Jersey City Mayor Steven Fulop and Ward D Councilman Michael Yun on Tuesday announced a plan to direct $250 million – including tax abatement revenues – towards the school district over several years, which they say is staring down a “historic budget gap.”
By John Heinis and Corey McDonald
“We are moving $10M to share from abatement revenue, while we’re making cuts in regards to police recruiting, fire recruiting, overtime reductions, hiring freezes and I think we have a pretty good grasp on how we’re gonna get there …,” Fulop said at a presser in his office this morning.
The plan, notably, would work towards directing tax abatement revenue that the city receives towards the school district, ensuring the schools receive the same revenue it would be receiving under conventional taxation.
Tax abatements, or payments in lieu of taxes (PILOTs), circumvent regular taxation to the county and school district by sending revenue directly to the city over a period of time — ranging a anywhere from five to 30 years.
The “School Funding Action Plan” released by the city outlines how to deliver $250 million to school district over the next three years, which includes $40 million in abatement revenue: $10 million in both 2020 and 2022 and $20 million in 2021.
Other major sources of revenue cited $55 million over three years from the payroll tax; and $15 million from the sale of the BOE’s district headquarters on Claremont Avenue.
The plan also cited a number of revenues generated from the school district’s side, such as “an operational efficiency corrective action” plan that the city says would net $45 million over three years; a school tax levy adjustment to net $75 million over three years; and an “energy audit” that would net $2 million.
“We’ve been working proactively to come up with this fair and balanced funding plan where the city is offering to make strategic adjustments to assist the schools with their current budget crisis,” Yun said.
“These proposed solutions are tough decisions we’re making on the city budget side, but they are necessary.”
In a particularly outside the box move, the city will issues voluntary separation plans to a yet to be disclosed number of municipal employees that is expected to produce $2.2 million in savings.
As part of the plan, a group of outside auditors will review all of the city’s PILOT agreements, following approval by the council last week. The city has 178 active agreements, some dating back to the early 1990’s.
An audit in October, which was first reported by Hudson County View, showed the city and school board both missed out on millions of dollars due to inaccurate billings on at least 19 different projects receiving payment in lieu of taxes agreements dating back to 2016.
Fulop has made it a point to phase out tax abatements, and noted today that the city has not granted any agreement for more than three years.
He also pushed back against remarks from Councilman-at-Large Rolando Lavarro where he said that PILOTS and other tax abatements have not been properly monitored since Maureen Cosgrove left her position as tax assessor in 2016.
“I know that [people] always want to throw stones, but the reality is that we haven’t issued tax abatements in three years and what we’re auditing are things that were here under Maureen Cosgrove, actually.”
The announcement comes as the school district is staring down a steep budget shortfall over the next several years, after revisions made to the state funding formula in 2018 resulted in a phase-out of state aid to the district.
The district, which operates with a roughly $550 million budget, receives much of its funding from the state. It is set to lose more than $150 million over the next few years.
In April, the school district filed a lawsuit against the state after the cuts were announced, challenging the constitutionality of the School Funding Reform Act of 2008, along with amendments to that law passed in 2018.
However, last month a judge denied a motion by the state to dismiss the suit.
Members of the city council, while lauding the move towards financial stability, said they will “eagerly scrutinize” the proposal during its budget hearings.
“At a minimum, it represents an important step forward,” Ward E Councilman James Solomon said. “The city’s commitment to transfer abatement revenue to the schools, instead of hoarding the cash for itself, is long overdue.”
Council President Joyce Watterman said the next step is to coordinate with the Board of Education after they have finished their budget process.
“We’re waiting really to hear what the board of education is going to do,” she said.
“They’re going through their budget process, so in the long run we will definitely work together to make sure the schools receive everything that is necessary, from both the city’s and board of education’s perspective.”
In an email to Fulop prior to the press conference, Board of Education President Lorenzo Richardson cited a number of concerns he had with the plan.
Now that the 2% tax levy cap has been lifted for the city, the “board can in theory increase property taxes this year by $48 million to close the gap.” In their budget plan, officials cite $25 million per year for the next three years in school tax levy.
Additionally, he took issue with the city authorizing an audit of all of their PILOT agreements.
“Our audit findings covered the top 19 PILOT agreements and they are all out of compliance. All you have to do is to initiate the 60-day cure clause and allow the 19 PILOTS 60 days to cure, which is to send you their audited financials for 2017, 2018 and 2019. Upon receipt, you can invoice them for the actual PILOT fees owed instead of the old 2016 rates the city was currently invoicing from,” Richardson wrote.
“Putting the Cure on hold and trying to do an audit of all the PILOTS which we have already audited last year in August does not make sense at this point in time. The sooner you can resolve this without delay reduces pressure on the city’s budget.”
At the press conference, Fulop also said that after multiple meetings with PTO groups, the superintendent, and school board trustees, he has yet to hear a budget initiative from the BOE that goes beyond raising taxes.
“I think it would be hard to argue that the city is not doing it’s part to move this issue forward and our hope is that the board of education moves forward on their side,” he said.
Follow Corey McDonald on Twitter @cwmcdonald_