Tax Abatements: A Taxpayer's Guide


Tax Abatements 101: A Basic Overview
Tax Abatements 101: A Basic Overview

A basic introduction to the topic of tax abatements in NJ ...
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/ Abatements 101: a Series, City Hall, Jersey City Abatement Policy, Jersey City Public Schools, Property Tax, tax abatements, Tax Abatements, Tax Base


Tax Abatements 201: Abatement Impact on Conventional Taxpayers
Tax Abatements 201: Abatement Impact on Conventional Taxpayers

This is Article #2 in my series about abatements, which focuses on the impact abatements have on conventional taxpayers.  My first post, “Abatement Basics,” is located here.  How important are abatements to Jersey City residents?  The answer: extremely important.  Abatement revenues – also ...
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/ Abatements 101: a Series, City Hall, Jersey City Abatement Policy, Jersey City Public Schools, Property Tax, tax abatements, Tax Abatements, Tax Base


Tax Abatements 301: Two Sides of the Same PILOT
Tax Abatements 301: Two Sides of the Same PILOT

This is article #3 in my series about abatements.  Article #1 is “Tax Abatements 101: The Basics” and Article #2 is “Tax Abatements 201: Abatement Impact on Conventional Taxpayers.” In my previous post, “Tax Abatements 201: Abatement Impact on Conventional Taxpayers”, ...
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/ Abatements 101: a Series, City Hall, Jersey City Abatement Policy, Jersey City Public Schools, Property Tax, Sugar House, tax abatements, Tax Abatements, Tax Base


Tax Abatements 401: The Transparency Issue
Tax Abatements 401: The Transparency Issue

In his 2010 report, “A Programmatic Examination of Tax Abatements,” NJ Comptroller A. Matthew Boxer highlighted numerous weaknesses with abatements.  One issue he touched upon was transparency.  He stated, “Information concerning abatement[s]…is not published in a transparent manner or centralized ...
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/ #AMDG #Revaluation #Property Tax, Abatements 101: a Series, City Hall, Jersey City Abatement Policy, Jersey City Public Schools, Jersey City Public Schools Budget, Journal squared, KRE, Rolando Lavarro, Steven Fulop, tax abatements, Tax Abatements


Tax Abatements 501: A Critique of Mayor Fulop’s “Buy Up” Abatement Policy
Tax Abatements 501: A Critique of Mayor Fulop's "Buy Up" Abatement Policy

In my Abatement Series, I’ve discussed the basic premise of abatements, how they are funded, and the impact to conventional taxpayers.  In this post I look at Mayor Fulop’s new tax abatement policy for Jersey City, which includes two notable components: Tiering ...
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/ Abatements 101: a Series, Jersey City Abatement Policy, Jersey City Public Schools, Jersey City Public Schools Budget, Property Tax, Steven Fulop, tax abatements, Tax Abatements


Tax Abatements 601: Brighter Sunshine Mandated for NJ Abatements
Tax Abatements 601: Brighter Sunshine Mandated for NJ Abatements

Tax abatement reporting in Jersey City is finally getting more transparent.  Two distinct authoritative bodies have mandated changes that require Jersey City (and other cities) to get onboard the transparency train. This news should come as a relief to taxpayers since abatements now constitute over 20% of ...
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/ #FundOurSchools, Abatements 101: a Series, City Council, GASB Statement No. 77, Jersey City Public Schools, Jersey City Public Schools Funding Crisis, NJ's User Friendly Budget: A Series, Public Budget, tax abatements, Tax Abatements


Tax Abatements 801: We need better abatement disclosures in NJ to show impact on public schools
Tax Abatements 801: We need better abatement disclosures in NJ to show impact on public schools

This is post included in both my abatement series and a series about the User Friendly Budget in NJ.  We need better disclosures in NJ to understand the impact of tax abatements on the local fiscal landscape, particularly as it ...
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/ Abatements 101: a Series, Jersey City Public Schools Budget, Tax Abatements


The “User Friendly Budget”, part 5 & Tax Abatements 701 – Abatement disclosures in the UFB
The "User Friendly Budget", part 5 & Tax Abatements 701 - Abatement disclosures in the UFB

Note: the visualizations below are best viewed on a computer or tablet (vs a phone). Jersey City recently announced it was terminating an abatement on four buildings within the Beacon complex. The reason: “ownership defaulted on an obligation to retain ...
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/ Abatements 101: a Series, NJ's User Friendly Budget: A Series, Tax Abatements

Abatements in Context:


Jersey City’s 2022 Municipal Budget: Focus on Revenues & Increasing City Tax Levy
Jersey City's 2022 Municipal Budget: Focus on Revenues & Increasing City Tax Levy

In this post I’m using 2 public datasets: A: Jersey City’s 2022 Municipal Budget (Introduced) with proposed 2022 revenue and expense, located on the city website here. B: Jersey City’s 2015-2021 Municipal Budget summaries compiled in NJ’s User Friendly Budget ...
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/ Abatements in Context, Jersey City Municipal Budget


Jersey City’s 2022 Municipal Budget: the Big Picture
Jersey City's 2022 Municipal Budget: the Big Picture

On June 15th, Jersey City released introduced its 2022 budget. This is a part of a series about that budget. In this post I’m using two public datasets: A: Jersey City’s 2022 Municipal Budget (Introduced) with proposed 2022 revenue and ...
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/ Abatements in Context, Jersey City Municipal Budget


Jersey City 2021 Budget: 160 abatements on city’s books; visualizations on abatement type, value, PILOTs, and taxes if billed in full
Jersey City 2021 Budget: 160 abatements on city's books; visualizations on abatement type, value, PILOTs, and taxes if billed in full

This is part of a series on the 2021 city budget. The spirit of this series is: I’m interested in unpacking the budget and sharing as I go. In that same spirit, I’m sharing interactive Tableau data visualizations that help ...
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/ Abatements in Context, Jersey City Municipal Budget, Tax Abatements


Why the School Tax Levy is Key to Funding JCPS (and why seeking abatement funds is not a concrete solution).
Why the School Tax Levy is Key to Funding JCPS (and why seeking abatement funds is not a concrete solution).

I've heard "can't we go after the abatement money to fund our schools? Rather than increase the school tax levy?" The answer is: no, at least not directly. I wrote about the intersection of abatements & school funding back in ...
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/ Abatements in Context, Jersey City Public Schools Budget, Jersey City School Funding, Tax Abatements


Jersey City: Approximately $40 Million of School Tax is Locked Up in Abatement Contracts
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 ...
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/ #DataViz, #FundOurSchools, #GetCivic, #openData, Abatements in Context, Board of Education, Jersey City Public Schools, Jersey City Public Schools Budget, Jersey City Public Schools Funding Crisis, Jersey City School Funding, Public Budget, School Funding Advocacy, tax abatements, Tax Abatements, Tax Base


Updated: Jersey City Abatements from 2016 User Friendly Budget. Mapped by Project Type & Ward.
Updated: Jersey City Abatements from 2016 User Friendly Budget. Mapped by Project Type & Ward.

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 ...
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/ #DataViz, #openData, Abatements in Context, Property Tax, tax abatements, Tax Abatements, User Friendly Budget


Fulop Era Abatements Approved from 2013 to 2016
Fulop Era Abatements Approved from 2013 to 2016

I’m sharing a new map I created that pin-drops all abatements approved since Mayor Fulop and the current City Council took office*, i.e. since the summer of 2013.  I created the map after reading Terrence McDonald‘s recent article from the ...
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/ #DataViz, #openData, Abatements in Context, Jersey City Public Schools, Property Tax, Steven Fulop, tax abatements, Tax Abatements


Op-Ed Follow-Up: Get the Facts & Figures About Abatements & Public School Funding in Jersey City
Op-Ed Follow-Up: Get the Facts & Figures About Abatements & Public School Funding in Jersey City

I teamed up with Ellen Simon to co-author an op-ed in The Jersey Journal about how Jersey City’s PILOT policy harms our public schools. The article is dense with facts, figures, and assertions. To ensure our assertions are as accessible ...
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/ Abatements in Context, Board of Education, City Council, Jersey City Public Schools, Jersey City Public Schools Budget, Jersey City Public Schools Funding Crisis, NJ SFRA of 2008, Public Budget, tax abatements, Tax Abatements


Mapping Jersey City’s Abatements by Project Type and Ward
Mapping Jersey City's Abatements by Project Type and Ward

If you are new to the topic of abatements, I recommend my tax abatement series here.  I’ve updated my 2015 long-term abatement map to include 2016 data. The map is provided below, along with reports showing underlying data grouped by project ...
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/ #DataViz, #openData, Abatements in Context, Board of Education, City Council, Jersey City Public Schools, Jersey City Public Schools Funding Crisis, NJ SFRA of 2008, Public Budget, tax abatements, Tax Abatements


Jersey City PILOTs Rob Funding from the School System
Jersey City PILOTs Rob Funding from the School System

A strong public school system is essential bedrock to a healthy community. Yet in Jersey City, our bedrock is threatened by a fiscal policy that is over-reliant on PILOTs.  Here’s the crux of the problem: PILOTs help grow the city, which in turn increases demand ...
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/ #FundOurSchools, Abatements in Context, City Council, Jersey City Public Schools, Jersey City Public Schools Budget, Jersey City Public Schools Funding Crisis, Public Budget, Steven Fulop, tax abatements, Tax Abatements


Mapping Abatements in Jersey City
Mapping Abatements in Jersey City

As I explained in my last post, transparency around abatements is finally, slowly, increasing.  As data is unlocked, taxpayers can glean greater insight into how their tax dollars are spent.  To help with this effort, I’ve mapped the 146 abatements from ...
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/ #DataViz, #FundOurSchools, #openData, Abatements in Context, City Council, Jersey City Public Schools, Jersey City Public Schools Funding Crisis, Public Budget, tax abatements, Tax Abatements

FAQ

Abatements are the among most frequently asked about topic on CivicParent. Shown below are common questions and my responses.

What is an abatement? How does it harm the schools?

An abatement is a contract between the city and a developer (and then subsequent homeowners in the case of an abated condo building) that results in the building's occupants paying a "PILOT" (payment in lieu of tax) instead of regular tax. While schools receive a portion of regular property tax, they do *not* receive any of the PILOT fees. Jersey City abatements have historically sent 95% of the PILOT fees to the city, 5% to the county, and 0% to the schools. This the most direct impact that abatements have on our schools, but more is explained below.

Why is it important to understand "PILOT" vs. "tax paying" property?

An abatement should truly serve a public good, because there is a real cost in giving up the tax-paying potential of real estate. The debate about what constitutes a "public good" or "public purpose" is core to understanding the fairness of abatements. For instance:

  1. Granting an abatement to encourage growth in a truly blighted area of the city may serve a public good.
  2. Granting an abatement to preserve and rehabilitate a historic building that may otherwise be torn down, resulting in lost history to the city, may serve a public good.
  3. Granting an abatement to encourage a developer to build mixed income housing that sacrifices top-dollar profit potential - so that lower and middle income class residents have space to live in our city - may serve a public good.
  4. But granting an abatement in Downtown Jersey City as recently as 2016 -- that arguably is less about a public good.  That speaks more to profit motive and private goods, e.g. a developer who is being given a public subsidy in exchange to construct a building in an area that is no longer "blighted".

The importance of trade-offs is critical when we look at what is lost by locking real estate up in abatement contracts that don't pay school tax.

Are there different types of abatements?

Yes. There are both short-term (5 years) and long-term (10+ years) abatements. The short-term (5 year) abatements pay regular tax, but at reduced levels for 5 years (eg 20% of tax in Year 1, 40% in Year 2, and so on...until by Year 6 the building pays full, regular tax). The long-term abatements are different, though. Those are given what's called a "PILOT" fee. And the long-term abatements are typically for (i) affordable housing, (ii) market rate housing (eg rentals & condos), (iii) hotels, and (iv) commercial properties like office buildings.

Why would the city let a developer avoid regular tax?

An abatement (aka PILOT or “payment in lieu of tax”) is intended to alleviate blight. The idea is that the developer takes on risk by building in a blighted area. As a trade-off, the developer pays a PILOT - typically a predictable schedule of payments over time - instead of a conventional tax. The goal is: once the building is constructed, private capital and interests will help to lift the area out of blight. However, like any tool, it can be mis-used and that's arguably what's happened in Jersey City. For instance, Jersey City has granted abatements in areas of the city that are no longer "blighted", like Downtown Jersey City, as recently as 2016.

Where are Jersey City's long-term abatements currently located?

In 2016 I mapped the city's long-term abatements from that year's "User Friendly Budget", which I'm sharing below. I'm in the process of updating this map based on abatements that have been added to the city's books between 2016 and 2018. The city does not provide an easy to following listing of all abatements, thus updating the information year on year is a time consuming civic exercise. In my map, I've broken out affordable housing abatements vs. long-term abatements. I've also layered on a Ward map, so we can see where the public subsidies have been granted. Also, a note: there is a 1-2 year lag between the time when an abated building opens for use and when it shows up in these budget documents.

Jersey City's Abatements, Mapped from the 2016 User Friendly Budget:

 

Here is the data tabulated, by abatement project type and Ward:
(I will be updating this with more current data once its made available by the City)

 

What's an example of a building that illustrates the pros and cons of the abatement issue?

Journal Squared, the 3-building complex that sits atop the Journal Square PATH station. Approved in November 2013, this abatement illustrates some of the pros & cons of an abatement, and the detrimental impact to the schools.

Pros:

  • The abatement and complex represented the first major private capital investment in Journal Squared, an area that many argue had been languishing behind Downtown Jersey City.
  • The development has arguably pushed up home values in the surrounding areas, as realtors and other real estate professionals promote the large project as a boon for JSQ in the years ahead.
  • The 3-building project, once complete, will include 1,800+ units, thus local businesses will benefit from new purchasing power as new renters who live in the buildings shop locally.

Cons:

  • Each building was granted its own 30-year abatement, so the complex will not pay school tax until at least 2045.
  • The abatement wrapped three buildings into one, thus the pace of development is increased. The prospect of a new, massive investment of private capital attracts residents who are priced out of other areas of the city, like Downtown Jersey City.
  • As home values increase more rapidly, so do tax assessment values. This in turn increases property taxes more rapidly.  This in turn puts more pressure on existing residents in the area - many of whom are on fixed incomes or have lower incomes as compared to residents who will be able to afford the high rents in the new, abated buildings.

How the abatement vote happened:

The abatement for Journal Squared was approved by City Council on November 13, 2013. I wrote about the vote here, because it illustrated some of the poor process and outcomes that result when these significant contracts are pushed through Council. As the Council transcript reveals, some Council members didn't realize they were voting on the abatement, and others learned during the vote itself that the abatement represented a reversal from a key 2013 Fulop campaign pledge to fund the schools with PILOT funds.

What abatements has Mayor Fulop's administration granted?

Mayor Fulop has granted more than 30 long-term abatements. The map below shows all of the abatements granted between 2013 and 2016. There has been a notable freeze in abatements since the mid-2016 timeframe.

Abatements granted in Jersey City by Mayor Fulop & City Council, 2013-2016:

Why would the city grant abatements in areas of the city that are no longer blighted?

Jersey City - the municipality - is now financially dependent on PILOTs to fund itself, so there is economic and political pressure to maintain the current course instead of fixing this structural problem before it grows even worse. In 2018, abatements represented over 20% of the city's revenues, making them a structural fiscal pillar in terms of how the city funds itself.

We can see the city's dependence on PILOT fees by looking at how the city funded itself in 2007 versus 2015 (this is based on an article I wrote in late 2015).  As state aid to Jersey City decreased from 2007 to 2015, it put pressure on the city to raise local revenues. One way to avoid raising taxes, however, while also sustaining and even increasing city spending, is to use PILOT fees.  However, PILOT fees don't support the local public schools; instead, they represent a limited source of hyped revenues to the city. For this reason, in 2010, NJ Comptroller Matthew Boxer characterized abatements as "perverse incentives that distort decision making" -- because the municipality is incentivized to hoard the PILOT fee to fund its own budget, even though other stakeholders, like the public schools, lose out.

But the PILOTs have disastrous side effects that play out over time:

  1. They encourage the city to spend beyond its true means. Eventually, the PILOTs will expire and the city will no longer have the full 95% PILOT fee to rely on.  Jersey City officials acknowledged in 2019 that it would have to raise city property tax because it was taking in less PILOT fees than last year.
  2. They deprive the public schools of needed public finance.

Where can we see abatement data & learn about the underlying numbers?

Jersey City is required to report out its abatement data in the "User Friendly Budget," an annual companion to the traditional budget document that is released each year. The "UFB" is available on the city website and it includes a listing of all abated properties, their assessed values, the PILOT fees paid by each building, and also the foregone taxes.

This Tableau visual is a *work in progress*.  I'm working with limited data available from the City. Here's what is missing:

  1. A listing of all abatements currently on the city's books
  2. The address location of each abated property
  3. The start & end year of each abatement.

If we have this data in full, we can do the following:

  • See exactly where the abatements have been granted, and analyze by ward which neighborhoods have been granted how much subsidy.
  • Glean insight into when abatements "convert" from abated property back to regular tax-paying property.

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