More Accountability Is Needed In Jackson’s Push For PILOTs

Payment in lieu of taxes programs have created quite the headache throughout the state (and beyond). Back in 2010, former State Comptroller A. Matthew Boxer stated that New Jersey’s loses hundreds of millions in tax abatements each year due to these programs, while nationally, close to $70 billion is lost. This blog wanted to point out a few examples of unpaid PILOTs over the years, including some that have affected Montclair.

In late 2013, Jersey City announced they would sue the Port Authority of New York and New Jersey for unpaid property taxes stemming from a PILOT agreement:

Jersey City recently announced it would sue the Port Authority of New York and New Jersey for $400 million in unpaid property taxes stemming from long-standing payment-in-lieu-of-tax agreements — called PILOTs — on Port Authority properties. Mayor Steve Fulop said the unpaid taxes have caused a “severe and negative impact on Jersey City taxpayers.”

Our neighbors across the Passaic River have also encountered problems with PILOTs. In 2012, North Arlington struggled with completing their budget due to unpaid PILOTs dating back to 2009:

Anthony Bianchi, East Rutherford's chief financial officer, said the borough still is waiting for state approval for its introduced budget of $24.8 million.

In North Arlington, the borough is tied up in "protracted tax appeal litigation" with the New Jersey Meadowlands Commission over roughly $1.7 million in unpaid property taxes and payments in lieu of taxes dating to 2009.

"As a result of the uncertainty of the payment … the borough has been unable to finalize its 2012 budget and will not be able to do so until the issue of payment is resolved," Randy T. Pearce, the borough attorney, wrote in a letter to state officials requesting a three-week extension.

And here in town, the Siena at Montclair was the biggest violator of the unpaid PILOT bills, owing more than $280,000:

Township officials say the owners of The Siena at Montclair , the seven-story retail and condominium complex at the corner of Church and South Park streets, owe the municipality $282,451 in unmade payments in lieu of taxes on the property, a claim the developers are disputing.

According to Township Attorney Ira Karasick, that dollar amount represents unpaid bills for the retail portion of The Siena that date back to 2008.

The Siena, constructed on the site of the long-vacant Hahne & Co. department store, is part of a redevelopment area and the owners and developers - Herod Redevelopment, the Pinnacle Companies and Kohl Partners - have a payment- in - lieu - of - taxes (PILOT) deal with the township.

Under the terms of that agreement, the property owners were expected to pay roughly $94,000 per year on the ground-floor, commercial facet of the project once it was completed. 

The way the agreement was set up was somewhat confusing to the developers. Under the agreement, the developers- Herod Redevelopment, the Pinnacle Companies and Kohl Partners- assumed they didn’t need to make payments until the property had been completely developed. But at the time, part of the property’s space had been developed and was being leased to Starbucks. The Montclair Tax Collector's Office started to send out bills to the developers to which the developers responded by saying nothing was owed yet. According to the Montclair Times:

“The township did not follow up and pursue the outstanding payments until now. When Herod and Pinnacle received their notices of default and sent letters arguing that they didn't have to pay, the municipality did nothing further. The developers therefore "assumed that the Township accepted" their explanation and reasoning, according to one letter from Applebaum.”

Thankfully, this mess has been resolved under our Township attorney’s lead, Ira Karasick, who has recovered more than $400,000 in unpaid PILOT programs.

Karasick has saved Montclair a considerable amount of money during his tenure, including more than $150,000 in legal expenses as well as money due to the township as part of Payment In Lieu of Taxes (PILOT) programs, according to Lewis.

In an Oct. 4 memo to the council, Karasick wrote that under his watch the Township Law Department had collected more than $430,000 in unpaid PILOT payments.

We should be careful with the type of agreements Mayor Jackson is trying to push on our town. PILOTs allow developers huge tax breaks at the expense of our town, our schools, and ultimately, us as taxpayers

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