Whoever redevelops the Green Village Road School property might not pay taxes to Madison in the usual sense, but they'll still be making quarterly payments a lot like, officials said Monday.
In an effort to boost the sales price of the Green Village Road School property and keep more of the developer's quarterly tax payments in Madison, attorneys for the Borough Council and Board of Education are recommending the borough have the buyer pay an amount outlined in a financial agreement instead of property taxes.
By detailing the quarterly payments in a financial agreement, the property could sell for a higher price because investors would not need to worry about fluctuations in the tax rate, which would make it easier for the developer to obtain financing, the attorneys said.
The financial agreement likely would be based on a percentage of the project's annual revenue, according to a presentation by the lawyers on Monday.
Attorneys Gregory Castano Jr. and James Bruno for the council and Brian Burns for the Board of Education addressed elected officials from both governing bodies on Payments in Lieu of Taxes (PILOT) during a 5 p.m. meeting at .
Officials are expected to consider making aspects of the PILOT agreement part of its .
"PILOT Agreements assist redevelopers with obtaining project financing because they provide stability and certainty which is attractive to lenders, according to slide in the presentation. "PILOTS can be instrumental in fostering effective development projects."
The former school is being considered a redevelopment zone so the borough can have more control of the project, including the ability to make sure a for-profit company develops the site and provides recurring revenue to the borough as opposed to possibly being required to sell the property to a tax-exempt nonprofit under a less flexible bidding process.
Among the points raised in the presentation:
- While Morris County gets 14 percent of every property tax dollar paid to Madison, it would only get 5 percent of PILOT payments. Because the school property is tax-exempt and thus not generating any revenue, the county would still be receiving more money than it does.
- "Local Redevelopment and Housing Law" allows the borough to create an arrangement where it can mandate "expedient and efficient site development" and control design standards
- Although PILOT payments are allowed under the "Long Term Tax Exemption Law," the developer still essentially is paying taxes. PILOT Payments also are called "Annual Service Charges."
- Regardless of whether the property was tax exempt, or paying PILOT payments or property taxes, the school district still would receive the same amount of funding.
- PILOT Agreements can last for up to 30 years, but typical last for shorter periods, such as 15 years.
- The borough may charge additional fees.
- The agreement must be with a company that has "urban renewal entity" in its name.
- The agree must be in place before construction begins.