PILOTs in the 2017 municipal budget

Payments In Lieu Of Taxes (PILOTs) more than doubled in last year’s municipal budget, eclipsing $2 million after three new projects were added to the tax rolls. The spending plan for 2017 anticipates $1.3 million after the expiration of one five-year PILOT.

The $54-million municipal budget for 2017 was introduced at the April 24 regular meeting, with a public hearing and final approval scheduled during City Council’s combined conference and regular meeting this Monday at 7 p.m. A tax increase of $81 is projected for the average home, which would increase the municipal portion of the average tax bill from about $3,350 to $3,431. (This does not include the county or school portions of the tax bill).

Meridia-Waters-Edge.April2014Two of the largest recent developments began PILOTs last year: The 108-unit Meridia Water’s Edge, adjacent to Rahway Plaza Apartments and Center Circle, paid $421,005. The 116-unit Metro Rahway on Campbell Street paid $231,015. Also added last year was the 51-unit Meyers Senior Residence on Esterbrook Avenue, which paid $72,052 and is budgeted to pay $55,000 this year.

Water’s Edge, a five-story building at City Hall Plaza, was approved for a 10-year PILOT in 2011 that set an annual payment of about $212,000, with annual increases. Water’s Edge is assessed for about $7,623,800 for 2017, which normally would generate a municipal tax bill of about $196,694 but this year’s PILOT payment is anticipated to be about $212,000.

Metro Rahway frontMetro Rahway was approved for a 15-year PILOT in 2013 that stipulated initial annual payments of about $265,000. The five-story building on Campbell Street is assessed for $10,275,600, according to property records, with another parcel assessed for $1,871,500. Based on a projected tax rate of $2.58 in 2017, the combined $12,147,000 assessment would normally generate municipal taxes of about $313,393.

The city receives 95 percent of PILOTs, with the county receiving the remaining 5 percent. PILOTs generally set a payment equal to about what a property would pay in municipal taxes in an effort to encourage development within the downtown redevelopment area.

There are eight PILOTs anticipated in the 2017 budget:

Here’s a look at PILOTs in the budget over the last several years, which have averaged $1.253 million annually since 2011. Rahway Plaza Apartments property is assessed for $17.150 million, which based on the 2017 municipal tax rate of $2.58 per $100 of assessed value normally would yield $442,750 in municipal taxes.

Park Square.Irving StreetComing off the PILOT list and now paying full property taxes is the 159-unit Park Square on Main and Irving streets. The five-year PILOT expired in 2016, with a final payment of $571,377.  Landmark, the original developer and owner, began paying 20 percent of the tax assessment after the project’s completion, and increased 20 percent each year until it reached 100 percent. The twin-building complex has a combined assessment of about $18,944,000, with a total property taxes of about $1.255 million; or about $488,755 in municipal taxes for 2017.

In other revenue items, the city’s foreclosure registry, which was created in 2014, generated $403,500 in revenue last year after budgeting $325,000. It’s anticipated to raise $350,000 in 2017:

The city realized $180,392 in hotel fees last year and anticipates $150,000 in 2017. In recent years, fees have generated:

  • 2015 – $129,233
  • 2014 – $124,699
  • 2013 – $100,000
  • 2012 – $100,000 (pro-rated, transitional year)
  • 2011 – $103,000
  • 2010 – $99,000
  • 2009 – $58,000

The state established a 5-percent hotel tax in 2003 and allowed municipalities to impose an additional levy of their own of as much as 3 percent.

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