New Jersey State Senator Joe Pennacchio, a member of the Senate Budget and Appropriations Committee, issued the following statement calling for deep and fundamental reforms on how municipal tax abatements are awarded. The Senator noted that a report by State Comptroller Matt Boxer was extremely critical of the process.
“State Comptroller Boxer was extremely clear in his executive summary stating that Payments in lieu of Taxes (PILOTS) shortchange school districts and the taxpayers by hundreds of millions of dollars. The PILOTS can artificially suppress the ratable property tax base.
“The Comptroller’s report further states that municipalities often pursue tax abatements and PILOTS for direct monetary gain, creating a windfall that does not benefit local schools.
“Most importantly, the taxpayers of New Jersey are directly affected by tax abatements.
The PILOTS artificially suppress municipalities’ ratable base, which are used in the school aid formula, unfairly requiring taxpayers across the state to pick up the revenue shortfall through increased school aid. “Guidelines for PILOTS are practically non-existent. The only criterion for implementing a PILOT is the adoption of a local ordinance. Once adopted, the taxpayers have no choice or recourse.
Local officials when pressed, disingenuously cite the lack of clear state standards when adopting municipal property tax abatements. These procedures could be changed at the local level but the local officials have no incentive to change a system that they benefit from. This is why we need to adopt more stringent standards on tax abatements at the state level.
“Sadly, many of the Comptroller’s August 2010 recommendations have not been adopted. My colleagues and I will work through the rest of the years to adopt recommendations included in the report to bring fairness and stability back to New Jersey’s tax structure.”
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