PILOT, Township Committee and the School District

A little-known New Jersey law has become a hot topic for this year’s primary election.

In their latest mailer, Greg Buontempo and Prakash Santhana, running for Holmdel Township Committee, accused Brian Foster of extending “a tax break for developers - costing Holmdel schools $45 million.”

At issue is the PILOT program that was agreed to for the redevelopment of Bell Works circa 2014.

PILOT (Payments In Lieu of Taxes) is a New Jersey law that allows municipalities to offer long-term tax incentives for the redevelopment of properties that meet certain standards for areas in need of redevelopment.

After Bell Labs, Holmdel’s historic landmark building, sat vacant for many years, Somerset Development and its concept for Bell Works was chosen as the successful redevelopment partner.  A PILOT program was included as part of the redevelopment agreement.

Somerset Development’s plan included selling parts of the land at Bell Works to Toll Brothers, a high-end residential developer.   Toll Brothers’ plan included the development of 185 units of townhouses (“Regency”) and a PILOT tax incentive to help Toll Brothers sell these units.  At the time, some critics questioned the need to give Toll Brothers the tax break to sell these high-end units.

2012 EXTENSION

What was not as well known or understood was that the Regency PILOT agreement had an adjustment clause on the resale of the units.

At the December 2022 Township Committee meeting, the Township Attorney outlined a concern that the adjustment caused the PILOT payment to exceed the normal property tax payment.  The Township Attorney then requested consideration for Resolution 2022-338 which would reduce the adjustment to a level below the normal property taxes, thereby extending the tax break.  This item was not on the agenda for the meeting, which was released only three days before the meeting.

The Minutes of the meeting showed that Committeeman DJ Luccarelli made the motion for Resolution 2022-338 and Committeeman Brian Foster seconded the motion.  The voting record showed that DJ Luccarelli, Rocco Impreveduto and Bian Foster voted YES while Greg Buontempo Abstained.

Why is this important?

Besides providing a tax break, an important aspect of PILOT is that the Township receives 95% of the PILOT payments while the County receives 5%.   Holmdel school district receives nothing from these PILOT payments.  If these had been normal property tax payments, Holmdel schools would have received around 68%.

Instead of extending the tax break, it’s not clear whether the Township Committee considered the option to cap the adjustment at resale of the Regency units at normal property taxes and revert the units to the normal ratable tax base.

Earlier this year, the school district issued dire warnings about its financial condition and could face a financial hole of $1.5 – 2.0 million for the next fiscal year.

It’s also not clear how the $45 million in the Buontempo/Santhana mailer was calculated.  However, had a decision been made to limit the adjustment to normal property taxes and revert units to the normal ratable tax base, the school district would have started to receive 68% of the property taxes from the resale units at the Regency long before the end of the 30-year PILOT program.

Stay tuned.  It will be interesting to see how this plays out on June 10th.

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