N.J. report questions municipal tax-abatement deals

TRENTON - A program that allows towns to give out tax breaks to attract development receives little state oversight and causes school districts to lose out, according to a report released Wednesday by the state Comptroller's Office.

The report said municipalities using the tax-abatement program often receive more money because they implement payment-in-lieu-of-tax agreements (PILOTs) with developers that almost exclusively channel payments to the towns. School districts, which would otherwise receive most of the taxes on a property, then get nothing.

Collingswood, Camden, and Gloucester Township are among the municipalities that have made significant use of the program.

Comptroller Matthew Boxer's office found that the abatements artificially depress the property-tax base in a town and leave surrounding communities to take on county tax burdens or to give out their own tax breaks. The report also found that standards for designating "redevelopment areas" eligible for the program were loosely applied.

Some towns have conceded that PILOT amounts often exceeded the revenue they would have taken in under the traditional tax structure, passing the true costs of abatements on to schools, other county residents, and state taxpayers, the report said.

In one example, the report questioned the need for Gloucester Township to grant short-term abatements to three Super Wawa stores between 2007 and 2008. It quoted an unnamed official as saying that while he did not believe large chains needed such incentives, the township was obligated to grant them because the stores met the criteria.

Township Administrator Tom Cardis said a lot of planning went into granting the five-year PILOTs to the Wawas - including one near the border with Washington Township - and they "were not just handed out."

Responding to the comptroller's assertions that the abatement program lacked transparency or monitoring, local officials said that the PILOTs were subject to a public approval process and that participants were regularly reviewed for compliance.

"The state has structured our property-tax system . . . in such a way that pits the townships one against another in trying to bring in these ratables," said Mayor David Mayer. "The state is criticizing towns for following [its] rules."

Camden has 31 PILOT agreements, plus several other negotiated tax deals not referred to as PILOTs.

In the proposed fiscal 2011 city budget, 31 PILOTs worth more than $4 million are listed, ranging from $347,922 for the for-profit Adventure Aquarium to $886,000 for the government-contracting giant L3 Communications.

Collingswood has a five-year PILOT agreement with the LumberYard condo development near the PATCO High-Speed Line.

The borough also has granted a long-term tax abatement to the Heights of Collingswood apartment complex. Mayor Jim Maley said the school district received a portion of the payment agreement every year, though the municipality was not legally required to share with the schools.

Maley is also redevelopment counsel to Mount Holly, which plans to grant tax abatements for residential and commercial developments set to replace the low-income Gardens neighborhood.

"I just think [Comptroller Boxer] got it dead wrong," said Maley.

He said the schools did not lose out under the tax abatement program. Instead, the tax burden is shifted onto the rest of the town's residents who do not receive the abatement, meaning the education system funds its budget either way.

He said that the PILOTs also covered the costs of the projects and that, if they were successful, they generated more ratables for the town and lessened the burden of school taxes for residents, helping schools pass their budgets more easily.

The comptroller's report calls for restructuring PILOT agreements so that payments are doled out among schools, towns, and counties, according to the normal breakdown of tax funds. Boxer's office also recommends that county governments coordinate abatement and redevelopment practices across towns.

Other recommendations include conducting "robust cost-benefit analyses" for the abatements, increasing monitoring of the program by state officials, and compiling information on the program into searchable online databases.

Sen. Michael Doherty (R., Warren) said in a statement that he had called for the nonpartisan Office of Legislative Services to begin drafting legislation to enact the comptroller's recommendations and that he would also ask Senate President Stephen Sweeney (D., Gloucester) to convene hearings on the matter.