Senator Mike Doherty (R-23) said Jersey City’s consideration of a new payroll tax would hurt the city’s efforts to lure businesses and jobs from New York, and suggested the city change how it shares payments from tax abated properties as a better alternative to fund local schools.

“Jersey City has asked for and used many tax incentives over the years, including UEZs and PILOT agreements, to draw both development and jobs from across the river,” said Doherty. “The imposition of a new payroll tax would negate the various benefits they’ve offered, creating a complicated tax picture that would discourage future investment in Jersey City.”

The proposed payroll tax is under consideration as a way to offset reductions in state school aid to Jersey City resulting from recent changes to New Jersey’s school funding formula.

Doherty said that Jersey City’s school funding problems have been exacerbated by the city’s extensive use of tax abatements and payment in lieu of tax (PILOT) agreements, which divert local funding from the city’s schools.

While school taxes account for approximately a quarter of regular property tax bills in Jersey City, Doherty noted that billions of dollars of tax exempted property in the city do not contribute anything to the local school district.

Instead, 95 percent of most PILOT payments end up in the city’s coffers, with the remaining five percent remitted to Hudson County, as noted in a 2010 report on municipal tax abatements by the State Comptroller.

With the impact of Jersey City’s excessive use of PILOT agreements under increased scrutiny, the city’s mayor signed an executive order last year to share ten percent of revenues collected through future PILOT agreement with the school district – still less than the approximately 25 percent the school district receives from regular property tax payments.

“Jersey City should share every dollar it receives through existing and future PILOT agreements in the same proportion as regular property tax collections with its school district,” added Doherty. “Giving Jersey City’s schools their full 25 percent cut should more than offset reductions in state school aid and eliminate the need for a chilling payroll tax. Doing so would help Jersey City to remain competitive with its neighbors, while ending the city’s long-discussed abuse of tax abatements.”