Vernon council approves PILOT for Omega Drive Housing project

The Vernon Township Council voted 3-1 on Dec. 29 to grant a a payment in lieu of taxes (PILOT) agreement to Omega Drive Redevelopment Urban Renewal LLC for a 27-unit four-story residential building.

Councilwoman Jessica DeBenedetto voted against it.

Six of the units would be designated as affordable housing to count toward the township’s state-mandated obligation.

The proposal includes a 30-year payment-in-lieu-of-taxes arrangement tied to the developer’s gross revenue rather than traditional property taxes. Township officials said the special meeting was necessary to complete the hearing and take action before the end of the calendar year.

The vote followed a public hearing that included a presentation by redevelopment counsel Matthew Jessup of McManimon, Scotland & Baumann, comments from Bryan Morris of Phoenix Advisors, the township’s independent financial adviser, and public comment from residents.

During the public comment period, supporters said the PILOT agreement is necessary to spur redevelopment of an underused property and to help the township meet its affordable housing obligations. Opponents argued the township would be subsidizing a project that may not be financially sustainable on its own.

Residents also raised concerns that the agreement does not account for inflation, potentially reducing the real value of payments over time while municipal costs continue to rise. School-related expenses were a central issue. It was projected the development would generate eight school-aged children at an estimated annual cost of $96,000. Residents questioned whether PILOT revenue would offset those costs or shift the burden to taxpayers and expressed skepticism about the student projection.

The absence of a renegotiation clause also drew criticism, with residents saying the township would be locked into a 30-year agreement regardless of changing economic conditions. Some noted that long-term PILOT agreements without adjustment mechanisms can limit municipal flexibility and create long-term financial risks. Concerns about no default penalties, the 30-year period and sewage issues also surfaced.

Jessup said the project would not be financially viable without the PILOT agreement, citing an internal rate of return of approximately 5 percent under traditional taxation. He also outlined the project’s financial background and referenced additional analyses conducted by Phoenix Advisors.

Jessup also addressed concerns raised during public comments, offering several clarifications. In response to questions about whether payments would be fixed and not adjusted for inflation, he said the payments would increase as rents increase.

Regarding the possibility of default, Jessup said the property would be subject to the In Rem Tax Foreclosure Act as if it were conventionally taxed. If the developer were to default, the township would have the right to terminate the agreement, end the PILOT, and assess conventional property taxes.

Jessup said it would take approximately six months for the development to fully ramp up once completed.

Responding to a resident’s question about what would happen if no action were taken, Jessup said the property currently pays about $3,800 annually in property taxes, of which approximately $900 goes to the township, a figure he said would likely remain unchanged indefinitely.

With the PILOT agreement in place, Phoenix Advisors projected the township would receive about $73,000 in the first year and approximately $3.7 million over the life of the agreement. Jessup said any revenue above the current $900 would represent new revenue for the municipal budget, adding that the project would generate income that does not currently exist and could help offset the tax burden for township taxpayers.

Township Council President Patrick Rizzuto said Newton Township has 13 PILOT agreements in place and said the programs have been a strong revenue producer for that municipality.

In response to skepticism about the projection of eight additional students, Phoenix Advisors relied on the Rutgers University Bloustein School demographic model, which incorporates multiple factors, including historical data and trend analysis, to estimate the number of school-aged children the development is expected to generate to come up with their projection.

After the vote, several residents who were not satisfied that their voices were heard are circulating a petition to overturn the decision.