Hackensack Deputy Mayor Kathleen Canestrino explained in depth the practice of PILOT (Payment In Lieu of Taxes) programs at this week's Committee of the Whole meeting and the benefits they can bring to the city and also to dispel misinformation on the subject.
In PILOT programs, municipalities and developers agree on paying a percentage of revenues - between 10 and 30 years - instead of traditional taxes.
"To even be eligible to apply for a Payment in Lieu of Taxes you have to have something called a Redevelopment Designation," Canestrino said.
A study needs to be done documenting that the property is in need to a full redevelopment. Following that, Hackensack requires them to submit a Fiscal Impact Analysis, which details all of the project's financials and any affect it will have to the city, including impacts to schools, sewers, infrastructure, etc.
"All of that has to be documented and the projected numbers are based on studies," she said. "This is a very detailed document. It shows their financials, it shows the impact to the city or the schools and it also shows the projection of: 'If I am granted this Payment in Lieu of Taxes, based on my numbers, here's what I'm projecting the city would be receiving from the payment in lieu of taxes.'"
State requirements have PILOT properties paying between 10 and 15 percent of their gross revenue. Five percent of that payment goes to the county and the remaining 95 percent goes to the city. Another state requirement is that if the property exceeds expectations and reaches 12 percent profits, that money goes back to the city as well.
"You really are enabling a good safe investment, for the most part - stable for them because this way, the developers can get the funding they need and also projected well for the city," Canestrino said. "The city also shares in the profits of their success."
Canestrino said any prospective PILOTs in Hackensack must align with the city's vision, part of which is redeveloping the downtown area.
"Primarily, if you're going to receive a PILOT in this city, it's going to be either central to the downtown or in very close proximity to one of our train stations or the River Edge train station," she said. "This way, what we promise to our residents is that we would maintain the integrity of our neighborhoods. We're not putting apartments throughout the city and in residential areas or in single-family home areas. We're maintaining those areas as they are."
The most important factor, Canestrino explained, is the financial benefit the PILOT project brings to Hackensack.
"A PILOT can never pay less than what they are currently paying in taxes," she said. "It can never go backwards. There's a minimum there. It can only go forward, and what this enables these developers to do is to get the financing that they need so they can get this project funded and make progress and move forward."
The increased revenue enables the town to maintain lower tax rates for residents.
The city currently has one project, on State and Warren, that is a PILOT project. As of 2018, their PILOT payment to the city was $266,000. Canestrino said their recent renegotiations will raise that amount to $468,000, which the city will begin seeing this year.
"The more money the project makes, the more money the city makes," Canestrino said. "You really are true partners in this because we want them to be successful. The more successful they are, the more successful we are."
"All this work going on creates a tremendous amount of jobs in the area," Hackensack Mayor John Labrosse added. "It's going to create a vibrant and pedestrian-friendly downtown, which is what we want."
Mayor Labrosse added that the new businesses will also offer even more jobs once they are up and running.
"As Kathy said, the PILOT program is a state-program designed to help aging downtowns redevelop," he said. "The money from these PILOTs is meant to repair our aging infrastructure, which it's doing, and to give tax relief to the residents, which it will do, and to create a vibrant downtown."