RARITAN TWP., NJ – News that Jack Cust’s plan to redevelop the Union Hotel and its surrounding properties will include Flemington’s agreement to accept “payment in lieu of taxes” prompted township resident JoAnne Elacqua to ask its Township Committee this week how the plan might affect local school and county taxes.
In particular, she wanted to know if Cust could be excused from paying school taxes on his development, creating a shortfall that could fall on township residents.
“I’m very concerned about this,” Elacqua said. She quoted a report prepared by state Comptroller A. Matthew Boxer that concluded, “Payments to municipalities by businesses and developers in lieu of taxes, known as PILOT payments, distort municipal incentives in using and structuring abatements at the expense of counties, school districts, and other taxpayers.”
“Municipal governments forego hundreds of millions of dollars in revenue through reductions of or exemptions from taxes in the name of economic and community development,” the report states.
“Tax abatements should be used carefully and sparingly given the multitude of pitfalls, their far-reaching impact, and the reality that exemption from taxation is a departure from the normal allocation of tax obligations,” Boxer wrote. “While community development and improvement are obviously desirable goals, public officials should ensure that appropriate analyses are undertaken before presuming that abating taxes is the optimal means to accomplish these goals.”
Township attorney Jeffrey Lehrer told Elacqua that he’s a redevelopment attorney in three municipalities, and that municipalities “have the ability to negotiate in that financial agreement the issue about school taxes and can say, ‘For every school child that is generated from that project, that the developer pays X number of dollars towards the school system. It is an option.”
Another option, Lehrer said, would be for Flemington to allocate a portion of its revenue from the PILOT program towards the schools. “That’s their option.”
“If none of those options occur in that agreement, then you’re right,” Lehrer told Elacqua, “It’s everyone else other than them that’s paying for their school tax.”
But through negotiations, Lehrer said, there are options “that can soften that impact.”
“My concern is that the other jurisdictions might not be included in this negotiation, and we will all be stuck paying,” Elacqua answered.
The township would not be included in the negotiations, Lehrer said, because the Union Hotel plan is within the borough, not the township.
“What recourse do I have as a taxpayer where I’ve been told that I have no input as an outsider, however it will be affecting my taxes?” Elacqua asked Lehrer.
PILOT programs are enacted by ordinance, Lehrer answered, which would require a public hearing before it could be adopted.
“You do have a right to go” to that public hearing, Lehrer said. “I’ve seen it many times where non-residents come and object to just this issue.
”You have the ability to make your argument,” he said, that Flemington’s PILOT program should be negotiated “so that the impact on the rest of the school system is not so significant.”
Elacqua asked Township Committee to “nudge” Flemington officials “so that everyone is included ... I have a feeling that at some point it’s going to be a big surprise.”
Raritan Township Mayor Karen Gilbert said township officials are impacted because they’re taxpayers, too, but “as elected officials, we can’t direct another governing body what they can do.” The answer, the mayor said, is to get residents involved.
The borough’s redevelopment agreement and details on the PILOT program have not yet been publically released. Gilbert said it’s possible that the agreement will include details on the payment of school taxes.
“A PILOT program is not a bad thing, necessarily,” Gilbert said, noting that such an agreement was made between the township and Costco. “There are no school children involved,” in that arrangement, she said, “because it’s a store.”
Elacqua said Cust’s plan includes condominiums and that several residential areas are part of the plan.
Gilbert said she hope’s Flemington’s attorney “will be as forthcoming as ours about the options.”
Committeeman Craig O’Brien noted that properties do return to the regular tax rolls at the end of a PILOT program.