5 things wrong with the Solomon-Yun 5-point plan to save Jersey City schools

Councilmen Michael Yun and James Solomon offer a 5-point plan that misses the mark 5 times, highlighting exactly why the city council shouldn’t be rushing to pass a Jersey City Payroll Tax.

PUBLISHER’S NOTE: Please read ‘Tax gentrification, not jobs’: Say NO to Jersey City Payroll Tax, YES to Income Tax for an extensive analysis of the payroll tax.

First, I’ve already written about why the payroll tax is an ill-thought-out idea. A link to the piece explaining my opposition can be found in the publisher’s note above.

Second, I’ve provided an alternative funding solution – a progressive income tax – which I think will be a wiser source of revenue for Jersey City Public Schools (JCPS). Additionally, I believe that a progressive income tax would put some downward pressure on housing demand fueling hyper-gentrification.

Third, the plan pushed by Ward D Councilman Michael Yun and Ward E Councilman James Solomon is either deeply flawed or lacking some devilish details. It’s time for a Real Jersey City Instant Analysis:

Let me begin by saying I essentially agree with the first four paragraphs of their guest column in the Jersey Journal regarding the seriousness of the situation. The next five points explain what’s wrong with the Solomon-Yun 5-point plan.

1) Ensure abated waterfront properties pay their fair share through a payroll tax is a rather questionable statement.

The developers of the office towers — and none have been built in over 10 years — are the ones who receive tax abatements, not the majority of corporations that would be paying the tax.

JP Morgan and Goldman Sachs do have tax abatements on the corporate towers they own, and actually lease space to other financial institutions (like RBC). Beyond that, I would assume many firms are leasing from Mack-Cali & LeFrak – like E*Trade, Fidelity Investments, etc.

A more accurate statement would be to “ensure corporations along the waterfront getting tax credits from the New Jersey Economic Development Authority (EDA) pay their fair share.”

Regardless, this is a dangerous policy.

Not only does the payroll tax fail to provide substantial relief, it’s volatile and unsustainable. If one or two big corporations leave Jersey City, like Billionaire David Tepper leaving New Jersey for Florida, the impact on the budget will be draconian.

Continuing on that point, most of the EDA tax credits are part of 10-year agreements. Those agreements will be expiring at the same time state aid cuts will be phased in. Imagine the disaster a few corporations leaving for Florida or Texas would do to the Jersey City Board of Education’s (JCBOE) budget.

2) Our city’s government should share abatement revenue with our city’s schools –  sounds great on paper. The problem is Solomon and Yun don’t explain how they’ll pay for the redirection of $4 million in existing abatement revenue to the JCBOE every year.

To be clear, that’s $4 million in PILOT (payment in lieu of taxes) payments redirected to the JCBOE in Year 1; $8 million in PILOT payments redirected Year 2; and so on until $40 million in PILOT payments are redirected by the city in Year 10.

Without raising municipal property taxes by $4 million every year, which will increase the tax burden on non-abated properties already crushed by the reval, I’m assuming they’ll be cutting $4 million dollars in spending annually? What exactly are they even willing to cut, if anything, from the city budget?

Let’s not forget that public safety makes up the largest part of the city’s budget, and Jersey City’s police officers and firefighters – not their superiors – were already hit hard in the pocket by their recent union contracts. Will Solomon and Yun cut their pay and benefits to share abatement revenue?

3) Share future abatement revenue with the schools misses the mark even worse than the second point. Specifically, what future abatement revenue will they be sharing?

Both councilmen ran on campaigns against giving out more tax abatements, and Mayor Fulop recently proclaimed “we have eliminated tax abatements on market rate housing for the last two plus years as we followed through on a campaign process.”

Here’s a better idea – issue new tax abatements and direct 100% of the PILOT revenue to the JCBOE. Quite frankly, it might be necessary for developers after the payroll tax is passed.

In short, the payroll tax will increase the cost of construction in Jersey City and make it harder to secure financing. When it comes to baseball fields in Iowa, the saying is build it and they will come. When it comes to residential development in Jersey City, the saying should be build something because they’re coming no matter what.

According to Tim Evans, a research director at non-profit organization New Jersey Future, Jersey City’s population grew by over 9% since 2010. I’m not saying that’s inherently a bad thing, but the housing supply isn’t growing fast enough to keep pace with demand – which is causing hyper-gentrification that’s displacing the middle-class.

New abatements with a 100% of PILOT revenue directed towards JCPS may actually be one of the few win-win situations I can think of from the payroll tax.

4) Audit the school district is an idea I support, but I doubt tens of millions in savings will actually be identified. Maybe millions, but we’re talking about a $170 million to $270 million gap (based on their numbers).

That said, two things mentioned during this point are really silly. First off, auditing union contracts? For those that don’t know, union contracts are negotiated and legally binding. What exactly is going to be audited? Second, “patronage hires” is a rather subjective term.

Do Solomon and Yun think JCPD Off-Duty Intake Coordinator Thomas Mahoney is a “patronage hire”?

While testifying under oath during The State of New Jersey vs Joseph Ascolese, Kelly Chesler, and Michael O’Neill, it was revealed that all it took was one meeting for Jersey City Public Safety Director James Shea to hire Mahoney – who admittedly had no prior experience managing anything resembling the multimillion dollar program. Shea never even discussed the responsibilities of an off-duty intake coordinator with Mahoney.

5) Amend the payroll tax to support small businesses is something that depends on approval from Trenton. I’ll believe it when I see it, but it may be “too little, too late” if and when the relief comes.

Also, what exactly do they define as small business? How much revenue will be generated without taxing those businesses? And, back to my earlier point, how much more volatile does that payroll tax become if 1-2 corporations move out of Jersey City?

In the end, I fully agree with Solomon and Yun that it’s time Jersey City increases its public school investment. Unfortunately, the well-intentioned councilmen are perpetuating ill-thought-ideas that are only going to make matters worse.

For the sake of the children, I hope they go back to the drawing board and make sure they get this thing right before passing a payroll tax.

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