The more things change, the more they stay the same.
Back at the end of 1989, then Jersey City Councilman Bill O’Dea took out his crystal ball and took a glimpse into the emerging 1990s.
One of the things he proposed was banning tax abatements for luxury housing. At the same time, he bemoaned the state takeover of the Jersey City school district after then Gov. Tom Kean successfully brokered a law allowing it through the state legislature.
A state evaluation of the district showed abysmal student test scores, massive administrative corruption, and political interference in the district. If you wanted a job, you needed to know the right people, and often had to pay a percentage of your salary to keep it. If you wanted a promotion, you have to sell a certain amount of political tickets for this or that politician.
Kean, a Republican, took aim at more towns in Democratic Hudson County than just Jersey City. Hoboken escaped state control by excelling in test scores. Weehawken only ran afoul on seven of the state’s 51 indicators. Union City stumbled a bit but made last minute adjustments. The heavy hand of state wrath fell mostly on Jersey City.
On the plus side, Jersey City managed to fend off an attack on Abbott v. Burke, a state Supreme Court ruling that said lack of funding and other issues discriminated against students in poorer districts. This guaranteed that the district would continue to get state aid to help make up for the fact that Jersey City schools were aging and lacked many of the resources that more modern schools in suburbia had.
But nobody could have predicted in 1989 the negative impact that abatements on new real estate development would have on the school district 30 years later, and how the state would gut Abbott v. Burke, using Jersey City’s abatement policies against the schools.
In the simplest terms, an abatement exempts a developer from having to pay full taxes on a development for anywhere from 5 to 30 years.
The developer is allowed to make payments in-lieu-of-taxes (PILOT.) These payments are generally a percentage of the total project. Until Secaucus filed suit which it won in the 1990s, these payments excluded county and school taxes. Since then, the county gets about 5 percent of the total amount it should from an abated property. Schools are still excluded.
Over the last 30 years, but in particular since 2013 when Steven Fulop became mayor, these payments allowed the city to balance its municipal budget without raising taxes. Since state aid paid most of the school budget – more than the schools would have seen if there had been no abatements – school officials, Jersey City politicians were happy.
But elsewhere in the state, politicians and other school districts began to grumble.
They wanted to know why the suburbs should be paying state aid to educate kids in Jersey City when local officials were using abatements to keep taxes low for Jersey City residents actually using the schools.
Abbott v. Burke was also designed to help those districts around the state with the poorest of the poor. While Jersey City has more than its share of poor, it has also seen a massive influx of wealthy and upper middle class, who were also getting the benefit of the state aid.
Here’s your schools back, now pay for them
In 2018, Jersey City got back the last elements of local control, and at the same time, saw a massive cut in state aid even after local officials complained they were already being shortchanged.
To be fair it should be pointed out that the new urbanite sending his or her children to public schools have many of the same issues poor people – often people of color – faced over the last three decades, crumbling infrastructure, lead-polluted drinking fountains and lack of technology.
The assumption by those who successfully cut state aid to Jersey City was that local officials would have to find a way to use its new found wealth – Jersey City is arguably the wealthiest city in the state – to pay for its own education. Most assumed Jersey City would raise school taxes to cover the loss of aid.
Local officials, especially the mayor and council, appeared to need another alternative. This involved finding someone else other than local residents to foot the bill for education, and so the concept of a payroll tax was born. This would force companies – big and small – who employ non-Jersey City residents to help make up for the loss of aid to local schools. In other words, local officials found someone other than those using the schools to pay for them. Newark already has a similar tax, only in that case, the money went into the general fund, not into schools.
The concept of forcing out-of-towers to cover the cost of schools for in-towners who use them has the stench of parochialism. But it protects local politicians from the backlash that would come from raising taxes – the usual way to fund education.
Inevitably, local officials will have to raise school taxes anyway because the estimated income from the payroll tax will only cover a percentage of the lost aid, and not the entire amount the school district said it had been short-changed prior the reduction of state aid starting this year.
Ironically, O’Dea also foresaw in 1989 several other pressing problems that would plague Jersey City, including the shortage of affordable housing and the need to provide “blue collar” jobs for local residents.
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