Jersey City: Approximately $40 Million of School Tax is Locked Up in Abatement Contracts

This is part of a series about the 2019/20 proposed municipal and schools budgets in Jersey City.

Jersey City’s proposed 2019/20 municipal budget shows that over $120 million in PILOT fees are expected to be collected in in the coming year.  What is notable about PILOT fees is that they don’t contribute to the school tax.

I wrote about abatements, PILOT fees, and the detrimental impact on the public schools back in 2015, but to quickly recap how it works: the City Council grants an abatement to a developer, who then constructs a building. Then, rather than the building paying property tax, which would be shared with the schools, county, and city, the building instead pays a PILOT (“payment in lieu of tax”), of which 95% of the payment goes to the city and 5% goes to the County. The schools are completely cut out.

The purple shaded “PILOT Fees” shown in the proposed 2019/20 municipal budget below reflect $121+ million in revenue that the city is collecting for its own growth and development, completely cutting out the schools. But we can compute the foregone school tax to be about $42 million of the $121 million total (JCPS Business Administrator Regina Robinson confirmed about $42 million at the May 2nd BOE Budget hearing).

The notion that PILOTs are “foregone school tax revenue” is a critical for taxpayers and JCPS stakeholders to understand, as we face hundreds of projected staff cuts as part of this year’s BOE budget. In fact, just yesterday, teachers, principals, and other staff received reduction in force (“RIF”) notices.

A Question for City Council

During this budget cycle, one question I’ll be asking Council members is: what is the plan to wean the city off of PILOTs, and distribute a share of the existing $120 million in PILOT fees to the schools?  Jersey City is in year one of a phased, incremental reduction of $250+ million state aid.  We are at the start of a 5-7 year fight to ensure full, sustainable local funding for our local public schools. Grappling with how the existing PILOT fees are allocated must be part of the conversation going forward.


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