Interesting Question, Is Middletown Being PILOT'ed ?

Over on the Facebook group, Stop Village 35, the Admin there added an interesting post yesterday asking if the town is engaging in the PILOTing of Middletown.  Until reading this post I had know idea what this alleged PILOT program entailed. 

PILOT is an anachronism for Payment In Lieu Of Taxes and is essentially a huge give away to developers in return for cash payments directly benefiting Town Hall. According to the Stop Village 35 post  95% of these payments would go to the municipality, 5% to the county and 0% would be given to the Board of Education. Which means that both Monmouth County and Middletown's Board of Education(BOE) are cut out of potential vast amounts of tax dollars that should be rightfully owed to them. For the BOE this would mean that Middletown's children and the quality of their education is at risk because of under funding and could then lead to higher school taxes being imposed to make up the difference.   

The post goes into further detail about what the PILOT program is and its potential ramifications for Middletown, if in fact this is what's happening behind the scene. It also hints at my Thursday post concerning the inflated cost of the new municipal complex that is in development.

The Stop Village 35 Facebook page is closed to the general public, you need to be a member of the group to see any of it's posts so I've copied it and have added it below for people who can't access the page to read. It really is a fascinating read and should be alarming to residents.

   

IT’S TIME TO TAKE BACK OUR TOWN. Fund the Fight, Save Middletown: http://bit.ly/Save07748
WHAT OUR TOWN OFFICIALS AREN’T SAYING: Redevelopment designation and PILOT (Payment In Lieu of Taxes) go hand-in-hand. They don’t want to talk about their possible deal with the Circus Liquors Redevelopment Developers; nor do they legally have to disclose a PILOT deal at this point.

Here’s a juicy nugget that might explain why our Township Committee gave it all away to the developer — the possibility of a PILOT program. The biggest effect of a PILOT program is how payments are disbursed: 95% to the municipality, 5% to the county, 0% to the schools. OK, this means the Board of Education loses out, the quality of our kids’ education is compromised, and our property values are screwed. Quality of education is a huge factor in property values.

Funding for the Municipal Complex, Town Hall, is rumored at $54 million to build. This is relevant to the following explanations of Areas in Need of Redevelopment, applicable PILOT programs, and revenue that is reaped by the municipality. This is complicated, but it’s important!

By designating a site an Area in Need of Redevelopment, the municipality may enter into a PILOT (Payment In Lieu Of Taxes) agreement with the developer. Archer Law offers a clear explanation of NJ PILOT programs: http://bit.ly/PILOT_explained

“Instead of property taxes, developers make an annual PILOT payment to the municipality. The PILOT payment is typically much less than traditional taxes, and is structured so that the municipality receives more of a benefit than it would from usual property taxes. Not only do these exemptions save a developer in real estate taxes, but they provide an increase in the fair market value of the property as a result of higher net operating income.

Long-term tax abatements may last up to 30 years from the completion of a project, are typically utilized for larger redevelopment projects, and require a municipality to declare an area as being in need of redevelopment....The PILOT structure...greatly reduces the developer’s tax burden, and results in significant savings over the term of the PILOT agreement.”

Effects of PILOT programs:

PILOT programs may last as long as 30 years from completion of project, or 35 years from date agreement is signed; minimum term is 10 years.

PILOT program payments are disbursed 95% to the municipality, 5% to the county, 0% to the schools. School taxes are the greatest single portion of tax bills in Middletown. In some cases, the property may already have been paying school tax, but under PILOT, that obligation would be removed.

PILOT amounts often exceed the revenue municipalities would have received from taxes, while, at the same time, denying funding to school districts.

PILOT programs artificially depress rateable property tax base.

IT’S TIME TO TAKE BACK OUR TOWN. Fund the Fight, Save Middletown: http://bit.ly/Save07748