Tax Abatements: A Taxpayer's Guide

Abatements in Context:

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.

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)

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

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.

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.