EDISON — Edison officials are looking at neighboring Woodbridge to see how development PILOT agreements can help the Edison School District.
To stay competitive in the warehouse market, developers are asking municipalities for payment in lieu of tax agreements, according to Township Attorney William Northgrave.
A PILOT agreement gives a developer a tax break on property taxes to encourage development of a project.
After much discussion, the Township Council approved the application for a 30-year tax exemption and authorized a financial agreement with 225 Raritan Center Parkway Urban Renewal, LLC during the March 28 council meeting,
“This developer came to us with an application and said ‘I’m going to build this, but I need a PILOT’,” Northgrave said, adding the application for a PILOT has been discussed and negotiated since the area was declared in need of redevelopment last year. “Part of [the process is] get this facility built and attract a tenant.”
The developer proposes to construct a 190,293-square-foot warehouse at 225 Raritan Center Parkway in Raritan Center and provide certain ancillary improvements on the site.
Councilman Joseph Coyle said the opportunity to build in Edison is sometimes a challenge for people to invest.
“Sometimes I believe there is opportunity to create an incentive where they will build,” he said. “I think this property probably sat for 30 years and there was nothing built on it. There is no pre-existing structure that was not knocked down. This is a brand new structure being built on a vacant piece of land.”
Northgrave said the other problem is competition.
“Woodbridge is doing PILOTs to encourage the development of warehouses in the township, Carteret is doing it and to remain competitive, [warehouse owners] are looking for PILOTs,” he said.
Jerry Shi, who serves as president of the Edison Board of Education, shared his concerns about tax allocations to the school district.
“If [the township does] not do a PILOT, the school district would get 56 percent as normal tax,” he said. “Now with a PILOT in place, the school district gets nothing. … To me, our kids are getting robbed with this project moving forward.”
Northgrave said with the PILOT agreement, the school district would get the same tax allocation as before the improvement is built.
“The land taxes will still be shared ratably with the county, the school board and the township,” he said. “But in terms of improvement, the taxes are exempt so the annual service charge goes to the town [not the school district]. Five percent gets allocated to the county.”
Shi asked the council to reconsider due to the overcrowding issue the Edison School District is facing.
“The school system is what makes Edison property values go up,” he said. “We have been talking about the overcrowding in the schools. … I don’t think this is the right way when the school board gets nothing.”
Coyle said he does not discredit what Shi said.
“I do believe for commerce, eventually, we have to balance … momentum to get a structure built; whereas, I think this particular area [the industrial section in Raritan Center] has been carrying our taxes forever,” he said. “We live in a reasonable tax base because of industry so if we have to take a swing at counterbalancing commerce for a tax release incentive PILOT to get them to build … sometimes that’s the right direction.”
Shi said he was not asking the township to prevent the developer from building on the site, but to reconsider the allocation of the tax through the PILOT agreement.
“Woodbridge is giving a lot of money to their school district with their PILOT [agreements],” he said.
Northgrave said Woodbridge has been doing PILOTs since Mayor John E. McCormac was the township’s chief financial officer in the late 1990s.
“Mr. Shi is absolutely right,” he said. “I participated in those [agreements]. What Woodbridge has done to support the school system, the mayor was able to do that because he has 20 years of PILOTs built up. The whole idea is to create the revenue to build a base and once the base is created, you can start doing other things.”
Northgrave said the PILOT agreement in Edison is the first one he has seen in five years.
“In the future, going forward, we can look at ways to help the schools,” he said.
Council Vice President Leonard Sendelsky said township officials in Edison are trying to build up the ratable base similar to their neighboring township.
“Some of [the PILOT] money will go towards helping our roads, helping our community center and things like that,” he said. “Hopefully we can build up that base that Woodbridge has where we can give back like Woodbridge has with turf fields and auditoriums [for their schools]. But you have to have that base before you can move forward.”
Councilman Robert Diehl said everyone acknowledges the serious overcrowding problem in the schools.
However, he said the Edison School District does not necessarily have 20 years to solve an overcrowding situation.
Coyle said he is not necessarily happy with a tax exemption of 30 years.
“But we definitely have to get things off the ground,” he said. “Where [the development] space is, it is huge and with Carteret taking off and so many other districts off the Exit 9 location of the [New Jersey] Turnpike trying to steal our lunch, I think sometimes [approving a PILOT agreement like] this is necessary.”
Edison officials said they will continue to work with the Edison school board on solutions for the overcrowding issue and look into terms of a formula on how soon the township can start contributing funds through future pilot agreements to the schools.
Contact Kathy Chang at email@example.com.