While Hopewell Township delivered the lowest equalized municipal tax rate in Mercer County in 2021, we are continually searching for new non-tax revenues to deliver the services our residents expect for less.
One potential solution, is PILOT (or Payments in Lieu of Taxes). But before I get into that, I wanted to provide insight on several of the financial headwinds the township faces.
First and foremost, there is an issue at the state level in New Jersey with property taxes: 1) municipal state aid had largely been flat at $1.6 million since 2011 and now covers only 6.6% of expenditures (amongst the lowest in the nation); and 2) the Legislature diverted a dedicated municipal revenue source towards other priorities via their Energy Tax legislation. This diversion has contributed to a more than $1.5 million annual loss in revenues for the township, beginning in 2008.
Second, Covid-19 has recently impacted several other non-tax revenues for the township, most notably court revenues. Finally, while we have worked hard to reduce township debt (down over 20% since 2014), the township’s debt service still accounts for approximately 25% of total municipal spending, including over a million in annual interest costs. Last year’s $6.5 million in debt service also exceeded what we expend on the township’s Public Works and Police departments combined.
That’s where PILOT comes in. PILOTs are a proven tool within New Jersey and can help our township build a stronger financial future.
New Jersey’s Department of Community Affairs encourages municipalities to utilize PILOTs to: 1) foster economic development; 2) enhance the municipal tax base; 3) expand community services; and 4) advance other public policy initiatives. The Township Committee has already successfully deployed PILOTs to satisfy the unfunded state mandate on affordable housing.
By encouraging private developers to provide affordable housing, we will save township residents over $160 million in construction costs vs. what we would have had to expend if we built these units on our own dime. In addition, PILOTs help reduce the residential tax responsibility for current residents by providing significant incremental revenues. Two examples:
First, the Woodmont project on Federal City Road is projected to deliver $830,000 in new municipal revenues in Year I, once construction is complete. This is equivalent to ~5% of our current total municipal tax levy and roughly as much as BMS (our largest taxpayer) paid annually, before moving to Lawrence Township. Over 30 years, this PILOT will deliver $46 million in municipal revenues, or enough to retire most of our debt.
Importantly, the proposed apartments at Woodmont are targeted to singles and young couples, to minimize the number of new school-aged children. In fact, a benchmarking analysis of similar Woodmont projects indicates this project should generate less than 30 additional students, which is well within the current number of open seats in the Hopewell Valley Regional School system.
A second project on the Zaitz tract behind the ShopRite on the 31 Circle will deliver $112 Million in new municipal revenues over 30 years, or 6.1 times more than if taxed conventionally, again without meaningfully impacting school enrollments. This project will also deliver over $16 million in additional benefits to township residents, including infrastructure, grading and storm water management for our new Senior and Community Center, public safety and traffic improvements at the Route 31 Circle, and 78 affordable housing units at no cost to current township residents.
Over and beyond these projects, the Township Committee has been working towards a PILOT for the Hopewell Parc project on the west side of Scotch Road. This development will be phased over 12-15 years, but will initially deliver $7 million dollars per year in incremental revenue (almost 30% of current township revenues). Over the 30-year term of this PILOT, we could leverage these revenues to finish paying off the township’s debt and to fully fund future year capital needs.
We will also be able to fund upgraded facilities for our EMS and other first-responders and other community amenities, including the new Senior and Community Center. Finally, and most importantly, these monies will enable us to fully satisfy the township’s incremental obligation on school costs. Contrary to some of the social media discussion in recent weeks, by law our schools will always receive all of the monies they budget (NJ Revised Statutes Sec 54:4-75), no matter what. The presence of a PILOT has no bearing on how much monies the schools receive, so the implication that a PILOT will somehow take money from the district is false.
We have been in active discussion with the school district, emergency services and other parties throughout this process and look forward to working together towards a better (and more affordable) Hopewell Township. If you want to learn more, there are detailed presentations and supporting material on the township website, including videos of our 1/27 and 2/22 Township Committee meetings, or feel free to reach out to me or one of the other committee members.
Kevin D. Kuchinski writes as a member of the Hopewell Township Committee and the committee’s finance liaison.
Kevin Kuchinski.,
