If you are new to the topic of abatements, I recommend my tax abatement series here including my 2015 article,”Jersey City PILOTs Rob Funding from the School System.“
This post is a refinement of my previous “Mapping Jersey City Abatements By Project Type and Ward” post. I wanted to update the data, and the map, to show the market value of the abatement impact to our public schools.
The estimated market value of abated property that doesn’t pay school tax is more than $11 billion. The city’s budgets will be updated to reflect this new value once Jersey City’s property revaluation is complete (within the next 6 months), but for now we can estimate this using known assessed values (from the 2016 budget) and the 2016 equalization ratio.
Here’s the updated data, showing the market values of PILOTs. Source data was derived from the city’s user friendly budgets and abatement documents from the tax office. These are all abatements currently paying “PILOT” fees into the 2016 budget.
Here are some key insights, based on the table above, related to the school system:
- Columns 1 and 2. The city had 158 abatements in the 2016 budget, of which the majority were market rate (a mixture of luxury rentals, condos, hotels, and office buildings) and most of those were in Ward E, i.e. the Jersey City Waterfront.
- Column 3: The market value of these 158 abatements was nearly $12 billion.
- Column 4: Sum of PILOT Billing. These abatements paid nearly $128 million in “PILOT” fees. These PILOT fees went mostly to the MUNICIPALITY. The school system received 0% of the PILOT.
- Column 5: Taxes if Billed at Tax Rate. If these properties were subject to conventional taxes, they would have paid over $211 million. Also, Jersey City property taxes are generally split 50%/25%/25% to the City/CountyPublic Schools, respectively. Here’s out that $211 million looks if we split it out:
There are 2 things to point out here:
1) our school system is losing out on nearly $53 million in possible local school tax. That money is instead getting funneled mostly to the city in the form of PILOT payments.
2) By PILOTing, the city is effectively profiting by $15 million at the expense of the public school system. Here’s why: the city gets $127 million in PILOT fees. If those properties, however, had been conventionally taxed the city would’ve only gotten $105 million. Comparing the PILOT option to the taxed option, the city chooses the former…and the schools lose.
NJ Comptroller referred to this entire abatement scheme as a “perverse incentive” in his 2010 report, “A Programmatic Examination of Municipal Tax Abatements … page 24 at the link includes this:
State, city, county, and BOE officials have had notice of this “perverse incentive” for years. However, this perverse incentive is coming under renewed, and much needed, scrutiny, as evidenced by the Education Law Center’s recent report about Jersey City’s “local levy gap” with respect to school funding. The music has finally stopped.
Here are the abatements, mapped:
Map Legend & Methodology Notes remain the same:
The pin drops on the map are color-coded:
- Green Markers = Commercial/Industrial (market rate properties like residential rentals and condos, office buildings, industrial buildings, and hotels)
- Red Markers = Affordable Housing (the developer receives the abatement in exchange for building housing that is then offered at reduced rates)
- Yellow Markers = Other (e.g. PATH properties)
There are six wards in Jersey City:
- Ward A: South Greenville (green-shaded area of the map)
- Ward B: West Side (red-shaded area of the map)
- Ward C: Journal Square (yellow-shaded area of the map)
- Ward D: the Heights (purple-shaded area of the map)
- Ward E: Downtown Waterfront (blue-shaded area of the map)
- Ward F: Bergen Lafayette / Bergen Hill / Greenville (orange-shaded area of the map)