Myths About Holmdel Property Taxes And PILOT Revenues

There was an article posted recently that suggested that the Township received $2.5 Million in PILOT revenues in excess of what it budgeted for and that it should be given back to the taxpayers.

Our current budget process is to start with a zero increase in each department and then work our way through the list of key priorities. It is therefore important that we consider all the facts.

First, we earned $4.5 Million in PILOT revenues in 2020 and budgeted for $2 Million. So, it appears that the excess amount is $2.5 Million. The PILOT revenues we earned in 2020 are based on the 2019 audited financial statements from Bell Works. Now, due to the pandemic, we are unsure as to what our net revenues would be until we receive the audited financial statements for 2020. If it turns out that the audited statements show a lower amount, we will have to give money back to Bell Works.

Second, even though we collected $4.5 Million in 2020, our anticipated surplus goes to support our reserves, which stand at $3.5 million. Any attempt to give money back at this time will seriously undermine our healthy reserves, as diminished reserves would negatively impact our triple A bond rating and increase our borrowing costs and would ultimately impact our property taxes.

Third, it is therefore natural to question why, despite our purported earnings from our PILOT, we’re unable to give money back to the taxpayers.

We incurred significant debt service costs starting in 2020 as the Township Committees in 2018 and 2019 incurred over $20 million in short-term debt, also called Bank Anticipation Notes. These only require interest payments and not the principal. Starting in 2020, we have converted this to permanent debt as this is the most prudent thing to do. Converting to permanent debt requires that we now pay the principal in addition to the interest. This has escalated our debt service costs and stand at $3.5 million annually.

Additionally, we embarked on the largest road program in Holmdel’s history, started construction of the Firehouse, and purchased two firetrucks. Most of these municipal imperatives were ignored for the last 10 years.

We have created a very tight budget that shows a healthy reserve for our bond holders while we undertake a financially prudent step to convert our temporary debt to permanent debt and simultaneously manage to implement important municipal activities.

Any attempt to suggest to the public that we are hoarding excess cash from our PILOT is naïve at best.

Prakash Santhana

Holmdel Township Committeeman (2020-2022)