Should Town Hall Keep All The PILOT Money?

By on March 1, 2015
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The luxury Hilltop apartments will generate more than $663,000 in revenue for Verona in 2015.

The luxury Hilltop apartments will generate more than $663,000 in revenue for Verona in 2015.

Town trucks plow school lots. Town lawnmowers cut school grass. At the Town Council meeting on February 17, Town Manager Joe Martin claimed that the municipal government does $100,000 in work on behalf of Verona public schools each year that it does not bill to the Board of Education. In a follow-up phone call, the spending grew larger still: Martin ticked off a list of items that he said totaled as much as $400,000. Martin believes that this un-billed spending justifies the town’s refusal to share any of the special revenue from the luxury Hilltop apartments with the school district.

But should it? And who should have a say in that decision?

This is a story about taxes, so it might get dry in spots. But stick with it, because there is a lot of money at stake right now and there will be a lot more money at stake in the future. Money that affects how much you will pay in property taxes and how much can be spent on any children you have in public schools. Verona currently has three properties covered by a payment-in-lieu-of-taxes, or PILOT, a special arrangement that gives virtually everything to town government and nothing to the schools. Nothing. Even though there are school-age children living in two of the three properties. Nothing, even though every other taxable property in town contributes to the cost of public education here. New Jersey’s state comptroller took a sharp look at PILOT arrangements five years ago, and now some people in Verona are starting to do the same.

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That could be a good thing because there could be more PILOTs in our future.

HilltopPILOT3Regular property tax revenues in Verona are parceled out to the public schools, the town government and Essex County, with roughly 55% going to the schools and 25% and 20% respectively to the two government entities. The two buildings known as the Highlands at Hilltop pay tax this way on the value of the land under them. But the improvements to the lots–the luxury apartments themselves–are covered by a PILOT that sends 95% of the payment to the town and 5% to the county. The BOE gets nothing.

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Some Verona residents, concerned about the steep cuts in state aid to education and the prospect of PILOT agreements on the redevelopment of the Annin Flag building and former Brunner auto dealership, say that PILOTs shortchange the public education that has been the bedrock of Verona’s attractiveness to homeowners. They are calling for all PILOT monies to be shared with the BOE just as property taxes would be. (Their remarks at the February 3 BOE meeting start at the 1 hour 8 minute mark of the video below.)

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    3 Comments

    1. Bob Manley

      March 10, 2015 at 10:15 am

      Mark Twain once said, “Some people use statistics like a drunk uses a lamppost; for support rather than illumination.” The above, undocumented, unverified graph that shows Verona’s property tax rising 30% since 2009, while Caldwell’s has only risen 5% is misleading at best, and an unfair comparison for a number of reasons. Each municipality is responsible for collecting 100% of your property tax. On average, 55% of Verona’s goes directly to the Board of Education, and 20% goes directly to Essex County. This leaves the Township roughly 25 cents on the dollar to run your town.

      A comparison done in the fashion of the above graph is simply an example of apples to oranges. All towns provide different services, have different revenues, and have a different tax basis (residential vs. commercial) to pay for the essential services they provide.

      The unverified graph by Mr. Roman chosen to be presented in this article offers no detail or support, and it is unknown from where his statistics are derived. It is obvious that he did not use the municipal tax levy which is a much truer example of what the Township Council has within its control. The municipal tax levy is set strictly by the Council, and while still driven by certain fixed costs, it does not fluctuate with the economy or other external influences.

      Back in 2010 when the national economy was in such dire straits, the Township Council heard the real and troubling concerns of our residents and came in with a flat tax levy, a 0% increase for the next 3 years. For 2010 to 2011, 2011 to 2012, and 2012 to 2013, the money to be raised by taxation for the municipality portion of your total property tax did NOT increase.

      According to the above graphed municipalities’ own official websites showing the tax levy % increases from 2010 through 2014, an illuminating truth is revealed. Caldwell’s municipal tax levy actually increased by only 2%, West Caldwell’s by 5.98%, and Verona’s by 11.75%. However, Montclair increased by 13.3%, Glen Ridge 14.8%, Essex Fells 16.91%, and Cedar Grove by 18.58%.

      A quick look at Caldwell’s audit report highlights three key reasons why they are lower than Verona’s.
      1. Caldwell’s Miscellaneous Revenue Anticipated accounts for over 40% of their budget, which leaves only 60% to be raised by taxation.
      Verona’s Miscellaneous Revenue only accounts for about 20% of our budget, half of Caldwell’s, leaving 80% to be raised by taxation.
      Caldwell’s Community Center brings in just under $2,000,000 a year as it is run like a fitness club charging membership fees.
      The Verona Community Center generates about $70,000 derived from rental of the
      banquet room. It is predominantly used to facilitate Township recreation programs.
      2. Caldwell pays 48% of property tax to their BoE compared to Verona’s 55%.
      3. Caldwell has a substantially greater percentage of a commercial to residential tax base compared to that of Verona.

      The Payment in Lieu of Tax program is a good thing, particularly for municipalities the size and demographic of Verona. It allows the township to maintain the delivery of essential services, and implement needed projects, programs and facilities while keeping the municipal portion of your property tax low. Please feel free to contact me if you wish to further discuss any concerns you may have.

      Mayor Bob Manley
      [email protected]

    2. Alex Roman

      March 11, 2015 at 1:15 am

      Mayor Manley,

      Thank you for your comments.

      First, the quote you refer to is generally attributed to Andrew Lang. Mark Twain may have said many memorable things but that is not one of them.

      The graph I prepared is based on the municipal tax levies of each of the municipalities shown. I pulled the state form municipal budgets from each of their websites for all years available at the time of preparation of this data. The numbers graphed are the cumulative percentage increase over a 2008 reference year for the value on Sheet 11, Line 6, “Total Amount to be Raised by Taxes for Support of Municipal Budget”, FCOA 07-199.

      You state that Verona did not enact a tax increase for the 2010 – 2011 time period. That is incorrect.

      In 2010, the total municipal levy was $14,059,373. In 2011, it was $14,865,208. From 2011 to 2012 and from 2012 to 2013 it did not increase from that $14,865,208 amount until the originally proposed 2014 tax levy hike to $15,833,811, later brought down to $15,710,811. Thus, we were hit with a 5.73% tax increase in 2011 and a 6.52% increase was originally proposed for 2014, finalized at 5.69%. You voted to approve those increases.

      I will agree that under intense public pressure the Township did limit the rise in its tax levy for a two-year period of time followed by a significant tax hike in 2014. We have still increased the levy at three times the rate of inflation over a 2008 reference year. That to me remains unacceptable financial performance and a real increase on the burden placed on citizens.

      Alex Roman

    3. Bob Manley

      March 11, 2015 at 7:17 pm

      The quote is actually derived from 1903 writing by H.E. Housman, but yes, I stand corrected. It is most attributed to Andrew Lang. Thank you Alex.

      However, I stand by every other comment made in my response. The Verona Township Council did not increase the amount of municipal spending to be paid by taxation for 3 consecutive years. As I previously stated, there are many fixed cost drivers, more than most people realize, that are beyond the control of the Council. I also stand by what I have said since I initially ran for Council six years ago; I firmly believe that the vast majority of Verona residents would rather see their Council endeavor to keep taxes as low and consistent as possible, but without sacrificing the delivery of essential services they have come to enjoy and upon which they rely.

      My apologies to Mr. Lang

      Bob Manley

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