On Tuesday, November 20, the Parsippany-Troy Hills Township Council will vote on whether to approve a PILOT (Payment In Lieu Of Taxes) agreement between the township and the developer of the District at 1515 project, which consists of 441 apartment units and 112,000 sq. ft. of retail space.
Under this type of agreement, rather than being taxed like other real property in the township, the developer is taxed according to the negotiated terms specified in the PILOT. A fair PILOT would compensate the developer for the lost income from having to construct affordable housing units, while at the same time maximizing the amount of tax revenue that the township will receive.
The township tax assessor estimates that if the District at 1515 project contained no affordable units and was taxed at the full market rate, then the estimated tax would be about $3.8 million annually. However, 15% of the units in this project are affordable units. If the remaining 85% of the regular units were charged at the regular rate, and the affordables were not taxed at all, Parsippany would still receive $3.2 million in taxes. Compare that to the estimated $1.1 million that Parsippany will receive under the PILOT and it is obvious that the township is getting a bad deal.
To make matters worse, the $1.1 million that Parsippany will receive in tax revenues does not cover the cost of municipal services that the township must provide. As I wrote in a previous article, the development is expected to send between 80-100 students to our schools. This number is based on a ratio of 19 students per 100 apartment units, which was calculated from 2015-2016 school year statistics for the 7,000 apartments that existed in Parsippany at that time. The 80-100 estimate is further supported by real numbers from that year for the Powder Mill Heights apartment complex, which has fewer units than the District at 1515 but sent 97 students to our schools. Lastly, the student estimate is also supported by common sense. The vast majority of District 1515 renters are expected to be millennials of childbearing age, and 177 units in the development have either two or three bedrooms. Given that combination, an estimate of 80-100 students may actually be on the low side.
The cost of educating a student in Parsippany in the 2015-2016 school year was $22,000, according to the N.J. Department of Education. At that rate the cost of educating students from the District at 1515 will be in the neighborhood of $2 million, which means that education costs alone will exceed total tax revenues from the PILOT by about $1 million.
Parsippany cannot afford to agree to a PILOT that will cost at least $1 million more than the taxes it will bring in. At a minimum, any PILOT that is agreed to must be tax revenue neutral. If the council were to approve this PILOT in its current form, they would be doing a great disservice to the taxpayers of this township.