Property tax abatements will cost local government $108 million this year in lost revenue according to an analysis by Brigid D’Souza, an assistant professor of accounting and taxation at St. Peter’s University, raising an old debate about the use of abatements to spur redevelopment.
D’Souza posted the study on her blog, Civic Parent, which over the years has become a go-to resource for Jersey City policy wonks hoping to better understand the intricacies of property taxes, tax abatements, and school funding.
The owner of a property that is tax abated remits to the city annually a fixed “payment in lieu of taxes” (known as a PILOT). Unlike conventional property taxes, which are split between the city, the county, and the schools, PILOTs go only to the city.
D’Souza estimated the current market value of the 160 abated properties in Jersey City and calculated that, if taxed conventionally, they would pay more than double the $96 million that they actually pay in PILOTs. They would pay $204 million.
“People should understand the data,” said D’Souza, who maintains a professorial neutrality. “Abatements are a tool.”
D’Souza acknowledges that, because the city does not have to share the PILOT, this mechanism is in the city’s economic interest. But she believes that “the public needs to know the costs,” one of which is the inability of the city to extract more revenue from abated properties in the future should needs change. Critics also point out that the schools receive nothing from PILOTs, leading to their underfunding.
The issue of abatements has roiled Jersey City politics for years, often pitting developers against good-government groups and school funding advocates.
Bob Antonicello took a job with the city in 1977, eventually rising to executive director of the Jersey City Redevelopment Agency, a position he held for eight years. He is now a principal of Grid Real Estate.
To Antonicello, abatements were badly needed from the ’70s to the early aughts. “Anyone who looked at the apocalyptic post-industrial collapse of this northeast industrial city agreed something needed to be done,” he said.
But, according to Antonicello, by the 2000s, developers no longer needed abatements Downtown: The rents had risen high enough to support construction without them.
The city continued to give out abatements where none were needed because it was running a structural deficit and could get developers to pre-pay their taxes. But, Antonicello explained, “Now these pre-payment of taxes became a problem. It became like an opioid addiction for the city. They would negotiate abatements where any objective viewer would probably say ‘it’s not necessary.’”
The practice continued, according to Antonicello, into Mayor Fulop’s first term. But he gives the mayor credit for changing the rules. “Where Steve [Fulop] absolutely hit it out of the park is when he put out the executive order” to focus abatements on neighborhoods that hadn’t seen development.
Antonicello rattles off some abatements that should still be considered: industrial projects, supermarkets for the south side, tall “eco” buildings that minimize heat islands, and central business district projects.
No matter which side of the abatement debate one comes down on, D’Souza is adamant that there needs to be greater transparency.
“A lot of people are looking back and wondering how these abatements happened. The city should invite people in to discuss them before they’re approved.”