The Berkeley Heights Pilot Problem Part 1: How “Inaccurate Projections” Created Our Current School Funding Crisis

As PILOTS and school funding discussions have recently intensified we are going to put out a multi-part series on the issue to get residents up to speed.

PILOT’s stand for Payment In Lieu Of Taxes and instead of normal taxes every day working folks have to pay, developers pay a fee they negotiate with the Township.  The other difference is that none of this money goes to support schools even though children from PILOTS use the schools (and rightfully so).

Based on estimates we received from various internal sources in the District (and it may have been mentioned in a meeting) there are nearly 60 students attending BHPSNJ that come from PILOT housing.  A portion of these students require additional services. The school is not receiving any revenue from the Township to support their education – working families are covering it through their tax bill. At the ACFR 2024-2025 cost per pupil of $31,572, these students represent an annual educational obligation of approximately $1.89 million.

We’re going to start with the historical context, which the recent council-aligned framing neglects. While it is true that PILOTs were marketed as a way of financing the Municipal Building, it neglects to mention that a large portion of the town was opposed to the idea for the very problem the district is facing today.

The current Council-aligned narrative also implies that the BOE suddenly woke up and realized the funding structure problem and is only now asking questions. At the time PILOTs were being pushed, the BOE was heavily aligned with the Council and Mayor.

They relied on consultants who concluded that PILOTs would not bring meaningful new student enrollment into the district.

The current Council-aligned narrative omits this political messaging and the context that surrounded the issue at that time. Stripping that out makes the current disagreement appear as if it’s simply a neutral policy disagreement instead of what it really is – a problem created by inaccurate projections.

“Throughout this process we coordinated with our school board which has similarly studied this issue and sees no measurable impact on the District’s enrollment capacity or the delivery of our outstanding educational services.  This was reaffirmed by the School Board President at the May 22, 2018 Town Council Meeting.  Regarding the financial impact to the school district, our schools will continue to be funded as requested by the Board of Education within State-mandated spending limits—There is also nothing that prevents PILOT monies from being used for extra school costs generated by the project.  In addition, the PILOT payments will increase our municipal revenues available, mitigating future tax increases and/or improving our ability to fund debt service associated with our municipal redevelopment project. “ Source

This was from a Republican Council Member who supported PILOTs then, after losing the election to Democratic Candidates, went on to win a seat on the BOE. The BOE President at the time was a strong supporter of the Council in power as they were of him.

Now onto the Democrats and their positions during that same time period.

Mayor Devanney’s campaign, in her initial run, leaned on the message that Republicans were wrong about PILOTs adding to the school burden – I know, because I was there for several of her campaign’s speaking events.

One Democratic Council candidate at the time made it their entire speech at a coffee event.

There are also hints of this on the public record:

“Medeiros said the PILOT agreement is “a great deal for the developer,” but one which loses revenue for the Board of Education.” source

Mr. Medeiros is currently a Council Member and would represent one vote in sharing PILOT revenue with our school. He has an opportunity to correct what he felt was an issue with the agreements when he initially ran for office.

Then there’s the repeated emphasis within the current narrative on how well the strategy has worked. It ‘working’ depends on the metric being used.

Throughout the State, districts are suffering and legislation that would resolve this is being held back, in part, by tax funded lobbying groups working on behalf of municipalities.

So here we are.

Two recent council exec sessions where the discussion on revenue sharing was supposed to take place have not materialized – they just happened to miss quorum as two members were unable to vote because of their employment within the District while two Council Members who would have been able to vote on the issue were missing.

Now the story here may come across as one-sided but that’s because it is. That’s where the facts line up.

There’s no arguing the Township has extensive need at this point given what has gone on with the Sewage plant and the rising debt- but they are not the only entity with challenges in need of financing. It is also fair to say, like the school District, there is a good portion of Township spending that many residents feel is questionable. So both sides of the story need to be told because the current story- the one that is happening right now – is only benefiting one side of our local government and the one that is arguably less important.

There is so much more to peel back from the recent Council-aligned narrative and this analysis will continue over the next week or two.