I discussed the following during open session at the Parsippany-Troy Hills Township Council meeting of Tuesday, October 16, 2018.
The current form of the PILOT agreement between Parsippany and the developers of the District at 1515 does a great disservice to the taxpayers of our town. And since this PILOT will become the template for future mega apartment complexes, it is imperative that the council get this agreement right or scrap it entirely. (Editor’s Note: PILOT means Payment In Lieu of Taxes)
In the presentation, the financial consultant stated that without the PILOT, Stanbery would ONLY achieve a 5% yield on its investment. In today’s interest rate environment, what’s wrong with 5%? Why must the residents of Parsippany subsidize Stanbery —and that’s what a PILOT is, a subsidy— in order to guarantee the developers a yield of at least 10%? Try building your own new house and asking the township for a PILOT so that you can achieve a 10% return and see how far you get. A PILOT can sometimes make sense for a project that will still yield positive tax revenues to the township, But, as we will see in a minute, the Stanbery project is a big-time tax revenue loser.
As we know, project presentations are always made in the most favorable light to the developers, who often include outrageously optimistic assumptions to achieve their goals. The Stanbery PILOT contains two totally unrealistic assumptions having to do with education costs.
The financial consultant estimates that the apartments will generate between 20-25 students at a cost of $10,000 per student. The true cost of educating a student in Parsippany is not $10,000, but $22,000, as shown in the document from the NJ Department of Education that I handed out.
In addition, as I stated at the last council meeting, the number of students that the District at 1515 will generate is about 82. That number is based on the average number of students per unit associated with the 7,000 apartments that already exist in town. In fact, the true number will likely be more than my estimate. Powdermill Heights serves a clientele that is similar in affluence to District 1515, and the rents are comparable. Based on 2015 statistics, Powdermill, which has 90 fewer units than District 1515, sent 97 students to our schools. Even at a conservative estimate of 100 students at District 1515, the education costs associated with the project would total $2.2 million. Add to that the $400,000 that Stanbery estimates for municipal expenses, and the total expenses of the project to Parsippany becomes $2.6 million annually. Comparing this number to the net tax revenue of $1.1 million that Stanbery expects when the project is stabilized, and you get a $1.5 million net tax revenue deficit, which existing taxpayers must make up for.
Council members, you must not sign off on this PILOT agreement without adding a condition that will protect the taxpayers of Parsippany from net tax deficits arising from overly optimistic projections. Specifically, the developers must be required to pay a tax surcharge for every student that exceeds their estimate of 25 students, multiplied by the most recent Department of Education cost per pupil.
Consider this clause as an insurance policy. If Stanbery’s student enrollment estimate is correct, it will cost them nothing. But if they are wrong, the taxpayers of Parsippany will have the protection that they deserve. If Stanbery refuses to agree to this conditional surcharge, then you know that the PILOT agreement was flawed from the start, and you should walk away from it entirely.
I believe that this clause will save our taxpayers millions of dollars over the lifetime of the PILOT, and it is your fiduciary duty to include it in the agreement. I would now like to hear your comments on this proposal.