New Jersey lawmakers are weighing changes to tax abatements that for more than 30 years have sparked waves of development in cities and suburban communities alike.

So-called payment-in-lieu-of-taxes, or PILOT, agreements have made way for affordable housing projects in arrangements that bring flexible revenue to local governments. They're used extensively in cities like Newark and Jersey City, as well as many smaller towns. But they've also increased the portion of the property tax burden for local schools that’s borne by the owners of existing properties, even with many districts grappling with financial crises.

A state senator from Burlington County is hoping that after years of schools around the state turning to tax increases, cuts that affect their students or both, there's momentum to let districts take some of the immediate financial benefit from PILOTs. It's one of multiple proposals for funding reform among state leaders, even as first-year Gov. Mikie Sherrill pushes for an increase to schools aid overall that critics argue has lopsided benefits for some districts, leaving others without relief because of the state's formula for divvying up the money.

PILOT agreements give developers property tax exemptions on new projects, and in exchange, developers pay the local governments annual fees, which are typically calculated based on developers' revenues. Municipalities then use that revenue to pay for local services like police and fire departments, as well as infrastructure investments that serve the new projects.

The PILOTs save developers on what they would otherwise pay in taxes but are temporary, lasting up to 30 years in most cases before a building returns to the tax rolls. They're often seen as win-wins — the developer gets an incentive to build now, and the tax base increases overall in the long run.

Existing state law for PILOT agreements calls for 95% of revenues to go to municipalities, with the remaining 5% going to county governments. But in New Jersey, school districts are their own government entities separate from municipalities or counties. The law has no mandate to provide local school districts with any revenue from PILOT agreements.

Some municipalities, like Woodbridge, Hoboken and Princeton, work out their own agreements with local school districts to share PILOT revenue, but that’s not required.

A bill sponsored by state Sen. Troy Singleton would change state law to ensure school districts get a cut of revenues from PILOT agreements. For residential projects, a district’s share would be based on the number of school-aged children living in the development. For nonresidential projects, districts would receive 5% of PILOT revenue.

“The bill ensures that schools are not unintentionally left behind,” Singleton said.

The bill passed unanimously out of the Senate Community and Urban Affairs Committee, which is chaired by Singleton, in February. That’s the first hurdle of a legislative gauntlet the measure faces and matches the farthest any previous version of the bill has advanced.

Tim Purnell, president of the New Jersey School Boards Association, said his organization supports Singleton’s bill.

“We're just guaranteeing our future, which is our kids, have a piece of the pie,” Purnell said of the bill.

He said giving schools a cut of PILOT revenue also would help drive down pressure to keep raising property taxes – a red-hot topic in New Jersey, where nation-leading property taxes average more than $10,000 per household. In most communities, school taxes are the largest portion of a property tax bill.

“It's easy for residents to blame schools for high taxes, right?” Purnell said. “If you require a portion of the tax abatements to go to the school districts to reduce the tax levy, it will reduce the overall property tax burden on you and me. On residents.”

Fears of slowing growth

The New Jersey League of Municipalities argues, though, that local leaders will offer fewer lucrative tax breaks to developers if they have to split the returns among more parties. All 564 of New Jersey's municipal governments are members of the association.

“ This will have a critical adverse impact on the economic development assistance due to environmental contamination, site conditions, and extreme blight, or which have smaller returns – for example, the construction of affordable housing,” Lori Buckelew, the league’s deputy executive director, said at a committee hearing on the bill in February. “In authorizing PILOT agreements, municipalities determine that the project would not be built if not for that PILOT. A significant increase in the amount of PILOT a project pays reduces the possibility that project will be built at all.”

Builders also have voiced concerns the bill would cause municipalities to offer PILOTs less frequently. Jeff Kolakowski, the CEO of the New Jersey Builders Association, said the state’s push to build more affordable housing could be threatened by any changes to tax abatement laws.

“ The reason why a lot of those projects need PILOTs is because they're asked to subsidize and have set-asides and deed restrict their properties and only sell them at limited price points,” Kolakowski said at the same hearing. “They build those properties at a loss. So they need to make up the revenue somewhere else.”

Singleton said he “fundamentally disagrees” with the opposition’s concerns.

“This has no impact on development,” Singleton said. “Developers will pay no more than what they would ever pay under a PILOT, as negotiated by the municipality. What does change is the distribution to the same taxpayer.”

Jersey City schools strained

Few places have generated more conversation around tax abatements and school funding than Jersey City. It has 159 PILOT agreements currently on its books. The city took in roughly $95 million from those agreements in 2025, according to budget documents. If those properties had paid regular local property taxes, they would have generated more than $222 million.

PILOT revenue impacts on local schools have been a hot topic in Jersey City for the past decade. As school funding reforms dominated state politics in 2016 and 2017, then-state Senate President Steve Sweeney, a South Jersey Democrat, derided Jersey City schools as being overfunded by the state, arguing the city should contribute more.

In April 2017, then-Mayor Steve Fulop signed an executive order dedicating 10% of all future PILOT agreements to Jersey City schools.

But that revenue sharing never happened. Nathaniel Styer, a spokesperson for current Mayor James Solomon, and Norma Fernandez, the superintendent of Jersey City Public Schools, both said Fulop’s executive order was never implemented; neither could explain why. The result is the 42 PILOT agreements entered into by Jersey City after the order was signed do not require revenue be directed to the city’s schools.

In the years since, Jersey City schools have lost nearly $300 million from the state as legislators changed the formula for state aid to reflect growth in a city’s tax base. The city’s school district raised its tax levy in response, contributing to surging local property taxes that have increased roughly 45% over the past five years. And those taxes will rise again this year, with the school district increasing its levy, the county expected to do the same, and the city facing a $255 million shortfall.

Fernandez said if the schools were getting some of the city’s PILOT revenue, the school tax increases wouldn’t have been as steep.

'It's never enough' — Newark's balancing act

Newark also relies heavily on PILOT deals to drive its redevelopment and encourage affordable housing, said Allison Ladd, Newark’s deputy mayor of economic and housing development. That’s because Newark local laws have inclusionary zoning rules that require projects getting tax abatements to provide at least 20% of their housing units at affordable rates.

Ladd said those local rules combined with the PILOT deals are key reasons there are almost 1,000 affordable housing units currently under construction in Newark.

“We have to provide, sometimes, these incentives to make sure that it actually works,” Ladd said. “Because it's real estate, and real estate is a business decision in the long run.”

Newark has no plans to back off using tax abatements, Ladd said.

“ If we scale back, even though some developers may continue to do the work that we're talking about, they also may not,” Ladd said. “We really want to make sure our development is downtown, is in our neighborhoods, and is both mixed income and affordable for seniors and for families.”

Newark’s city government does not have arrangements in place to directly share PILOT revenue with the city’s schools, but Ladd said city leaders work with school district leaders and the state School Development Authority to get new schools built and existing ones renovated around Newark. And in some cases, projects benefitting from PILOT agreements may include space for schools.

“Like with all funding sources that come from another funding source, like in this case PILOT revenue, it's never enough,” Ladd said. “ We're looking at it, I think, from a holistic standpoint. Sometimes the dedication is just not enough. But we work hard to use those partnerships.”

How some schools benefit now

Some communities have been proactive in sharing PILOT revenues with their local schools. Woodbridge, a suburb of more than 100,000 people in Middlesex County, has been aggressive both in using PILOT deals to bring new development, and in using the money collected from those deals to help the local schools.

Woodbridge Mayor John McCormac, who formerly served as state treasurer, called PILOT revenue a windfall for the township because the bulk of projects getting the tax abatements use few local services. McCormac said he doesn’t think PILOT deals harm school finances, because the school districts are able to raise taxes to fill out their budgets as needed, and he argues that having PILOTs drives down the municipal share of property taxes and mitigates the burden of the school share.

But he said his administration tries to dedicate about 25% of the town’s PILOT revenue to school capital projects each year because doing so benefits the whole community.

“We want to share our good fortune with the schools, because even though they’re not hurt, they should share in our success,” McCormac said.

Correction: This story has been updated to correct Tim Purnell's title.