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.

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