pays reduces the possibility that the project will be built at all. Further consideration should be given to the negative impact on development. We have requested a fiscal note for S-1807 to understand the actual financial impact and potential disincentives that the bill will have on PILOT agreements. 

We have also requested that any discussions on the reallocation of PILOT payments be delayed until there is a broader discussion regarding the entire property tax collection process. Municipalities, not counties or school districts, expend the energy and resources to spur economic development for the benefit of the entire community. These efforts encourage new tax ratables while also promoting job growth in areas in need of redevelopment. Municipalities are also responsible for not only collecting the property tax levies of other taxing districts but guaranteeing 100% of the levy regardless of the collection. Municipalities are also responsible for defending tax appeals and paying out any judgments. In essence, municipalities assume greater risks and receive less benefit. 

We urge you to contact your Senators to explain the adverse effect S-1807 will have on your community.  

Contact: Lori Buckelew, Deputy Executive Director, lbuckelew@njlm.org, 609-695-3481, x112.