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dgm
Citizen
Username: Dgm
Post Number: 130
Registered: 5-2001
| | Posted on Tuesday, August 12, 2003 - 11:04 am: | 
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washashore is right, the meeting was set in august because it would not be heavily attended nor highly visible. there are still questions, I guess (i could not attend either because of vacation). what is the fine line between using the one resource (or incentive) that the Village has to encourage development in a way that disallows access to that resource by the schools, which are arguably also valuable to the Village, property values, and overall desirability? how much and how many abatements are too much and too many abatements still lingers in my mind. why is the village leadership unwilling to commit to a guiding policy, communicate one, or discuss one? do developers expect pilots (which can be good) and abatements (which can be bad)? were any of these questions answered? i'd like to know. |
dgm
Citizen
Username: Dgm
Post Number: 131
Registered: 5-2001
| | Posted on Tuesday, August 12, 2003 - 12:47 pm: |
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Mr. Matthews,
Thanks for the privateline. Let me clarify my question about the "fine line." Let me tell you my context is national: I have some experience in the methods of municipal finance in other parts of the country. Typically the quid pro quo in an abatement is that the abatement does bring in a larger amount of tax money, whether it is in the form of a PILOT, additional capped or limited property taxes, or in the form of additional sales taxes from a commercial project. The first is the case in SO. However, if you can only grant tax relief and collect taxes from the same base, there is a risk that you have forgone too much. Therefore, I ask, what is the "fine line" between the relief granted is an incentive or forgone revenues? At least LCOR's PILOT agreement has some escalation provisions. Does it accomodates the village if the Gaslight has a value of $50 million in 5 years?
My interests also go beyond SO Village to the school district, which cannot tax the abated property (as far as i know) until after my preschoolers are out of the school system. You are right, abatements are not always bad, but I think that this one is bad for me. This is my opinion, and I believe that I am justified in considering the financial needs of the school system as I would like to send my kids to SO-M. Therefore, I do worry about any abatements that will not allow the school district to tax new development.
My assertion about the unwillingness to discuss policy came from a statement in one of your prior posts where you said that the meeting on August 7 would not include a policy discussion. By your privateline, the Village's policy appears to be to consider each case separately.
Your assertion in the privateline that the village is always better off with an abatement works from the Village's perspective (solely). It won't put any new money in the schools for operations or capital in the short term.
It is always a pleasure to respond to you publicly.
P.S. --- I have never understood why one local government could provide an abatement that exempts property from the taxation of other overlapping jurisdictions. However, that is the way it is in New Jersey and in Texas, among other places. |
woodstock
Citizen
Username: Woodstock
Post Number: 295
Registered: 9-2002
| | Posted on Tuesday, August 12, 2003 - 4:19 pm: |
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While I cannot and would never claim to speak for the town, some of this was answered at the meeting. Yes, the school is not able to tax the abated property. However my understanding of the way budgeting is done is that a budget is drawn up, and then the amount that is agreed upon is divided among the sources of revenue. That is, the school says "We need $70 million. We get our revenue from taxes. Therefore the taxes will be $x per hundred of assessed value."
So the school is not deprived of income. The burden of funding the school is put on the shoulders of the current residents, and not the residents of the new construction. Yes, your school tax would be lower if there was no abatement, and the development still went forward (which was described as a highly unlikely scenario by both trustees, and by Mssrs Matthews and Gross). But your village property taxes would not have "gone down" by as much as with the PILOT.
The financial needs of the school system are not (or should not) be impacted by whether Gaslight Commons is taxed or not. I would hope the school district determines it's budget by its needs, and not its potential revenue sources. Even if Gaslight Commons was part of the tax rolls, the school would not get any additonal funding.
As for not discussing policy at the meeting, I too was disappointed that it was not on the table. However given the people who were present (no trustees), there was no one at the meeting involved in making policy, from what I understood.
With regard to the question about if Gaslight Commons has a value of $50 million in 5 years, Mr. Matthews did not go into the specifics of timing. But he did explain that the abatement has tiers, so that after some number of years, the payment goes to the greater of the PILOT payment (adjusted for increases in village taxes) or 20% of what the taxes would be, then 40%, then 60%, then 80%, then finally it goes on the tax rolls.
I wish the spreadsheet and presentation used were available online. While I'm sure there would still be lots of policy questions, it would alleviate many of the technical questions about how the PILOT works.
Waiting For The Electrician, Or Someone Like Him
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mrosner
Citizen
Username: Mrosner
Post Number: 549
Registered: 4-2002
| | Posted on Tuesday, August 12, 2003 - 4:48 pm: |
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Woodstock: You have it right about the schools and the funding. I had tried to post a reply earlier but kept getting the file locking error.
As I have said before, I will consider each proposal from developers on it's own merit. I think it would be unfair if we said no matter what we would never give a PILOT again and by the same token I would never make a blanket statement that as a village we are prepared to give a PILOT to every developer that wants to come to S. Orange.
If I think it improves the village (and not just financially) then I would consider voting in favor, if not, then I wouldn't.
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doublea
Citizen
Username: Doublea
Post Number: 246
Registered: 3-2003
| | Posted on Tuesday, August 12, 2003 - 5:11 pm: |
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Some time ago, in one of these threads, a suggestion was made that if in fact a PILOT is required in order to get a project developed that would not otherwise be developed, then a portion of the total PILOT payment be used for school tax purposes. That is, the total amount of payments would not change, but just the allocation. While it is true that the total impact to S.O. taxpayers on paper might not change, this type of allocation does have the merit of making sure that the Village does not use the entire PILOT amount to satisfy its spending requirements and say that the Village was being judicious but it is the school budget that is the problem. Then there is the problem that even if the Village gets the entire PILOT amount, the S.O. members of the BOSE always approve the BOE budget anyhow, so basically there is no control over the budgeting for either body. I think that even Mark Rosner has acknowledged this about the school budget.
Additionally. it had been suggested some time ago that if a PILOT is absolutely required, than the PILOT payment should be intially set at something more than the 2% of construction costs as in Gaslight, but less than the full amount.
These proposals had been suggested and I don't think they were ever addressed. Maybe because a real situation hadn't been presented.
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dgm
Citizen
Username: Dgm
Post Number: 132
Registered: 5-2001
| | Posted on Tuesday, August 12, 2003 - 5:12 pm: |
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Mr. Woodstock,
Thanks for the clarification on the LCOR deal. You are right,the school district doesn't budget by revenue availability, but its needs (much less its hopes and dreams) strain the capabilities of the local tax base. The cost of educating children K-Graduate school inflates every year. Most States comparable to New Jersey (Michigan, California, and New York for example) have a large State Aid program, but New Jersey does not, and if there was one, SOM might be too wealthy to benefit anyway. If the School System cuts programs to match fiscal constraints, the quality of the schools will decline, and people will move to a place which can support strong schools.
You and I and all other Village residents will eventually shoulder the tax burden that the Gaslight Commons might have shouldered if it were a taxable property (for school purposes) like a Home Depot. The abatement exempts the Gaslight from payment of school taxes. The impact may be buffered for some time by the 58-42% interlocal split of the school tax burden, the escalating PILOT, and stabilized village taxes, but I would also be surprised if my Village taxes remained stable enough to offset school tax increases (absolute and percentagewise)over the next 13 years when the kid graduates. |
woodstock
Citizen
Username: Woodstock
Post Number: 297
Registered: 9-2002
| | Posted on Tuesday, August 12, 2003 - 5:26 pm: |
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dgm,
The explanation that we were given that the meeting (and which the numbers seem to back up) is that the amount that our local taxes "go down" is greater than the amount our school taxes go up. So qwhile we may be paying more to the school, we're paying less to the town.
I put "go down" in quotes because as we all know, our taxes have never, and will never, go down. Even Mr. Gross indicated that at the present rate of tax increases, the average taxpayer in SO will pay approximately $45,000 in property taxes by the time Gaslight Commons pays taxes rather than a PILOT.
Waiting For The Electrician, Or Someone Like Him
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doublea
Citizen
Username: Doublea
Post Number: 247
Registered: 3-2003
| | Posted on Tuesday, August 12, 2003 - 7:05 pm: |
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Woodstock: When it is said that the PILOT eventually pays 80% of the taxes that would have been paid before going on full taxation after 30 years, what is the 80% based on - construction cost with the applicable escalators or the business or rental value, as would be used in a non-pilot situation. And if based on the construction cost, was there any comparison to what the assessed value would have been had the development not been piloted? Thanks. |
doublea
Citizen
Username: Doublea
Post Number: 248
Registered: 3-2003
| | Posted on Tuesday, August 12, 2003 - 7:18 pm: |
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Random musings: In 30 years, when I'm 90, my taxes will be $90,000. |
woodstock
Citizen
Username: Woodstock
Post Number: 298
Registered: 9-2002
| | Posted on Tuesday, August 12, 2003 - 10:25 pm: |
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doublea,
To clarify, what was said was that after the first period, which could be from (I think) 6 to 16 years, the property is assessed. At that point, the PILOT payment is the greater of 20% of the taxes on the assessed property, or the PILOT payment (adjusted for any increases in taxes). So if the property is assessed at $20 million, and the tax rate after the first period is 7.5% (an increase of about 50%), then the payment is the greater of $500,000 (present payment) times 150% ($750,000) or 7.5% of $20 million ($1.5 million). So the payment would be $1.5 million. Then after the next period (1 to 6 years) it goes to 40%, then 60%, then 80%, then the full tax on the assessed value.
However if the property is assessed at a lower value, the town would still get the PILOT adjusted for the change in property taxes. I did not get to ask what happens if taxes go down. 
This is just my understanding. I might gave gotten someo the details wrong, but the gist of it is that the payment does take into account if the assessed value is especially high, or taxes go up an inordinate amount.
One more thing, people have questioned whether the town has "left something on the table," so to speak. There is a provision in abatements that prevents the building owner from making "too much profit." It's part of the deal - LCOR cannopt make more than a certain amount (or percentage). Any overages, and the town can claim the extra profit.
Now, I know some suspect the source of all this info, so you might want to check out the NJ regulations on tax abatements.
And doublea, you asked about the 2%. My understanding is that the 2% is a cap in the regs.
Waiting For The Electrician, Or Someone Like Him
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J. Crohn
Citizen
Username: Jcrohn
Post Number: 331
Registered: 3-2003
| | Posted on Wednesday, August 13, 2003 - 1:07 am: |
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"My understanding is that 2% is a cap in the regs."
It's a cap for low and moderate-income housing, but I think 2% is the state-regulated flat rate for all other projects where the yearly PILOT is calculated as a multiple of total project costs (as opposed to a multiple of annual gross receipts).
I was at the PILOT meeting but had to leave after an hour and a half, part of which was taken up with broadcast technical snafus. (I was the one in the back whose mind wandered for a moment, and who then asked an idiotic question about the other-municipalities'-share-of-county-taxes item on the spread sheet.)
Mr. Gross in particular made a convincing case for PILOTs, nearly erasing any lingering doubts I still had as to their preferability over other kinds of tax abatement or non-development.
I still don't know whether I think PILOTs are a good idea in the long term, from the standpoint of our schools. As doublea reiterates above, if school districts have fewer means of minimizing taxpayer impact than towns, then school districts are likely to come under greater political pressure to conserve fiscally than municipalities are. Yet good schools are a large part of what makes our towns attractive, and good schools are not cheap.
However, as Woodstock notes, "The explanation that we were given that the meeting (and which the numbers seem to back up) is that the amount that our local taxes "go down" is greater than the amount our school taxes go up. So while we may be paying more to the school, we're paying less to the town."
About $20 less on an average SO home assessment. Indeed, assuming the figures we were provided were accurate, the average property tax is lower than it would be in the absence of a PILOT.
As to disbursing PILOT income to the schools, it's understandable that the Village is reluctant to part with any of its PILOT moneys. The Village budget is a little over $22 million; the district's budget is in excess of $71.5 million. One could make the argument that any funds disbursed or granted by the town would only amount to a drop in the district's rather larger bucket; Mark Rosner has argued that the town is probably more fiscally prudent than the district already.
Unfortunately, I haven't been able to attend the district's Budget 101 presentations yet.
I wish Brian O'Leary would expound a bit on where (and whether) he thinks the schools could economize without unduly slashing services, and I'd be interested if he could describe any remaining concerns he may have about PILOTs. I believe he has a better understanding of the details of both budgets than most of us do.
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bobk
Supporter
Username: Bobk
Post Number: 3291
Registered: 5-2001
| | Posted on Wednesday, August 13, 2003 - 3:59 am: |
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The school population here has grown over the last few years by over thirty percent. Obviously, this causes a need for increased funding. Piloting residential properties leads to an increase in the number of pupils. A month or so ago one of the Town officials asserted that there are no students in the schools living in Gas Light Commons. I think this information is incorrect since we know of at least two HS students who live there, and we don't know all that many people. We also know of one family in the apartments on Church Street with two kids in school, although these buildings aren't, I believe, Piloted.
Why could the Church Street buildings be built without a Pilot, while one was needed for Gas Light Commons, a very high density (not to mention butt ugly) development?
The "savings" for SO taxpayers are very minor and can change as the school budget grows. Also, the very large increases in tax rates for the schools are hard to swallow on a political level. My best guess is that if the voters in MW and SO voted on the budget, as is the case in most NJ districts, it would have been turned down last year.
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doublea
Citizen
Username: Doublea
Post Number: 249
Registered: 3-2003
| | Posted on Wednesday, August 13, 2003 - 8:10 am: |
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Thanks everyone for your comments and expanations. I think there have been some constructive suggestions made that at least should be considered and discussed by the Village officials. I agree with bobk and think we have to consider how many school age children will be in these residential developments in say 10 years. It is pretty safe to say a lot more than now. The argument that even if there are school age children in these developments, Maplewood will pick up 58% of the cost, is a little bit like saying I don't really need an item but since it's on sale I'll buy it. This of course has always been the reason commercial or non-residential development is preferable. |
bobk
Supporter
Username: Bobk
Post Number: 3293
Registered: 5-2001
| | Posted on Wednesday, August 13, 2003 - 8:32 am: |
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...and remember, if so inclined, Maplewood can Pilot properties as well. There is some interest in building apartments at the site of the old chain factory on Burnett. Can a big time Pilot be far behind? Not to mention redeveloping Springfield Avenue..................
Does this mean War?  |
Brett
Citizen
Username: Bmalibashksa
Post Number: 42
Registered: 7-2003
| | Posted on Wednesday, August 13, 2003 - 9:46 am: |
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I live in Gaslight Commons and was surprised to hear the there are 2 HS students there. All I ever see is toddlers, and babies. The oldest kid I saw was about 4. I’ve also noticed a lot of people moving out in the last two months. The management offers a lot of discounts for the first couple of months, so staying one year is relatively reasonable. After that it appears the people buy houses. |
mrosner
Citizen
Username: Mrosner
Post Number: 550
Registered: 4-2002
| | Posted on Wednesday, August 13, 2003 - 10:07 am: |
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bobk: The church street apartments replaced an empty lot, an abandoned building and several homes. Basically, there was a market for those homes and if the company that ultimately purchased the property had not, there were others interested - therefore a PILOT was not needed.
LCOR presented a different set of problems and there was little interest in the property. The density is similar to the Village Mews. The appearance of the building while not to my liking is appreciated by many. The beauty (or being butt ugly as you put it) is just a matter of taste.
The number of children on church street, at the Gaslight Commons and in the schools will always be changing. There were school age children living in some of those homes on church street that were sold and torn down and the net number is less today than it was before the new apartments were built.
While there might be 30% more students today than several ago, there are no more today than there were in the early 70's. The school population was shrinking in the late 70's and remained low thru most of the 80's, yet the school budget increased every year. How does one explain those increases while the population was shrinking? The money was certainly not spent on repairing the buildings or on upgrading the supplies.
The BOE had no long range plan then, and today the budget is so tight they are dealing year to year. And to top it off, the amount of state aid has continually decreased with no relief in sight. The PILOT at LCOR has nothing to do with the school budget problems. It is the property tax system that has caused the problem and the solution is with an overhaul to how we fund schools in NJ.
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bobk
Supporter
Username: Bobk
Post Number: 3294
Registered: 5-2001
| | Posted on Wednesday, August 13, 2003 - 10:41 am: |
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I agree that the property tax system in the Great Garden State is horrible, especially as it relates to school funding. However, the chances of getting the system changed in our life times is about the same as winning Lotto. We have to play the cards we are dealt.
I have been a critic of the SOM School District over the years. However, when all is said and done we spend just around the state average per pupil, which is less than other "affluent" towns in the area. The issue is that because of relatively small lots and a fair amount of multi-family housing we have a higher population density than most suburban towns. In my opinion, for what it is worth (and it may not be much ), increasing the density doesn't make much long term sense.
While not doubting you, I find it incredible that a property such as where LCOH built was not developable without a Pilot, while the smaller, and thus less cost effective, buildings on Church Street made economic sense in a free market enviornment.
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woodstock
Citizen
Username: Woodstock
Post Number: 301
Registered: 9-2002
| | Posted on Wednesday, August 13, 2003 - 11:37 am: |
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I wrote:
quote:So if the property is assessed at $20 million, and the tax rate after the first period is 7.5% (an increase of about 50%), then the payment is the greater of $500,000 (present payment) times 150% ($750,000) or 7.5% of $20 million ($1.5 million). So the payment would be $1.5 million.
There is an incorrect calculation here. It should be the greater of:
$750,000 = $500,000 x 150% (change in taxes) or
$300,000 = $20 million x 7.5% (tax rate) x 20%
So after the first period, the payment would be $750,000, not $1.5 million.
I've been told the payment as a percentage of what taxes would be typically will not become a factor until the 60% level or so.
Waiting For The Electrician, Or Someone Like Him
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dgm
Citizen
Username: Dgm
Post Number: 133
Registered: 5-2001
| | Posted on Wednesday, August 13, 2003 - 4:00 pm: |
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Apparently property taxes are the talk in many towns -- see the article in the Times.
http://www.nytimes.com/2003/08/13/nyregion/13SUBU.html?hp
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dgm
Citizen
Username: Dgm
Post Number: 134
Registered: 5-2001
| | Posted on Wednesday, August 13, 2003 - 4:02 pm: |
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Apparently property taxes are the talk in many towns -- see the article in the Times.
http://www.nytimes.com/2003/08/13/nyregion/13SUBU.html?hp
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