'Parsippany's in a lot of trouble': Councilman rallies opposition to PILOT tax breaks
With a lone councilman leading the charge, opposition is growing in Parsippany to the sometimes controversial practice of towns luring developers with discounted PILOT programs - payments in lieu of taxes that can shield builders from paying traditional property taxes.
During a packed town hall meeting on Wednesday at the Parsippany Library, the opposition to the once-obscure municipal arrangements was clear: PILOTs, one speaker quipped, should stand for "Parsippany's in a lot of trouble."
With Councilman Justin Musella as the sole objector, the Parsippany council voted 4-1 to approve three PILOT programs during a five-hour meeting on Dec. 5, during which dozens of residents spoke out against the practice.
Three more such agreements are up for public comment and a final vote at the council's next meeting on Tuesday. All of the recently approved and proposed PILOTs are for vacated office properties in or near the Mack-Cali office campus bordered by routes 202 and 10. Detailed information about each deal can be accessed on the township website.
Developers' attorney: 'Everybody benefits'
PILOTs can help encourage developers to replace vacant office buildings with modern residential, industrial or mixed-use facilities, according to Richard Wenner, a land-use attorney with the law firm that represents the town.
The process "is a collaborative effort between the planning board and governing body" to identify areas in need of redevelopment and if a given redevelopment plan is consistent with the township's master plan, Wenner said at the Dec. 5 council meeting.
John Inglesino, a former township attorney who now represents housing developers, said at the same meeting that "everybody benefits" from a negotiated PILOT deal. Such arrangements are commonplace in the current real estate market, he said.
"If it is a goal to really attract best-in-class redevelopers and companies to come to Parsippany, this is a tool that has to be considered if you want to accomplish that objective," said Inglesino, who represents many of the builders involved with the six PILOTs currently in question.
Parsippany Mayor James Barberio agreed, saying "I don't like to do PILOTs if I don't have to," but that developers will turn to other towns more willing to strike a PILOT deal.
"Hanover, Florham Park, Boonton, they are our competitors now," Barberio said.
How PILOTS work
But Musella and other critics object to the structure of the agreements, which typically pay 95% of a negotiated fee to the municipality and 5% to the county. If the developers were to pay traditional property tax bills, 65% of the money would typically go to the local school district.
Parsippany school board members, not surprisingly, have joined the chorus of objections, saying PILOTS fuel development that burdens the school system while steering tax revenues away from it.
At the Dec. 5 meeting, Barberio continued to feud with critics on the board who say they should have a seat at the negotiating table. The mayor reiterated his pledge to provide a fair share of the PILOT funds to the school district.
"I don't want to do PILOT programs, but if we don't do something, I'll tell the board members, you get no money," he said. "It's that simple."
Town Hall rally
Musella has bucked his fellow Republican council members and the mayor on the subject. He rallied local residents to attend Wednesday's town hall, which drew about 100 people. With more viewers on a Facebook live broadcast, the first-term councilman explained the complex process of negotiating the tax deals and why he opposed them.
Passing out a sheet of financial details for one approved project, at 2-3 Campus Drive, Musella said that without a PILOT, that development would have paid more than $110 million in taxes during the 30-year period of the agreement. With the PILOT, the tax bill is discounted to about $53 million.
"Who makes up that difference?" Musella asked. "You get to make up this difference. Not only for this building, but for the other five buildings that are also receiving PILOTs."
Joining the first-term councilman were Board of Education member-elect Andy Choffo and Parsippany-based commercial real estate broker Ken Kaplan, who questioned the need for PILOTs when developers are already incentivized to build warehouse and industrial space in the current market.
Kaplan held up a photo of a rundown building, boarded up and covered with graffiti.
"To my mind, that's what a PILOT program was designed for in the state," he said. "I don't see anything like that in Parsippany. We're a desirable community. There's a demand for warehouse space. And the rents have gone sky-high. Developers can make a lot of money here without financial incentives."
Choffo said school officials are cut out of the PILOT process, even when developers propose residential projects that will add to enrollment.
"A strong public school is the bedrock of a healthy community," said Choffo, who has 15 years of previous experience on the school board. "In Parsippany, our bedrock is being threatened by municipal fiscal policy that is overreliant on PILOTs. We need an open dialogue with the mayor about this issue, and to date, that has not occurred."
A 'nightmare' tax deal for Bergen County town
Guest speakers at the town hall included two councilmen from other North Jersey towns who shared complaints about PILOT programs. William Fenwick, the council president in Park Ridge, in Bergen County, spoke of an initially popular redevelopment project that would have replaced a waste-transfer station in the middle of town.
"Nobody wants to drive by garbage stored in the middle of town, so everyone in town was in favor of having that property redeveloped and turned into something else − pretty much anything else," he said.
The Park Ridge Council approved a redevelopment project calling for a five-story mixed-use residential and commercial building. They also approved a PILOT deal calling for annual payments of about $700,000, about 10% of the rent revenue.
More: Neighbors fume as Parsippany OKs warehouse zone next to big housing project
"Now that may be all well and good if the building is fully occupied, but it wasn't," Fenwick said. "Only this year, three years after it was opened, has the commercial space finally leased."
The property was then sold to a new owner who raised rents, "and the vacancy rate in the building went up and as a result, our revenue went down." First-year fees paid to the town, he said, amounted to just $400,000.
"It has been a nightmare for the people of Park Ridge," Fenwick said.
Chatham Township Committeeman Mark Lois also spoke out against PILOTs, saying an underperforming PILOT project in Chatham borough has negatively impacted the budget of the school system serving the township and neighboring Chatham borough.
"I can tell you in Chatham, it hasn't worked out," Lois said.
Will council vote on Tuesday?
Musella asked the audience to call Parsippany's mayor and other council members and urge them to table Tuesday's vote until more information is available. Some in the audience suggested packing the council chambers to force a postponement until the panel can meet in a larger venue.
A rescheduled meeting would have to take place in January, when Democrat Judy Hernandez, who has spoken out against PILOTs, takes a seat on the council after her narrow election victory last month.
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 Twitter: @wwesthoven
This article originally appeared on Morristown Daily Record: Parsippany councilman rallies opposition to developer tax deals
