Officials argue PILOTs provide taxing entities with more ratables in the future on properties that wouldn’t be redeveloped otherwise.
Evesham Township officials are continuing to promote the benefits they believe the township has realized through the municipality’s use of New Jersey’s Payment In Lieu of Taxes program.
In an ongoing effort to better inform residents of the program, Evesham Township Manager Tom Czerniecki presented on the topic at this week’s Council meeting.
Through PILOT agreements, municipalities can encourage redevelopment of vacant or underutilized properties using financial agreements with potential developers.
As municipalities waive their right to collect the full property tax bill of a redeveloped property for a specified time, developers can agree to pay municipalities a percentage of the annual gross revenue of a redeveloped property or have the property’s full tax bill phased-in during several years.
By easing the financial burden of developers at the start of a redevelopment project, Evesham officials argue the township can gain more ratables and revenue in the future as PILOT agreements end and taxing entities are able to collect the full tax bill for properties that might not have been redeveloped otherwise.
Speaking before council, Czerniecki analyzed several of the township’s five-year PILOT agreements for projects at various stages of completion.
Czerniecki highlighted each of the properties’ tax assessments pre-redevelopment, along with the estimated assessment after the projects’ PILOT agreements are scheduled to end.
With the former Olga’s Diner, valuation pre-redevelopment was $1.6 million. With post-redevelopment into an in vitro fertilization lab and office building, valuation is an estimated $6.25 million.
For several former properties along South Maple Avenue, valuation pre-redevelopment was $400,000. With post-redevelopment into the newly opened Jackie’s Crossing apartment complex, valuation is an estimated $7 million.
At a former office park along Route 73, valuation pre-redevelopment was $8.29 million. With post-redevelopment into The View Retail shopping center, valuation is an estimated $12 million.
For the former municipal building on Main Street, valuation pre-redevelopment was $0 due to the municipality owning the property. With post-redevelopment into the Marlton Gateway Apartments complex, valuation is an estimated $6.6 million.
With the old bank building on Main Street, pre-redevelopment the valuation was $315,000. With post-redevelopment into the Main Street Apartments at Marlton complex, valuation is an estimated $3.5 million.
“These are properties that were troubled properties that needed help, and as a result of that help, they’ve now become profitable,” Czerniecki said.
Czerniecki said the properties’ combined pre-redevelopment assessment was about $10.6 million, and the combined post-redevelopment assessment was $35.3 million, resulting in a growth of $24.7 million in ratables.
According to Czerniecki, applying the current tax rate to $24.7 million results in nearly $700,000 in new property tax revenue, with more than $400,000 estimated for the township’s school districts once all PILOT agreements have expired.
“These redevelopment properties that got PILOTs would have just been sitting there, not very productive,” Czerniecki said.
Czerniecki said he also compared ratable growth in the township in 2017 to preliminary figures for 2018, but without including PILOTs or redevelopment projects.
For those calculations, Czerniecki said ratables grew nearly $50 million, from $5.21 billion to $5.26 billion
Of that $50 million growth in ratables, not including PILOTS or redevelopment projects, Czerniecki said local taxing entities would see a combined total of about $1.42 million in new tax revenues.
When broken down by specific taxing entity based on last year’s tax rates, Czerniecki said the county would receive about $203,000, the Evesham Township School District would receive about $578,000, the Lenape Regional High School District would receive about $347,000, open space funds would receive about $15,000, the local fire district would receive about $68,000 and the township would receive about $214,000.
“The picture I wanted to paint is we had a great year in ratable growth, and it had nothing to do with redevelopment and PILOTs,” Czerniecki said.
However, PILOT agreements are not without their critics.
While municipalities are able to realize some amount of revenue from a redeveloped property during a PILOT agreement, other local taxing entities, such as school districts and fire districts, do not receive funds until normal property tax collection begins once the PILOT expires.
State law only requires municipalities to set aside 5 percent of funds from PILOTs for their county governments. The choice to grant PILOT funds to local school districts or fire districts is decided by the municipal government.
In Evesham Township, no such agreement exists between the municipality and other local taxing entities.
However, Evesham officials argue the township’s school districts and fire district will ultimately realize more revenue in future years when they’re able to collect full taxes on properties that would have otherwise had a much lower assessed value pre-redevelopment.
Evesham officials also note the municipality is the only taxing entity in town with the burden of repaying the difference in lost revenue when property owners win tax appeal cases and have the tax assessment of their properties lowered.
According to Evesham Township Director of Finance Tom Shanahan, the municipality sustained more than $7 million in tax appeal losses from 2009 through 2017.
Shanahan said that while the county reimbursed the township in each of the following fiscal years for the county’s share of the tax appeal losses, other taxing entities in Evesham, such as the school districts and fire districts, did not offer similar reimbursements.
If the financial losses in tax appeal cases were allocated to each taxing entity by its share of the tax rate from 2009 through 2017, Shanahan said the township would have saved nearly $5 million.
According to Shanahan, Evesham schools would have paid $2.85 million, the Lenape Regional District schools would have paid $1.7 million and the Evesham Fire District would have paid $337,000.
