Pennington Borough Mayor James Davy issued a strongly worded letter to residents today, criticizing Hopewell Township’s recent decisions that have shifted a significant tax burden to Pennington and Hopewell Borough taxpayers. In his letter, Mayor Davy outlines the consequences of the Township’s tax abatement agreement with the developer of the new Scotch Road housing project, which he argues unfairly places the financial responsibility for School District funding on the Boroughs. Below is the full text of the Mayor’s letter, detailing the impact of these decisions on Pennington residents.
Dear Taxpayers of Pennington Borough,
Some questions have been raised about school district funding. In an effort to keep you informed, I’m sharing some facts with you.
School District’s Request for a Contribution from Hopewell Township for $87-Million Referendum
As you know by now, the Hopewell Valley Regional School District (District) has proposed an $87-million referendum for capital improvements. What you may not know is that the District asked Hopewell Township to make a voluntary contribution related to the addition to the Bear Tavern Elementary School, because the need for the addition is precipitated by an increase in students from the new 1,077-unit housing development on Scotch Road.
You should also know that the Hopewell Township Committee granted this same development a tax abatement known as a Payment in Lieu of Taxes (PILOT) that over the next 30 years will generate $387 million for the Township and shift an estimated $25 million of tax burden to Pennington and Hopewell Borough taxpayers.
Unfortunately, the Township Committee refused the District’s request, saying that because the Township was in litigation over the PILOT with the Boroughs, they could not even consider such a contribution.
Pennington Takes Legal Action to Stand Up for Taxpayers
PILOTs can be valuable tools for local governments to attract development where developers need added incentives, which does not appear to be the case for the 190-acre Scotch Road development. PILOTs in shared school districts are challenging because unless they are crafted thoughtfully, they can result in an imbalance in the financial responsibilities across a region. This is particularly troubling when the PILOT development itself generates additional burdens on a shared school district. This is exactly the situation we find ourselves in here in the Hopewell Valley.
This tax abatement agreement effectively removed approximately $332 million of assessed valuation from the Township’s taxable ratable base. So, instead of paying property taxes, which is the conventional vehicle for funding the Hopewell Valley School District, county government, municipal government, and the fire district, the agreement called for the developer to make an annual payment in lieu of taxes that goes almost entirely to Hopewell Township.
Pennington applauds the fact that this project will bring affordable housing units to the Valley. Twenty percent of the units have been designated for affordable housing. I want to emphasize that neither Pennington Borough nor Hopewell Borough challenges nor objects to the affordable housing component of this development.
Rather, our joint legal action challenges the tax abatement agreement itself, because it adversely affects Pennington and Hopewell Borough taxpayers, costing them millions.
PILOT Will Cost Pennington and Hopewell Borough Taxpayers $25 Million
Since the formation of our Hopewell Valley Regional School District and in accordance with State law, the municipalities of Hopewell Township, Pennington Borough, and Hopewell Borough have shared in the cost of education based on the ratio of each of their assessed valuations to the total assessed valuation of the three together. So when, by virtue of its tax abatement agreement, Hopewell Township removed approximately $332 million of assessed value from its tax rolls, it effectively shifted a greater portion of the school property tax burden
to Pennington and Hopewell Borough taxpayers.
As alluded to earlier, based on a cost analysis by the Boroughs’ financial expert and consultant, the property tax shift from Hopewell Township to Pennington and Hopewell Boroughs over the next 30 years will be approximately $25 million. These are dollars that will need to be raised through your property tax bills.
Hopewell Township to Get $387 Million
To be clear, the developer’s PILOT payments will solely benefit the Hopewell Township municipal government; not the School District or the Fire District. Under the State’s redevelopment law, the County government will receive a mere 5 percent of the allocation. So, while a $25 million burden will shift to Pennington and Hopewell Borough taxpayers, Hopewell Township will generate approximately $387 million in funds from the developer, which is almost 6 times the amount it would otherwise receive from conventional property taxes. Further, the PILOT monies Hopewell Township will receive are “unrestricted.” In other words, the Township Committee can use the money any way they want. Meanwhile, costs for the District will expand as the new development generates new students. This is what makes the Township’s refusal of the District’s request so disappointing.
Why the District Requested Funds from Hopewell Township
When the Township approved the Scotch Road housing development and entered into the tax abatement agreement, it represented, based on the Township’s analysis, that the housing project would have no impact on the Hopewell Valley Schools and that there was plenty of unused classroom space in the schools to accommodate any children from the new housing development. The District has concluded otherwise and anticipates a significant impact
on the school system. As a result, the District included a major addition to the Bear Tavern Elementary School to accommodate new students as part of its upcoming $87-million capital referendum.
Summing it Up
In conclusion, the purpose of the Pennington/Hopewell Borough lawsuit is to contest the basis for the tax abatement and PILOT agreement; not to challenge the Township’s attempt to produce affordable housing. We contend, based on the facts, that the tax abatement was not necessary as an inducement to build the project. By the developer’s own estimate, the projected return on investment will be approximately 68 percent. Even this estimate would appear to be low given the current listing of prices for homes in this development. We also believe that when a community partners in a regional school district with other municipalities, a PILOT agreement must consider the negative impacts it will have on the partnering towns and account for them. This has not happened here.
While the Boroughs lost their case against the Township in Superior Court, we have appealed to the State Appellate Court. We are currently moving through the process. Please know that the Borough Council and I will continue to advocate on your behalf and to protect the interests of Pennington’s taxpayers.
Sincerely,
James M. Davy
Mayor – Pennington
