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Florence Township officials discuss impact of tax abatements on municipality

Florence Township municipal officials discussed the role of tax abatement programs and their impacts on the area after residents expressed concerns with financial incentives being granted to local developers.

Florence Township Mayor Craig Wilkie dedicated a portion of the township’s Jan. 15 council meeting to field discussion about two types of tax abatement programs the municipality is currently engaged with: Long-term tax exemptions (PILOT) and five-year tax abatements.

A PILOT is defined as an authorized financial agreement granted to developers by municipalities where tax exemptions are allowed from traditional property taxes for a set period of time to encourage development of a property. Instead of property taxes, developers make guaranteed payments to the municipality, which are typically less than traditional taxes and are aimed to be structured for the municipality to receive more of a benefit than it would from traditional property taxes.

For a five-year tax abatement, Florence officials said a property owner continues to pay full land taxes for the five years that the phase-in period is in place. Taxes are only phased in over a five-year period on the new building value, officials said.

Wilkie explained that after residents expressed concerns to him last year about the potential impact of recent tax abatements granted to developers and their potential bearing on the local economy, he wanted to address the matter at a meeting to explain how they affect the township.

“There were a lot of accusations that new businesses [with PILOTs] don’t pay us something, but they do pay us something,” Wilkie said. “Florence Township, as a whole, gets the benefits out of [PILOTs] because we share that money with the school and fire districts, and we have also used it to stabilize the tax rate, so it’s a good thing for the taxpayers.”

According to Florence municipal officials, the aim for PILOT agreements with developers in the township are intended to accomplish multiple factors such as stabilize municipal taxes; assist in expanding municipal services; and serve as guaranteed payments over the life of the PILOT on the improvements. Meanwhile, they are not appealable like property taxes.

According to state legislation, a PILOT can run from 10 to a maximum of 30 years. Under a long-term PILOT, a company is planned to continue to pay its full land taxes during and after the end of a PILOT. The only financial incentive which applies under a PILOT is on the taxes related to new building improvements, and only properties in redevelopment areas are eligible for a PILOT.

Florence officials reported that the municipality received approximately $2 million last year from PILOT agreements particularly with seven local businesses. Among those businesses included payments from Amazon and Burlington Coat Factory. Officials said that in 2019, Burlington Coat Factory paid the township $468,513 and Amazon paid $352,453.

If the payment agreements follow through as planned, officials said that the township is projected to receive an approximate total of $36 million through 2033 from these businesses, which also includes Subaru; Express Scripts; Destination Maternity; QPSI; and B&H.

So where does the money go?

Officials said that state law requires 5% of all PILOT funds be paid to the county each year. Officials also said that Florence Township has “invested heavily” in the infrastructure of the community, increased services to the community, school and fire districts, and funds are used to stabilize municipal taxes.

“The main goal of this is that the seven [businesses] with PILOTs are paying money to Florence Township and that they are a benefit to the community,” Wilkie said. “We do get money from them, and it’s a major part of income for Florence Township.”

Officials explained that among the aimed benefits of a tax abatement with a developer, the Florence Township School District was a recent benefactor.

In January, Florence school district officials reported that funds were planned to be subsidized as part of a financial agreement with developer IPT Florence West Urban Renewal, LLC, and are intended to provide enhancements to the community as part of their negotiations with the municipality.

IPT Florence West Urban Renewal committed to contribute several aimed additions to the district, which is proposed to include safety enhancements at Roebling Elementary School and ADA improvements at Riverfront Middle School. Included in this plan is the installation of security measures and construction improvements to create a more secure entrance at the Roebling Elementary School as well as repair and refurbishment of an ADA compliant ramp at the Pine Street entrance at Riverfront Middle School.

Officials also said that a developer for Amazon voluntarily did major work to the fire district property, which gave the fire department useable ground and saved them approximately $250,000 in costs.

Funding from these payments has also allowed the township to hire two school resource officers in the school system, continue the township’s annual road improvement program, acquire and demolish several “problem properties,” and expand recreational services and upgrade municipal parks, officials said.

“A key thing with a PILOT is that it’s a guaranteed payment,” Wilkie said. “They are making a guaranteed payment to us, and if the property values go up, they actually pay us more, but there are minimal payments as part of the contract, which are the numbers that we reflected.”

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