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Tax Abatements, Affordable Housing and Debt

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In my last article I put forth my argument for endorsing the Democratic candidates for Township Council in the upcoming November 7th election. This time, I speak to the challenges our Township faces and how the Republican Township Council has acted in opposition of the conservative principles that historically act as a reliable, institutional guide for sustainability. With the enactment of two very dangerous laws, our fully Republican council and mayor have put the future of our town in question.  Looking at these two very controversial decisions autocratically approved in our town, it’s clear that our Republican leadership has increased government involvement, drastically increased debt, increased our taxes for a municipal complex and risked further budget pains and tax increases with the possible overuse of tax abatements for developments.

Law: NJ Affordable Housing Ruling, January 18th, 2017

Text: http://www.gfoanj.org/news/news.asp?id=221458

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This is a statewide issue as opposition to this rather recent court ruling gains momentum.  Assemblywoman Holly Schepisi is very visibly advocating against how the state has handled the affordable housing problem. The court ruling is a response to the Council On Affordable Housing’s failure to produce a formula for townships to determine low-income housing requirements. In reality, COAH failed because it was directed to fix a problem greater than itself: the unaffordability of this state.  Providing more “affordable housing” in unaffordable municipalities is actually an attempt to solve a long-standing, sort of de jure segregation created by a lack of oversight and standardization in zoning laws. Now the state aggressively attempts to assist low-income families by mandate of a strict formula upon townships to stabilize the mix of low-income families among high-income communities. Each township must front the effort and cost to litigate a reasonable settlement which Berkeley Heights already accomplished.

Instead of the state addressing the elephant in the room- tax reform and statewide breakdown on fiscal waste- an agenda for pushing forward additional laws deepens the problem by burdening townships (ergo residents and homeowners) to apply regressive tax structures in order to entice developers. Because of the limitations of Affordable Housing, the outcome may very well only be to the benefit of a fraction of mid-income families but certainly benefits developers that are racing in to sign up for lucrative contracts from townships with access to bonds.

What is happening across the state, is that townships are mandated to meet the terms of the affordable housing settlement but then must still entice developers to build the required housing. To meet settled requirements, township master plan standards and overcome the instigated leverage of the developer, townships are having to offer tax incentives,  Payments In Lieu Of Taxes (PILOTS).  Berkeley Heights has finalized one PILOT agreement (Locust Ave) as of this year and three more are likely to be negotiated.  It is becoming apparent in towns already having PILOTS that these tax incentives can yield a regressive tax structure to a town as a whole. Because the developments tax payment remains fixed for the term of the contract, usually thirty years, with future tax levy increases current homeowners will see property tax increases to meet a rising tax levy. This suggests that PILOTS, though seemingly necessary to meet development contract needs, could be damaging to a town if too many are originated without thought to the rest of the town's financial picture.

As necessary as it might sound to offer tax incentives, it doesn't make their application completely right.  It certainly doesn’t remove the risk they pose for the taxpayer or the township's ability to balance future budgets. Their mutation from not-for-profit property to use in commercial development points to an economic flaw where a developer cannot find the financial means to develop without extreme tax abatements. Imagine if your primary residence property tax were fixed for thirty years. You would have the joy of being positively fixed in your tax rate but at the burden of the tax collector who now doesn't have the ability to reassess your property to meet budget increases. Another owner with less luck will pay more.

http://www.njpp.org/budget/its-time-for-new-jersey-to-rebalance-the-economic-development-scales

Law: NJ A3615, NJ Local Redevelopment & Housing Law

Text: http://www.state.nj.us/dca/divisions/dlgs/programs/au_docs/40a_12a_1.pdf

This law allows a governing body to determine blighted property under a definition of unparalleled breadth (40A:12A-5, subparagraph a), float unrestricted debt free of citizen scrutiny and may “redevelop” without public bidding or scrutiny over price (40A:12A-8, subparagraph g).  The language and intent of this law removes restrictions -some being state law- upon a governing body to remedy qualified blighted housing, commercial and industrial installations to provide the means for local economic enhancements.  In 2015 the Berkeley Heights town council began exercising this law to replace the municipal building, considered blighted.

This law provides government with new, unprecedented power, in particular, removing the due diligence of the collective constituent.  While it is arguable whether this law is being exercised within its original intent, the law is allowing for unlimited, unchecked debt, provides instruments for the governing body to act outside of standing New Jersey laws, contract studies and redevelopment planning and allows the initiation of any contract bid without restriction. Therefore, there is no accountability for the rates paid to the municipal complex contractors when government contracts with limitations are already exorbitantly costlier than private bids.

What really should have happened is our council could have seen the Affordable Housing action as an opportunity to stand up for the residents. By joining a statewide opposition and skepticism, it would have been apparent that the intent of our council was to question the state's course instead of rushing to be the first to settle it.  The suggested argument: that the floating of a $28 million bond does not put Berkeley Heights in a position to accept development requiring PILOTS. The principle of using NJ A3615 to accelerate the municipal building project along with the council and mayor touting how quickly they settled the Affordable Housing litigation shows that the guiding principles in our township government system is to do things quickly and easily not due processes and diligence.  This principle, an unguided and aimless pursuit of quick fixes at any future cost absolutely needs to be scrutinized.  

This has happened, I believe, for two reasons. First, a lack of basic and obvious check-and-balance within our government has allowed them to act without the scrutiny that partisanship provides, and the self-inflicted move to disallow residences proper access to the potential negatives posed by their actions.  The opportunity to repair both is in November by providing another party affiliate a seat on the township council.  Second, a lack of principled guidance- a value system- that usually Republicans hold as a founding party principle.  Most municipal governments today might be guilty of this but there should be some principles set forth, beyond the Master Plan, that dictate what serious matters do justify debt and, more importantly, what values to abide by when handed down questionable litigation and blanket legislature from the state that may not work in our township (which, by the way, will only get worse).  The use of these laws points to no consistent use of a set of principles or serious consideration to our future. We are diving into serious debt while adding untested tax abatements thus increasing our vulnerability to economic volatility.

As a citizen with concern for our town’s future, my recommendations to minimize future fiscal failures and create direction in our town would be to add accountability to the town council by introducing a second party and, second, to allow them to work towards and establish a set of principles that will identify and minimize the risk to our towns future. Principles that maintain that government contracts should be shorter and of public nature.  Not private. If this is sometimes impossible, then the pros and cons needs to be proactively communicated openly not just the pros as is the status quo. Debt should be immediately remedied and limited to use for an agreeable, identified limit of necessary projects so that emergency debt can be bonded only if necessary. To our young family in our town, the conversation towards full day kindergarten, improved infrastructure and a pedestrian-friendly town becomes ever more distant with these lurking problems for our future.

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer. Click here to submit a Letter to the Editor.

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