Wednesday, May 22, 2024
HomeLetters to the editorLetter to the Editor: PILOT: Parsippany In Lots Of Trouble

Letter to the Editor: PILOT: Parsippany In Lots Of Trouble

Dear Editor:

As Chair of the Parsippany Troy-Hills Transparency Committee, it is my duty to inform the residents that on December 5, 2023, the Council voted 4-1 to agree to give a 42 million dollar tax break to subsidiaries of Avalon Bay Communities (AVB), a publicly traded company with a worth of 26 Billion dollars.

This and other proposed projects are a gross misuse of the PILOT (Payment In Lieu of Taxes) program.

They will deprive our schools and our children of hundreds of millions of tax dollars over the next 30 years. The PILOTs offered to the Avalon Bay Communities are not in the best interest of the community nor does it meet the intent or criteria for a PILOT plan to even be considered.

The information presented is available by going to the Parsippany home page and then clicking the transparency tab. 2 Other references are cited below.

I reviewed the financials reported for the 2 and 3 Campus Drive properties. They show that the developer will receive a $42 million tax break and the schools will lose $56 million in tax dollars over 30 years.

Click here to download the PDF.

1 year

30 Year

The current property pays School District 277, $130 per year and the municipal budget receives $122,771. This is currently warehouse space with NO students in the district.
If the 410-unit apartment project is built and the current tax rate is applied, the annual school budget would increase to $1,574,029 per year. The municipal budget would increase to $697,307.

This may seem like a large increase, however, according to the Tax Payers Guide to Education, Parsippany pays $18.7 K per student. The $1.3 M increase would support the cost of 69 new students.

For comparison recent similar Parsippany projects “Modera, Watersedge, and Mountain Way are 200-unit, 30-unit, and 105-unit projects, respectively, and these three developments alone bring in at least 56 children to the district.” Using this real-world example, if 380 units bring 56 students, we can mathematically extrapolate that 410 units should bring in at least 60. The expected tax gains should cover the added students.

However, as you can see in the chart since the project is built with a PILOT, the annual school budget would have a zero increase. Not one penny to support the expected additional students.

The municipal budget, however, would increase to $1,140,006 (increasing $442,699) and the remaining $42 million would go back to the developer.

30 YearSchoolMunicipalOpen SpaceDeveloperCounty
No Polit6910411630613653297863010756148
Pilot1216667475309183652443420490323411722

So in a few flicks of a pen, the two signatories go from sharing 27.6% of the $110 million pie to 85.9% with no other affected parties present, consulted, or even considered.
Six additional PILOTs are proposed, which would further cut the School district out of its fair share of taxes. This will devastate the school system for decades to come. Unlike the municipal budget, the school budget increases are capped at 2%. There will be no way for schools to hire more teachers, provide competitive wages, or support all of the current programs.

I was at the last School Board meeting and there have already been talks of holding classes in trailers, cutting programs, and leasing space from St. Christopher’s. Our school district has long been a draw for new residents, but the PILOT program is a poison pill that will erode what we have taken so long to build. This is without a doubt unethical, but is it right?

According to the town’s own website 4 “The redeveloper must evidence that but for the tax abatement, the project would not proceed as designed. Without the use of this tool, the project would not be economically feasible in its current form, yielding an inadequate rate of return. The redeveloper also benefits by having predictable, stable payments over a long-term period. This stability is often necessary for the redeveloper to be able to obtain bank financing for the project.”

The developers argued that inflation is up and interest and labor costs are high. Is that enough to claim that the project would not be financially feasible without the PILOT? In short, NO.

According to the SEC, Avalon Parsippany 3 Urban Renewal is one of hundreds of subsidiaries 5 across the country of AvalonBay communities.

According to the AVB 2022 financial statement 6: “At year-end 2022, these proceeds remained entirely available to us. In addition, we upsized our unsecured revolving credit facility to $2.25 billion from $1.75 billion and extended its term to 2026. At year-end, we had over $600 million in cash and cash equivalents on our balance sheet and had no amounts outstanding under our unsecured credit facility.”

The Mayor claimed that we have to give PILOTS or risk losing ratables 8 to surrounding towns the same time he is touting how we are one of the hottest housing markets in the nation 7. New developments fill quickly. With the rental prices of Avalon properties, there is no concern they will profit greatly with or without a PILOT.

He also claims we need to give PILOTS because it is a bad economy. With $600 M in cash and no outstanding debt, AVB can complete both 2 and 3 Campus Drive without even touching the $2.25 B of revolving credit already established and a hot housing market, there is no way they can pretend that the project could not proceed unless they received a tax abatement. The PILOT does impact the project in the least but does pad their sizable bottom line.

It perplexes me why the Mayor and 4 out of 5 council members, knowingly and willingly are sacrificing our children’s education over the next 30 years to line a developer’s pocket. Please shed light on this issue.

Share with your friends and family attend the upcoming Council meetings and have your voice heard.

Sincerely Nicholas Kumburis, MBA, CQA
Transparency Committee Chair, Township of Parsippany-Troy Hills

1 “Parsippany In Lots of Trouble” quoted from Casey Parikh

https://www.parsippany.net/pages/pilot-program-information

https://patch.com/new-jersey/parsippany/school-board-speaks-out-against-parsippany-pilot-approval

https://www.parsippany.net/_Content/pdf/Frequently-Asked-Questions-PILOTs-General.pdf

https://www.sec.gov/Archives/edgar/data/915912/000119312512080629/d235613dex211.htm

https://s1.q4cdn.com/777653952/files/doc_financials/2021/ar/2022-annual-report-letter-wrap-final.pdf

https://www.parsippany.net/News/View/2259/parsippany-ranked-as-one-of-the-hottest-real-estate-markets-in-the-nation

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