New Apartments Get Closer To Tax Deal

On Tuesday night, the Town Council approved the former Brunner auto dealership property as an “area in need of redevelopment”, bringing the property one step closer to a tax abatement that could spur its being turned into two new apartment buildings. But even as the Council agreed to the designation, two Council members voiced concern over the structure of the tax treatment and its impact on the Board of Education.

In January 2014, the Verona Board of Adjustment approved a plan for the two Brunner lots presented by Mark De Mattheis, a 1983 graduate of Verona High School. But he has been unable to start the project and sought to have the properties designated as an area in need of redevelopment, which could make it possible for the lots to qualify for a payment-in-lieu-of-taxes, or PILOT. Under a PILOT, the property pays a pre-determined amount every year instead of property taxes, which could fluctuate.

Bankers like PILOTs because they make the costs associated with a property more predictable. But while regular property taxes are split 55%-25%-20% between the Board of Education, town government and Essex County, under a PILOT, 95% of the money goes to the town and 5% to the county. The BOE gets nothing.

There is a 30-year PILOT on the two apartment buildings on Verona’s Hilltop. This year, they will pay Verona $663,292. But even though several children in Verona public schools now live in the Hilltop, none of its PILOT revenue will go toward covering the cost of their education. The BOE has been asking the town to share some of the PILOT money for years, to no avail. (In October 2012, BOE member Joe Bellino said at a meeting, “I don’t want to be antagonistic, but push has come to shove now. If they [the Town Council] are going to be generous and give us some, what can we count on?”)

“We love capturing 95% for the home team,” said Council member Michael Nochimson at Tuesday’s meeting. “The issue is how to split things with the Board of Education.”

The issue is important because the De Mattheis apartments may not be the only new residence under a PILOT in Verona. On January 15, the Planning Board determined that the former Annin Flag factory and the properties around it are also an area in need of redevelopment. It doesn’t take much to be designated an area of redevelopment: There are eight criteria and an area need only meet one. Council member Kevin Ryan, who also sits on the Planning Board, quipped at Tuesday’s meeting that most of Bloomfield Avenue in Verona could be designated an area in need of redevelopment, as well as his own home.

Annin’s owners floated a plan to redevelop the factory into loft apartments last year and that plan seems headed for revival now. Annin is located within the boundaries of Brookdale Avenue School, Verona’s smallest elementary school.

At the Council meeting, Nochimson tried to rally a commitment from fellow members to split all PILOT revenues with the BOE. He didn’t get that, but emailed MyVeronaNJ.com later to clarify his plans. “The Verona PILOT Program has great benefits to our Township as long as it includes the Board of Education,” he wrote. “All PILOT Program dollars from both past (Hilltop) and future projects, need to include the Board of Education at 40% and the Township at 60% in order to be fair and equitible. We are one community that needs to be responsible, fair and work as a team to maximize these revenues opportunities together. Let us not forget that strong schools equally benefit our entire community.”

On Tuesday, Council member Kevin Ryan shared a 2010 state report on tax abatement programs with the Council. The report, by state Comptroller A. Matthew Boxer, found that New Jersey governments are doing little to monitor the use of abatements, both to ensure that they are awarded appropriately and that they meet their intended goals. “Payments to municipalities by businesses and developers in lieu of taxes, known as PILOT payments, distort municipal incentives in using and structuring abatements at the expense of counties, school districts and other taxpayers”, the report noted. (You can read the full report here.)

With the Council’s vote to approve the area in need of redevelopment designation, the Brunner lot plan goes back to the Planning Board for approval before returning to the Council for a vote on the PILOT. All of this is likely to take several months.