Bruce Paterson is a Resident of Garwood, NJ

As an existing homeowner, the question arises why our property taxes continue to soar; especially after watching so many high-density luxury-rate residential complexes being built in the last 5-10 years. You can chalk it up to the “curse of the PILOT”. Although occurring statewide, we will look at our local area as example. PILOTs (payment in lieu of taxation) were created by the state as a tax exemption which means certain complexes don’t pay property tax, but instead provide a fixed low % revenue stream from rents collected. Sadly, this was sold to our various inexperienced governing bodies and us, the clueless citizenry, as tax relief by 3 groups, our legislature, a certain advocacy organization and developers. If a resident questioned this, the governing body would strangely respond that they will still have control over these huge bloated complexes. Yes, towns get to identify what small % of affordable units can be included but that’s basically it. Ask yourself, did every town want flat sided, flat roof, odd parapeted, 3 to 4 story, no greenery, bloated out to every square inch of property cookie cutter buildings? This program IMO became a financial and community disaster for us.

To explain in simple terms what this curse has done to us financially, once a luxury high-density complex is given a PILOT, our municipality (IE us, the existing homeowners) are converted into silent subordinated partners with the developer as full partner. As a silent partner, we do get some % cash flow from the rental income, but we get no say in what rents can be imposed, no say in how the complex is operated nor improved or changed and at the end if the building is sold or transferred, we get no part ownership share. From PILOTs all financial control such as taxation has been transferred out of our municipality’s hand over to the developer. After it’s built, we, the town nor the homeowners have no say. The townsfolk, the local governing bodies and professionals that accept this and give out PILOTS should be considered incompetent. This could also explain why the huge luxury complexes have been sprouting up exponentially nearly over night. Developers, which all are capitalistic “for-profit” companies recognize how much money they can make, while having to share a small % of their rental income stream to the town. One needs to question, that if a recession comes and half the renters move or can’t pay rent, what happens to our income stream based on total rent?

As to financial details: Looking at the tax-exempt PILOT’s rental revenue versus normal property tax assessment (like we existing homeowners are subjected to): Once given a PILOT, the luxury building revenue into the town is found to be only 50%-60% of the normal taxation level. And amazingly by law, the breakdown of that revenue excludes any monies going to our school district, crazy as that seems. It gets worse: this PILOT scheme becomes fully exposed when a town or school district has to take on large debt. Just recently we saw Scotch Plains/Fanwood with their $45 million school referendum, Westfield with the $167 million school referendum and presently Berkely Heights with their $50 million school referendum. Normal process when the referendum is passed the annual debt service costs are then in the budget and passed onto a higher property tax. And the PILOTs? They have all been previously set as a fixed % revenue stream so avoid any of those debt service costs. This question was asked to the Scotch Plains district CFO and he noted the PILOTs do not fund the referendum. All these luxury complexes do have school age children in the district. So if not paying any costs of the bonding, how does one think the people in those complexes would vote on the referendum? Further, the borough of Roselle Park the other year faced a sudden extra $5 million sewer bill from their sewerage authority. Since their luxury complexes do not need to fund the imposition, it was left for the existing homeowners to foot the horrendous bill. The state of NJ stepped in and gave a free $2 million aid to offset some of it. PILOTs avoid any major program or debt impacts to budgets.

As to the community impact, these luxury complexes are not just tax-wise screwing over residents but are also degrading our area’s quality of life. Our area was basically already built out, until the tens of thousands more residential units were added in 3 to 4 story buildings the last many years. These complexes are increasing a town’s population and residential unit density by 10-15%, some up to 17%. Who hasn’t noticed the huge influx of traffic everywhere where the streets are now at or over capacity and the intersections are rated D or F like in grade school. State statutes dictate that this does not figure into any consideration for approval of these complexes. Infrastructure, greenhouse gases, sewer increases drastically incur. Those yellow high-pressure gas lines and now the taller high tension power poles have large costs involved for the installation. This is resulting from the large added demands servicing these complexes. Yes, those units will also pay the monthly utility bills but also the existing homeowners get dinged for it too while not creating this forced infrastructure program. The scary part is what you have seen is called “Round 3”. This year the state has now imposed a “Round 4” which means even more large complexes, people, cars and burdens. And the scariest: these PILOTs given by governing bodies actually last for 20- 30 years.

Are we passed the point of no return? We need to at least ameliorate what the future holds. Towns’ governing bodies need to wake up to this financial and community disaster. Presently 27 towns are suing the state over this, but when ideology and political donations overrules common sense it’s a tough haul. Its time to see thru the developers’ scheming and also the governing bodies alligator tears that they have to build these huge complexes because of affordable housing mandates. The state recently said affordable housing units if required should now make up 20% of the buildings. But that is not enough. Increase it to 25%-30% or higher. The law only suggests a minimum. And the PILOTs: Instead of the 30-year duration curse of a community destruction, scrutinize their financials and reduce it down to 5 years or none at all. We have seen some financials; no way would it justify 30-year PILOTs. Inexperienced town governments were too cushy, prone to the crying profit driven developers. All towns should demand to the developers, “You’re the profit driven company, you figure out how to do it”. Every legislator needs to wake up and be aware of this letter on what they have created. Thank you for your attention.

The views expressed are those of the author and do not necessarily reflect the editorial position of NJ21st.

As a non-commercial and ad-free, free platform, we rely on you to help us grow. If you value independent coverage of local government, please consider helping us out.

Read More From Community Voices

Subscribe to NJ21st For Free

Our Commitment to Ethical Journalism