Redevelopment impact on property tax rate
Feb 15, 2009 | 879 views | 0 0 comments | 6 6 recommendations | email to a friend | print
Citizens of Hoboken:

At the last City Council meeting, a resolution was on the agenda to be introduced (although it was sent to committee) to begin the process of transforming eight blocks in northwest Hoboken into a redevelopment zone ("RZ"). Even though this was the first mention of this project at the Council, the proposed developer, Rockefeller Group, has already lined up millions in NJ state money to remediate contamination from the site in preparation for a $1.1 billion redevelopment project. How can the state award cleanup money for a project that has not even been considered, much less approved, by the City Council?

Creation of a RZ is in general a very bad idea: the redevelopment property ("RP") built within RZ can be exempted from municipal, school, and county taxes, it is exempted from certain current zoning laws, and the city can take over property within the RZ by eminent domain. The Mayor pushes redevelopment because he can in principle negotiate payments in lieu of taxes ("PILOTs"), all of which go to the City and which pay more to the City than would full municipal property taxation. But even if this is true, the taxpayer may end up paying higher taxes, because the RP does not pay school or county taxes which are about 70 percent of the total property tax, and these taxes are passed onto the taxpayers.

Aside from the quality of life impacts of exemption from zoning (e.g. impacts of crowding on infrastructure, light, air, traffic, parking, etc.), the potential impact on tax rate should be known by the Council and the public prior to approval of a RZ. As far as I have been able to determine, the detailed PILOT agreement has never been made available to the Council or public prior to approval, much less a way of evaluating its impact on property taxes.

I have developed formulas for calculating the impact of redevelopment PILOTs on property tax rates, which allow annual PILOT payments and RP values to be translated into a resulting change in property tax rates. I have so far presented a seminar to three Council members explaining the use of these formulas for evaluating PILOT agreements. At this seminar I learned that the Council is told only that PILOT revenue to the City exceeds what would be obtained by full municipal taxation, but the impact on property tax rate is never revealed.

My analysis and seminar on the effect of redevelopment PILOT agreements on property tax rates can be obtained online at In the seminar, formulas for calculating changes in tax rate resulting from redevelopment PILOTs are derived and examples of their use (including hyperlinks to data used for the calculations) are given for two redevelopment projects: the Port Authority Southern Waterfront (PA) redevelopment which was approved in 1995, and the proposed New Jersey Transit (NJT) redevelopment. These examples conclude that, at full build, the PA and NJT RPs will increase Hoboken property tax rates by 11.16 percent and 9.51 percent respectively. The webpage provides contact information for those who want further information.

Given its negative impacts on quality of life, property rights, and tax rates, redevelopment should be banned. Minimally, the Council and the public should have the PILOT and other information and means of evaluating it necessary to determine impacts on tax rates and quality of life before any further redevelopments are approved.

Daniel Tumpson

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