Politics & Government

Princeton Officials Hear Suggestions on Negotiating PILOTs

Payments in Lieu of Taxes are important in Princeton, where tax-exempt Princeton University owns close to half the land in the Borough and nearly 20 percent in the Township.

The author of a study on Payments in Lieu of Taxes, also known as PILOTs, made a presentation and answered questions at Monday’s Princeton Township Committee meeting.

Daphne Kenyon, a visiting scholar at the Lincoln Institute of Land Policy in Cambridge, Mass., co-authored a report that outlines the challenges local municipalities face trying to keep property taxes down while providing services like roads and police protection to all, including tax-exempt nonprofit institutions.

The report is titled “Payments in Lieu of Taxes – Balancing Municipal and Non-profit Interests."

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Voluntary PILOT payments are a way for nonprofits to pay for the services they use, albeit at a much lower price than if subject to property taxes.

Committee member Sue Nemeth said the PILOTs are important for property tax relief, but the aim is not to hurt struggling organizations.

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“We’re not in the business of hurting nonprofits that are struggling and providing very basic services,” Nemeth said. “Our intent is not squeezing dry every nonprofit in town. That is not the purpose of this conversation.”

This issue of PILOTs has led to been a topic of discussion between Princeton municipalities and the largest employer in town, Princeton University. The university is a nonprofit that owns 40 percent of the property in the Borough and 17 percent of the property in the Township.

Borough and township officials have negotiated PILOT payments with the university in the past, but hope to establish something more consistent.

Kenyon said over the past decade, PILOTS have been used in at least 154 municipalities in at least 27 states. She said they work best where nonprofits own a significant amount of tax-exempt property in municipalities that rely heavily on property tax revenue.

Both conditions apply in Princeton Township, said Zvi Eiref, a township resident and member of the Citizens Financial Advisory Committee.

Princeton University owns a higher percentage of non-exempt property in the township than any municipality Kenyon studied. And the nationwide average is that about 30 percent of a municipality’s revenue comes from taxes; in Princeton, that number is 60 percent in Princeton Township, Eiref said.

“You have a situation where the Township is in a very difficult situation, it’s hard for me to see long term how we can keep on providing services we

need to without a steady long-term revenue stream from our non-exempt institutions,” he said.

Kenyon said PILOTs can increase over time and may include non-cash payments that benefit a local municipality.

She cited Yale University’s PILOT agreement with the city of New Haven which began with a $1.2 million PILOT in 1991 and grew to $7.5 million in 2010, not including university programs that give stipends to employees buying homes in the city, redeveloping several blocks in the city’s retail center and providing funds to address social problems in the city. 


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