The New Jersey Assembly is currently considering legislation that would impose new obligations on municipalities that grant long-term tax exemptions. Under the proposed bill, cities and towns would be required to share funds collected under payment-in-lieu-of-taxes (PILOT) agreements with school districts.
As we have previously discussed on the Scarinci Hollenbeck Government & Law Blog, many New Jersey municipalities use long-term tax abatements to attract local development projects. Municipalities must enter into a written Payment in Lieu of Taxes (PILOT) agreement with applicant developers that calls for the payment of an annual service charge in place of traditional real estate taxes on improvements for a specified period of time, typically at a much lower overall rate.
Under the Assembly Committee Substitute for Assembly Bill Nos. 326 and 1475, municipalities must notify counties and school districts when they are considering granting long term tax exemptions, and must also share amounts received by urban renewal entities in lieu of property taxes with school districts, including regional school districts.
The legislation specifically would require urban renewal entities to provide counties and school districts with copies of applications for long term tax exemptions. Mayors would be required to provide counties and school districts with copies of their recommendations regarding the PILOT applications. Counties and school districts would then have a 10-day period to review the mayoral recommendations and submit their own recommendations. When determining whether to approve an application, a municipal governing body must give “due consideration” to the concerns of counties and school districts.
The proposed bill would also require municipalities to provide a portion of the PILOT payments to the school district or districts that serves the municipality, including a regional school district. Municipalities would specifically be required to distribute a portion of the amount received, immediately upon receipt, to the school district or districts, including regional school districts, based upon the distribution of the amount raised by taxation in the taxing district to the school district or districts in the prior year.
The New Jersey League of Municipalities published on its website, that it opposes the measure, arguing that it could undermine economic redevelopment. The NJSLOM further notes that “both school districts and counties already receive 100% of their assessment, while not sharing in the cost of collection.”
We will keep you apprised of any further updates to this important legislation and its impact on your community.
For more information about the proposed tax abatement bill or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.