Press of AC 'Tax abatements hurting schools, state comptroller says'

While some municipalities get negotiated payments in lieu of taxes, none of that money makes it to the school districts, the report said. That cuts revenue on which school districts depend, forcing them to rely more heavily on state aid and school taxes paid by other businesses and homeowners, it said.

County governments also lose out, getting only 5 percent of those payments, or less than they would get through the property tax system, the comptroller said.

The report also found that municipal tax abatement programs get little monitoring by the state. There's also little incentive for municipalities to properly administer the program, the report reads.

The report identified Atlantic City, Bridgeton, Millville and Vineland as southern New Jersey municipalities that make significant use of tax abatement programs. While the report made no other mention of Bridgeton, Vineland and Atlantic City, it lauded Millville for doing "more than the norm" in connection with administering its program.

New Jersey's tax abatement laws allow municipalities to exempt developers from paying property taxes to encourage development that otherwise may not happen. The state allows two types of tax abatements, one lasting five years and one involving long-term abatements that are designated for redevelopment areas. One part of the process involves developers making payments in lieu of taxes. Most of the abatements are for commercial development.

Officials with the Comptroller's Office said they have no master list of how much municipalities have in active tax abatements.

However, the money can be substantial: Officials in Vineland put the figure there at $47 million related to about 110 active tax abatement projects. The figure for Millville's 43 tax abatement "line items" is almost $52 million, with most related to the Union Lake Crossing shopping center on Route 47.

Officials in Atlantic City's Tax Assessor's Office did not return calls Wednesday. The report did not cite the total in abatements in Atlantic City. A recent proposal would have given a $50 million property tax break to the Revel casino and redirect the money to fund infrastructure improvements around the casino site. Revel withdrew the proposal, which also sought nearly $300 million in state tax breaks.

Millville requires certifications from entities that received tax abatements. Those certifications include a list of jobs created and changes to the project receiving the tax abatement.

"More recent abatements in Millville also include provisions that make clear that if a developer fails to fulfill the terms of the abatement agreement, the agreement can be rescinded," the report reads. "Millville in fact reported rescinding several such agreements."

"It's worth it, because you're talking about tax dollars," Millville Tax Assessor Brian Rosenberger said of the extra steps taken by the city.

Millville has rescinded about five tax abatement agreements over the years, he said, but none since the more stringent program began this year.

Still, State Comptroller Matthew Boxer said the tax abatement program overall needs some changes, including making sure the program is used only to attract development that would otherwise not occur without an abatement. He said school districts and county governments, which also lose out under the municipal tax abatement program, need to be involved in the process.

"Tax abatements are a tool that can be used and have been used to create jobs and revitalize communities that are struggling economically," Boxer said. "However, when abatements are awarded for a project already set to occur, or a project that isn't needed, the result is an unnecessary giveaway of the public's money.

"When the entity in charge of deciding who receives a tax break knows it will profit from its decision regardless of its merits, that's a recipe for poor decision making. Abatements should be granted only when the public at large will come out the winner."

Boxer's proposals are getting mixed support in this region.

"We have always said we're not against this," Atlantic County Executive Dennis Levinson said of tax abatements. "All we are saying is we would like to have a seat at the table when the county's interests are being discussed.

"We may not be successful, but we at least believe we should be heard. We can do nothing but complain afterward now."

Vineland Tax Assessor Donald Seifrit said if school districts and county governments want some of the payments in lieu of taxes, they should also share in the cost of property assessment appeals. Municipalities must pick up that cost, which can run in the tens of thousands of dollars, he said.

"They want to have their piece of the pie, but they don't want to provide any funding when it comes to the appeal," he said. "That's one of the inequities as well."

According to the comptroller's report, while most of New Jersey's municipalities are not involved in tax abatement programs, "the fiscal impact from the ones that are can be significant." The system of payments in lieu of taxes "distorts the costs and benefits an abatement deal, as municipalities may receive greater funds while other entities, particularly school districts, absorb costs," it reads.

Not only does less money go to schools, the report said, but the practice can affect a school district's state aid by allowing municipalities to "hide its true wealth from the school district and the state," the report reads.

"Any tax abatements that are generated means less taxable money to spread the burden," Atlantic City Superintendent of Schools Fredrick Nickels said.

However, Nickles said he does not think the school district should "get involved with the taxes of Atlantic City" when it comes to tax abatements.

School officials in Millville and Vineland did not respond to requests for comment from The Press of Atlantic City.

The report cites Hoboken as one example of how tax abatements can affect a school district.

Hoboken's school district will not receive $3.5 million in revenue this year because of tax abatements, the report reads, indicating that is more than double Hoboken's reduction in state school aid.

Contact Thomas Barlas:

609-226-9197

TBarlas@pressofac.com