A provision in A5680 requires municipalities to share PILOT revenue with school districts—and it could affect your property tax bill.
Most child care business owners in New Jersey don't realize that a provision buried in bill A5680 changes how municipal PILOT agreements work—and it could affect their property tax burden.
Here's what's happening: When municipalities enter into PILOT (payment-in-lieu-of-taxes) financial agreements on or after A5680's effective date, they must now remit a portion of the annual PILOT service-charge revenue directly to the local school district. That portion can be up to 40% of the revenue collected.
PILOT agreements are financial deals between municipalities and large property owners or developers. Traditionally, the municipality kept all the PILOT revenue. Under A5680's new requirement, a share of that revenue goes to the school district instead, which reduces the school tax levy.
When the school tax levy drops, the property tax burden on all taxable properties in the municipality decreases—including commercial real estate owned by small businesses. If you own the building where your child care center operates, or own other taxable commercial property, a lower school tax levy means a lower property tax bill for you.
The key word here is taxable. Properties that are tax-exempt (such as some nonprofit facilities) won't see a direct benefit, but the overall municipal tax environment may shift.
Section 4 of A5680 amends N.J.S.A. C.40A:20-12, specifically paragraph (4)(b). The provision requires that municipalities remit payment to the school district in an amount based on the school district's share of the total school tax levy in the municipality.
The law applies only to PILOT financial agreements entered into on or after the effective date. Existing PILOT agreements are not affected. This means the impact will grow gradually as new agreements are signed.
A5680 became effective immediately upon enactment. From that point forward, any new PILOT agreement a municipality enters must comply with the revenue-sharing requirement. If your municipality is considering a PILOT deal with a developer or large property owner, this provision is now part of the negotiation.
If you own taxable commercial property in a New Jersey municipality, monitor local PILOT agreements. When new deals are signed, the school tax levy should decrease over time, which affects your property tax assessment. The size of that decrease depends on the amount of PILOT revenue generated and the school district's share of the total levy.
This is a long-term shift in how municipal finances work, not an immediate tax cut. But it's worth understanding, especially if you're evaluating property ownership or expansion plans for your child care business.
For a detailed, business-specific guide to how PILOT revenue sharing affects child care operations in New Jersey, contact your local child care trade association or municipal tax assessor's office.