Millville & Tax Abatements – Doing It Right

In the 2010 New Jersey State Comptroller’s report, A Programmatic Examination of Municipal Tax Abatements,* two southern New Jersey municipalities were specifically cited for their use of tax abatements to foster redevelopment and rehabilitation in their communities.

While Gloucester Township’s use of tax abatements was said to have an “indiscriminate retail emphasis,” the City of Millville was said to have been “making substantial efforts” in “how to maintain and enhance policies that are working and how to reform practices that are not.”

What were these substantial efforts?

First, Millville “reported doing more than the norm by requiring annual certifications from abatement recipients that address agreement terms.” Since, in essence, tax abatements are an investment by a municipality (i.e., taxpayers), it is reasonable to ask what the taxpayers are receiving in return for that investment. The return expected can take many forms: increasing commercial ratables, increasing the residential population, creating jobs, or upgrading older buildings. These expectations should be included in the abatement agreement and regularly certified to see if they are being met. According to the report, in Millville, “typically, these certifications include a list of jobs created and any relevant changes to the project itself or to the entity receiving the abatement.”

Second, Millville put some teeth into its tax abatement agreements. The Comptroller’s report highlights, “More recent abatement agreements 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that make clear that if a developer fails to fulfill the terms of the abatement agreement, the agreement can be rescinded. Millville in fact reported having rescinded several such agreements.”

How is it possible Millville can have more stringent tax abatement policies than other municipalities?

New Jersey State law permits a wide variety of development types that can qualify for tax abatements, and there is essentially no state oversight and monitoring of the granting of individual tax abatements. The State law only has baseline standards and general limitations on such things as the definition of an area in need of redevelopment, abatement length, and parameters for setting payment in lieu of taxes (PILOTs).

As the report says, “local governments can add to these requirements as long as they do not contradict state mandates.”

The City of Millville has stricter tax abatement agreements because they choose to do so. 

What has the Township of Gloucester chosen to do?

A search of the official Gloucester Township website offers few clues other than the following perfunctory mentions.

The Municipal Assessor’s page on the website (http://www.glotwp.com/departments/finance/assessor.html) states: “Special Tax Abatements are also available for Commercial and Industrial Properties as an incentive to develop or redevelop in areas in need of rehabilitation. Preliminary application and request for consideration must be presented PRIOR to any development application or permit application.” (Note: The capitalization of the word prior is as it appears on the web page.)

The link www.glotwp.com/econ/incentives.html provides the following information on the Tax Abatement Program:

“The Township’s commercial and industrial tax abatement program is a ‘phase-in’ of property taxes over 5 years for new projects, or the rehabilitation and/or expansion of existing commercial and industrial properties. Developers must file a pre-application for abatement prior to construction. Further information and abatement applications are available from the Tax Assessor’s Office at (856) 374-3532. All applications must be filed within 30 days from completion of construction.” (The abatement applications do not appear to be downloadable from the Township’s website.)

The PILOT Program is described on the page as follows:

“The PILOT Program is a form of a long term tax exemption in which the developer pays an annual service charge to the Township in place of local property taxes. The municipality may base the amount of the PILOT on a percentage of a project’s total cost over the term of the exemption or a percentage of the project’s gross revenue which may fluctuate depending on the financial success of the project. In either case, the Township aims to reduce the amount of money a redevelopment project would be responsible for in property taxes.”

From the publically published information it is hard for the residents of Gloucester Township to determine how rigorous and strong our tax abatement programs are and if the return on our investment in these abatements is fiscally effective. 

* The full report can be viewed, and a PDF downloaded, at http://www.state.nj.us/comptroller/news/docs/tax_abatement_report.pdf.

Next time:  Toward More Equitable Gloucester Township Tax Abatements