OpEd: Wayne Must Carefully Consider PILOT Agreements that May Leave Schools and Taxpayers Paying the Price.

New Jersey’s Payment in Lieu of Taxes (PILOT) program, authorized under the New Jersey Long-Term Tax Exemption Law, was originally designed to encourage redevelopment in blighted or underutilized areas. In Wayne Township, however, it has increasingly become a tool used to support residential and mixed-use development that has significant implications for local school funding and property taxes.

When Wayne Township enters into a PILOT agreement with a developer, the property is removed from the traditional property tax system for the duration of the agreement. Instead of property taxes being distributed among the township, Passaic County, and the Wayne Township Public Schools, approximately 95 percent of the payment goes to the municipality and about 5 percent to the county. The school district receives no direct share of PILOT revenues.

It is important to clarify a common misconception: PILOT agreements do not take money away from Wayne Township Public Schools or reduce its existing funding. Rather, they change how new tax revenue from development is distributed. Under normal taxation, new development would enter the tax base and be shared among the township, county, and schools through the statutory formula. Under a PILOT agreement, that revenue is instead directed almost entirely to the township, while the school district must still respond to the impact of growth through its regular budget process.

This distinction matters because the Wayne Township Public School District already operates at a very large scale and significant cost. The district serves approximately 7,653 students across 15 schools. Its total annual budget is approximately $200 million, with spending of about $26,124 per student. Total district revenues are roughly $207 million annually.

These are not abstract figures—they represent a fully utilized school system where even moderate enrollment increases from new residential development require additional staffing, transportation, special education services, and facility maintenance.

The practical impact in Wayne becomes most significant when PILOT-supported projects include apartments or townhomes. These developments inevitably bring new families and additional students into the Wayne Township Public Schools. While the township receives stable PILOT revenue, the school district does not receive a dedicated, proportionate increase tied directly to that development. Instead, the district must absorb the enrollment impact within its overall budget structure.

As enrollment pressures increase, the Wayne Township Board of Education must adjust its budget through the normal school funding process. In practice, that often results in higher school budgets supported by the local property tax levy across all taxpayers in Wayne Township. In other words, while PILOT revenues flow to the municipality, the cost of educating additional students is ultimately spread across existing homeowners and businesses through increased school taxation.

This dynamic is especially challenging at a time when the Wayne Township Public Schools—like many districts in New Jersey—are facing rising fixed costs. One of the most significant pressures is the cost of employee benefits, including health insurance through the New Jersey State Health Benefits Program, where increases approaching 30 percent have been reported in some plans. These increases alone can create multi-million-dollar gaps in a district the size of Wayne.

When Wayne Township Public Schools must simultaneously absorb rising mandated costs and educate additional students generated by PILOT-supported residential development, the fiscal pressure intensifies. The result is predictable: increased reliance on the local tax levy, pressure on program funding, larger class sizes, deferred maintenance, or staffing constraints.

The Township of Wayne benefits from PILOT agreements through a predictable municipal revenue stream. However, the school district—responsible for educating the children created by that growth—must rely on the broader tax base without receiving a directly proportional share of the development revenue.

The Legislature should address this structural imbalance. At a minimum, it should require that a meaningful portion of PILOT revenues be shared with school districts like Wayne Township Public Schools, similar to how traditional property taxes are allocated. Alternatively, the state could limit PILOT use for residential developments that are likely to generate significant student enrollment, while preserving their use for projects such as age-restricted senior housing or other developments with minimal school impact.

Supporters of PILOT agreements argue that they are essential tools for economic development, and in many cases they are. But in Wayne Township, economic development policy should not unintentionally shift the fiscal responsibility for educating new students onto local taxpayers and the school district without a transparent and equitable funding mechanism.

Wayne Township has long prided itself on strong public schools and high educational standards. Maintaining that quality depends on stable, predictable, and fair funding. If New Jersey continues to expand residential development through PILOT agreements without fully accounting for their impact on school enrollment and school funding, it risks placing unsustainable pressure on local taxpayers and the Wayne Township Public School system.

Reforming the PILOT program is not anti-development. In Wayne Township’s case, it is a recognition that growth must be accompanied by a fair and transparent distribution of fiscal responsibility—especially when that growth directly increases the burden on one of the community’s most important institutions: its public schools.

At this time, we only know that the Township is considering the use of a PILOT structure in connection with potential affordable housing development as part of its affordable housing obligations. However, the specific scope, scale, and design of any such project have not yet been finalized. It is not yet known whether any limitations will be placed on the development, or whether it may be targeted toward populations such as seniors or special needs residents—groups that would likely have a more limited impact on enrollment in the Wayne Township Public Schools.

Until those details are made public and the parameters of any proposed development are clearly defined, it is important for residents to remain aware of the potential fiscal implications. In particular, the eventual structure of any PILOT-supported residential development could have a meaningful impact on the long-term level of property taxes in Wayne Township, depending on the extent to which it affects school enrollment and the resulting school budget needs.

Michael Gottesman is a Wayne resident, retired attorney and public schools advocate. He is the founder of the New Jersey Public Education Coalition (NJPEC), a grassroots non-partisan organization protecting public education. He is also the Director of Communications and Marketing for the Energizing Young Voters Initiative and a member of the League of Women Voters of New Jersey Education Committee.