What is in a Name?

Shakespeare wrote, “A rose by any other name would smell as sweet.”  However, when it comes to Holmdel property taxes, what it is called makes a huge financial difference to the Township Committee and the Holmdel school district.  In fact, it is the primary difference that allows the Township Committee to be “fat and happy”, while the BOE struggles with a financial crisis that could lead to drastic actions that may include laying off teachers, outsourcing paraprofessionals and custodians, and raising property taxes yet again.

PILOT and the importance of it to Holmdel Residents

A Payment in Lieu of Taxes (“PILOT”) is a financial agreement between a municipality (Holmdel Township) and a developer.  In essence, it is a tax break granted to a developer designed to encourage the redevelopment of an area designated as “in need of redevelopment”, such as Bell Works and Vonage.

The developer is exempt from paying conventional property taxes for a set period, typically 10 to 30 years.  While this state law was intended for urban blighted areas, it is available to all municipalities.

For the last few years, the school district has received about 68% of all property taxes collected by the Township.  However, unlike conventional property taxes, Holmdel Township retains 95% of all PILOT payments and 5% goes to the county.  The Holmdel school district gets nothing from PILOT payments.

“It was the best of times, …” – Charles Dickens

As part of the budget process, each governing body prepares a budget and forecasts its anticipated revenue (which includes tax levies) and anticipated expenditures (called appropriations).

Over the past 5-year period (2020 to 2024), Holmdel Township has received excess revenue over what it had anticipated by almost $24 million.  Most of this excess revenue is from PILOT payments received from the Bell Works commercial building and the Regency residential townhomes.

Comparison of Realized vs. Anticipated Revenue

	2020	2021	2022	2023	2024
Realized revenue	$26,771,480	$30,083,032	$33,185,181	$34,763,881	$39,781,339
Plan revenue	$25,084,009	$26,007,313	$28,575,108	$30,340,968	$30,715,153
Excess revenue	$1,687,471	$4,075,719	$4,610,073	$4,422,913	$9,066,187

 This has allowed the Township Committee to increase its annual spending by $7.4 million (from $25.0 million in 2020 to $32.4 million in 2025) and grow its surplus from $3.5 million in 2020 to $8.2 million in 2025, all while proudly proclaiming it didn’t raise taxes for its residents.

Holmdel’s surplus, as a percentage of appropriations, stands out in comparison with other relatively affluent towns governed by conservative bodies in Monmouth County.

Comparison of Surplus as a % of Appropriations

2025	Surplus	Appropriations	Surplus as % of approp.
Colts Neck	$3,000,000	$20,018,755	15.0%
Fair Haven	$1,600,000	$12,331,134	13.0%
Little Silver	$2,205,000	$13,375,000	16.5%
Rumson	$2,800,000	$22,429,515	12.5%
Average	$2,402,250	$17,038,601	14.1%
Holmdel in 2020	$3,500,000	$25,006,365	14.0%
Holmdel in 2025	$8,185,000	$32,402,131	25.3%

 “…, it was the worst of times, …” – Charles Dickens

Meanwhile, the Holmdel school district has hiked its taxes by $9 million in the last three years.  In May of this year, the school district issued a dire warning of a budget deficit of $2.4 million for the 2026 – 2027 school year.  It now appears that the budget deficit will exceed $4 million, possibly $6 million.   The school district also does not yet have a new teachers’ contract (even though the contract expired back in June), so we don’t know what the financial impact of a new contract will be.  There is anecdotal evidence that capital improvements are also needed due to leaky roofs and other major repairs that may be needed.

Vonage PILOT

To make matters worse, the redevelopment agreement between the Township and the redeveloper of the Vonage property includes a PILOT program.  The redeveloper currently has an application for their project before the Holmdel Planning Board.  The Township collects about $358,000 in property taxes for the Vonage property, of which the school district receives about $240,000.  However, if and when the Vonage PILOT becomes effective, the school district could lose $240,000 in annual tax revenue.

What to do?

The school district has given notice to the school district union that it may consider outsourcing of paraprofessionals and custodians and may have to lay off teachers.  Even with that, this may not be enough.

Since the school board election was moved from May to November, the BOE is allowed to increase the budget by up to 2% without approval from Holmdel taxpayers.  The school district will likely need to raise its taxes above the 2% cap, triggering a referendum.  The significant tax increase affects all Holmdel residents, whether they have children in the school system or not.

During the election, PILOT was a front-and-center issue.  Allan Roth, a Township Committee candidate, proposed a shared services agreement between the Township Committee and the BOE, directing some of the PILOT money to the school district.  There are precedents for this in other New Jersey towns.

Earlier in the year, the school district considered the idea of whether to continue the free courtesy busing for students within 2 miles of the schools.  If free courtesy busing is discontinued and given that some of the roads near Holmdel schools may not be safe for school children to walk on, road improvement would likely be needed.  That certainly would be one basis for a shared services agreement and is used by more than one town in New Jersey.

The Township Committee is paying for security officers at the school district (about $450,000) and, earlier this year, agreed to a “bailout” of $600,000 so that the BOE, under President Chris DiMare, can cobble together a budget that does not need Holmdel taxpayers’ approval and kicked the can down the road.

The looming school budget deficit of $4 – 6 million may be too big for a band-aid approach.

Many families moved to Holmdel because of the school district.  Will the Township Committee continue to live in an embarrassment of riches while the school district struggles financially?  If so, how will this sit with Holmdel taxpayers and voters, especially parents with children in the school system?

Stay tuned.  It will be interesting to see how the situation develops.