NEW PROVIDENCE, NJ – A proposal of the so called PILOT (Payments in Lieu of Taxes) arrangement for a potential new development did not ignite excitement among members of the Borough Council. Attorney Glenn Pantel representing Erickson Living gave a presentation on the PILOT arrangement at the Monday, Aug. 13 council meeting. He asked the council to authorize further negotiations regarding the PILOT proposal with Erickson Living representatives.

Pantel explained that Erickson Living is considering acquiring a lot adjacent to the Lantern Hill Development for a further expansion of the senior living campus. Instead of property taxes, Pantel proposed paying fees to the municipality and to the county.

Pantel noted that New Providence has a high credit rating and that the additional development would only enhance those ratings. Many municipalities have incurred significant benefits through the PILOT arrangement, he said. This arrangement is sometimes used in so called designated areas in need of redevelopment. The lot that Erickson Living is considering for acquiring currently houses “a pretty much obsolete 70’s office building,” Pantel said.

Sign Up for E-News

The typical PILOT payments consist of 95 percent to municipalities and 5 percent to the county. Pantel called the PILOT arrangement “a win-win situation” that could benefit both the municipality and the developer. On one hand the negotiated payment amount might be less than the regular property taxes, but municipalities would also gain significant benefits, he stated.  

“We are aware of the Board of Education (BOE) as well,” Pantel said. Many municipalities throughout the state are sharing their PILOT proceeds with their respective Boards of Education, he explained. Because of the recent tax appeal the New Providence BOE is expected to receive approximately $260,000 in tax revenues for the property in question. However, with profit sharing of the PILOT arrangement the BOE could restore the revenues from this property to $273,000, and beyond up to approximately $400,000 per year, he explained.

Pantel explained that the surplus generated by the PILOT arrangements could be very substantial to the municipality. It would be up to the council to decide how to use any proceeds. He noted that some municipalities are using the proceeds for enhancing existing athletic fields or for other projects. He also pointed out that the planned new development would not impact the school district with any additional students as the average age of the residents at Lantern Hill is 80. The current Lantern Hill development is generating approximately $1.3 million in tax revenue.

Pantel asked the council to consider the PILOT proposal. Mayor Al Morgan noted that the borough has not engaged in PILOT arrangements before and will consult the borough’s professionals before making any decisions on the issue. “I want to hear all the pros and cons” regarding the PILOT, Morgan said.

Ira Krauss, Member of the BOE, objected to the proposal during the public speaking session. He asked the council to reject the PILOT idea, noting that “they don’t understand how we collect taxes.”