Before city commissioners in Millville last week voted down a 15-year extension on a tax agreement with the New Jersey Motorsports Park developers, some residents expressed concern about the impact on school taxes.
The dissenters argued that the extension would, among other things, cost the school district thousands of dollars in revenue greatly needed by the already struggling urban district.
Because there is no state mandate requiring payment-in-lieu-of-taxes agreements to include local school districts, often times the schools are left out of receiving any funding. The issue is so wide-reaching in New Jersey that there is legislation in the Senate to require municipalities to share a portion of the revenue from PILOTs with schools.
State Sen. Troy Singleton, D- Burlington, said he decided to sponsor the bill after a 2010 state comptroller report noted that New Jersey’s municipal tax abatement program was pulling critical funding away from school districts and leaving taxpayers to pick up the costs.
“In some cases, the result is schools’ increased reliance on state aid. This bill seeks to change that,” Singleton said. “However, our main motivation in introducing this legislation is seeking property tax relief for New Jersey homeowners, who pay the highest property taxes in the nation. School taxes are the largest component of our property tax bill, and by requiring a portion of tax abatement to go to the school district to reduce the tax levy, we can reduce the overall property tax burden.”
Millville’s PILOT agreement with Motorsports Park goes back to 2007 and is based on the improvements at the track, so the school district does receive some tax revenue — $28,572 in 2018 — from the land, valued at just over $3 million.
The city received $107,501 between the PILOT — $63,884 — and the land taxes.
The school district’s tax levy makes up 25% of a Millville taxpayer’s annual tax bill. Of its $3.44 tax rate for 2019, 86.7 cents goes toward the school district for every $100 of assessed value. If the city split the PILOT with the school-based proportionately on its tax rate, the school would receive an additional $16,000, equal to about 1/10 of a cent impact on the tax rate.
The school district lost about $800,000 in state aid in 2017-18 and has seen aid remain relatively flat over the last two funding cycles. Because she joined the district this summer, interim Superintendent Shelly Schneider declined to comment on the effect of extending the pilot.
Singleton said schools across New Jersey are seeing their tax bases artificially suppressed and causing taxpayers to make up a greater share of the load for funding schools.
“Property taxes and affordability are significant problems in New Jersey. So, any way that we as lawmakers can find avenues for property tax reform, we should pursue them. Again, we chose to address this through legislation based on the state comptroller’s recommendation. However, this concept isn’t a new one. Three states (Michigan, North Dakota and Ohio) require that school boards be notified and afforded an opportunity to comment whenever tax abatements are being considered. Additionally, four states provide that a portion of the collected PILOTs go to school districts,” Singleton said.
Every town in New Jersey handles PILOT agreements differently. The Press of Atlantic City reached out to superintendents in many area school districts to comment and some declined, while others did not respond.
Atlantic City’s PILOT agreement with the casinos, one of the most widely discussed and broadest impacting agreements in the region, did not include a specific provision for how much money the municipality would share with the schools, but did require some portion of the payments to go toward the public education system there. This year, Atlantic City School District received $45 million from the casino PILOT, which generated a total of $152.6 million.
In Galloway Township, Mayor Tony Coppola said his township uses PILOT agreements as a means to draw in business and increase economic activity, but they try to consider the impact on school enrollment and share when necessary.
“It’s expensive and obstructive to do development projects in New Jersey. We provide these incentives to businesses to lure them here, get them to set up shop. Once they’re in, they’re in, they’re operating, they’re a business,” Coppola said. “We’re supposed to be doing these to lessen the burden to our taxpayers.”
In Egg Harbor Township, the township has PILOT agreements with two affordable housing developments required by the state, as well as the Atlantic County Economic Alliance for the aviation park and the Atlantic County Utilities Authority
“To make them affordable we have to control property taxes,” Egg Harbor Township Administrator Peter Miller said of the housing.
Miller said because there is no mandate to share with the school district, the township does not. He said that, either way, residents still benefit from lower taxes due to PILOTs.
“The person writing the check, it’s the same impact on them,” he said.
Miller and Coppola both said the impact of PILOTs on schools is not large because of how taxes are collected and dispersed. Miller said municipalities collect all taxes and are statutorily obligated to pay out a school district 100 percent of the tax levy it sets, even if a municipality collects only 90 percent of the total taxes.
“Also, if we have tax appeals and property owners are successful on tax appeals, and we have to refund money or reduce their assessment, we can’t go back to the school district and say ‘we lost 20 million in ratables this year,’” Miller said. “There are things like that where a municipality has to always make sure a school district stays whole.”
Coppola cautioned that towns should not use the PILOT funding to finance line items that are going to last longer than the agreement. He said money from PILOT agreements is best used for capital projects.
“So when that revenue stream expires, were not stuck with a big hole in the budget,” he said.