Parsippany mayor spars with school board, public over PILOT tax breaks for developers

PARSIPPANY — Mayor James Barberio and a council majority are convinced that the financial arrangements known as PILOTs - short for Payments In Lieu Of Taxes - are necessary to lure developers who can repurpose the township's glut of empty office buildings into revenue-generating properties.

Without them, and with neighboring towns offering their own PILOTs, the continued "blight" of 17 vacant or demolished office buildings, will significantly add to the tax burden for residents, Barberio said at Tuesday's council meeting.

"In 1980, when the market was great, we had all these companies coming here," Barberio said at the meeting, which ran more than three hours as critics of the tax breaks challenged town officials.

"It's not 1980 anymore," Barberio said. "And now we're paying the piper."

Barberio and his fellow Republican council members faced a gauntlet of opposition from the public, as well as members of the Parsippany Board of Education, who said newly proposed PILOTs will shortchange the school system even as new developments inevitably add more students and costs.

School board pushes back on PILOT deals

"There's been very little financial information shared by the township with the public and no information shared directly with the Board of Education," school board President Alison Cogan said during the public comment portion of Monday's meeting.

"PILOT agreements that do not include clear revenue-sharing agreements with the Board of Education create a situation where the school district is obligated to educate those new students with no additional revenue to offset those expenses."

Cogan was among a few dozen local residents who spoke out against PILOTs proposed for three redevelopment projects in town. Those proposals, which envision more than 600 new housing units, would come on the heels of more than 1,400 apartments already under construction in the township at the site of old office properties.

Cogan was joined by two recently elected board members, Andrew Choffo and Tim Berrios, who questioned the PILOTs being proposed at 2-3 Campus Drive, 249 Pomeroy Road and 6 Sylvan Way.

With Councilman Justin Musella in vocal opposition, the council introduced a redevelopment agreement for the Sylvan Way project by a vote of 4-1. No PILOTs were approved, although Barberio and others acknowledged negotiations would likely be part of any final deals.

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More votes scheduled for December

Similar redevelopment agreements were introduced at the previous council meeting for the Campus Drive and Pomeroy Road projects. Those will be up for public vote and final discussion on Dec. 5. Discussion and final votes for the Sylvan Way project are scheduled for Dec. 19. A financial analyst with PILOT expertise will appear at both meetings to answer questions, the council confirmed.

"Studies show we're not going to see any recovery in the commercial market until 2040," Barberio said. "If we're not going to be proactive and we don't do PILOT programs, taxes are going to skyrocket on the residential portion."

Parsippany Tax Assessor Dan Cassese detailed the current state of the commercial real estate market, which in Parsippany includes 17 vacant or demolished former commercial properties totaling about 2.5 million square feet.

"Professionals in the industry are predicting a catastrophic loss to the market value of office buildings due to rising interest rates," Cassese said.

"I'm still not a big fan of PILOT agreements," Cassese said. "But if you don't do anything now, you're talking 16, 17 years of dark buildings."

Mayor Barberio added: "We're the third-largest corporate center in the state of New Jersey that's losing the most ratables."

What is a PILOT?

Enacted in 1971 to encourage redevelopment of blighted areas in New Jersey, PILOTs have helped to transform vacant and obsolete properties into commercial centers in Newark and elsewhere.

PILOTs allow municipalities to negotiate discounted payments instead of taxes. Those payments are made directly to the town and typically cut out the usual portions of tax revenues that go to local school boards and fire departments.

Towns, however, can distribute the funds as they wish, including funneling money back to schools and firefighters. Barberio has promised to meet with the Parsippany board to discuss their needs.

Berrios, a former school board president who was elected back to the board this month, said a district study predicts an enrollment increase of 1,000 students from the more than 3,300 residential units currently either under construction or being proposed in town.

That increase, he said, would "cripple" the 7,300-student district even as it copes with PILOT deals arranged by the town "diverting tax dollars that would otherwise go to the schools."

Choffo, who also won a school board seat on Election Day, chastised the mayor and council for allowing former township attorney John Inglesino to appear as a featured speaker during the last council meeting to make the case for the PILOT program.

A prominent land-use attorney in private practice, Inglesino now represents applicants for the projects at 2-3 Campus Drive and at 6 Sylvan Way.

Inglesino "did an excellent job explaining the development and PILOTs in general," Choffo said. "But there were some things he left out. And I have to remind you, he is the developer's attorney. He is the adversary in this negotiation. Are you really negotiating that hard with him?"

Barberio pushed back against the school board's criticisms, saying that when the township absorbs tax losses from vacant properties, the district never has to pay back its share. The district typically receives about two-thirds of a property owners' tax bill, he noted.

"I'm going to negotiate with the school board, but I'm going to be very candid with everybody here tonight," Barberio said. "When we have uncollected taxes, maybe the school board should give us our 63% back."

New Lifetime Fitness, hundreds of housing units on the table

Inglesino was back on Tuesday with two representatives of Lifetime Fitness, which would be part of a proposed mixed-use project to replace the Avis Budget Group headquarters at 6 Sylvan Way. The developer wants to add the luxury fitness center and 238 units of multifamily housing.

"We want you to come to Parsippany," said Musella, who rallied residents online to attend the meeting and oppose the tax deals until more information was available. "But why are we giving a PILOT to a gym?"

Another proposed residential development at 2-3 Campus Drive, replacing two demolished buildings, would add about 410 units. About 20% of them would be set aside as low-income units that are part of Parsippany's settlement with the nonprofit Fair Share Housing Center to produce affordable housing per state law.

A third project at 6 Pomeroy Road would replace a long-dormant building with new construction for light industrial use. which Councilman Paul Carifi Jr. noted would add to the tax base without producing new students.

Soaring construction costs and rising interest rates were blamed by Carifi and others for the increased demand by developers for PILOT funding.

Is Parsippany playing favorites with developers?

Pushback for the developer tax deals also came from several residents at Tuesday's council meeting.

Bob Venezia described the prior meeting, where Ingelsino spoke, as "an all-out PILOT sales pitch" by the attorney and Barberio. Their pronouncements included "a generous amount of scare tactics," Venezia said.

Ken Kaplan, a career commercial real estate broker, questioned the need for PILOTs on the Pomeroy Road project when, he said, demand is already high for light industrial facilities.

"We're hearing some dire projections, but projections are just that," Kaplan said. "Earlier this year, there were projections that the Jets were going to the Super Bowl. I'm all for development. But I like to see it be market-driven. I don't think it's the job of the government to play favorites, to give some developers a hand up and not do the same for other developers."

Musella continued to urge caution and patience, suggesting the council return to the PILOT discussion in the new year, when two new council members will be seated.

"I can't be the only one up here with questions," he said. "We shouldn't reflexively enter into any agreements right now without having heard all the facts. The financials are still not on our website. My feeling right now is that the public is not buying what the developers are selling."

William Westhoven is a local reporter for DailyRecord.com. For unlimited access to the most important news from your local community, please subscribe or activate your digital account today.

Email: wwesthoven@dailyrecord.com 

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This article originally appeared on Morristown Daily Record: Parsippany mayor spars with school board over developer tax breaks