Profits to towns came at expense of school districts, counties and taxpayers
State Comptroller Matthew Boxer at a hearing in June.TRENTON — Across the state, municipalities have granted special tax breaks to developers in an unregulated system that allows towns to profit at the expense of school districts, counties and taxpayers, a state comptroller report found.
The comptroller report found the municipalities give up hundreds of millions of dollars through tax abatements given to developers without much oversight, either from the state or cities and towns.
"In New Jersey, little is done to monitor the use of such abatements, to ensure that they are appropriately awarded, or to determine whether they achieve their purposes," the report said. "Tax abatements should be used carefully and sparingly given the multitude of pitfalls."
The tax breaks are used as an incentive to bring development and jobs to cities, but the report warned - without giving specific examples - the practice can "present opportunities for unfair favoritism or cronyism."
The practice can leave school districts and, to a lesser extent, counties in lurch, the report said. Developers can get reduced property taxes in exchange for making a payment to the town or city known as a PILOT - a payment in lieu of taxes. But this payment is usually not shared with the school districts at all and only partially with counties. This means the school district does not see any property taxes, while the city sometimes sees a boost in its share, the report said.
The comptroller recommended rearranging the structure of the tax breaks to allow school districts to be involved in making decisions and share in the proceeds, conduct better cost-benefit analyses, making the abatements easier to spot by the public on tax listings, require periodic reviews and require state oversight, among other recommendations.