Hopewell 57 PILOT Agreement — Financial Analysis & Review

Summary

A $300,000 bond, representing less than 1% of the $44 million Hopewell 57 Project, triggered a statutory loophole that will save this Redeveloper up to $42 million over 30 years in property taxes. Instead of paying the regular property tax bill that would have amounted to $53.5 million in taxes over 30 years, the Redeveloper will only pay $11.6–14.0 million over that same 30-year period. The Hopewell Valley Regional School District receives nothing from the reduced revenue. Mercer County receives only 5% of the reduced revenue. The $39.5–41.9 million shortfall will be absorbed by all other municipal taxpayers. This analysis explains how this happened, and why it matters to all Hopewell Borough residents.

About this Analysis

This review was prepared by Ton Mesters, Treasurer of the Hopewell Community Alliance (“HCA”), based on publicly available PILOT documents, the Redeveloper Agreement dated November 12, 2024 between Hopewell Borough (“Borough”) and Hopewell 57 Urban Renewal Entity, LLC (“Redeveloper”), and the applicable New Jersey statutes. The financial projections use standard tax-abatement methodology. HCA has shared this analysis for review, and we welcome correction of any factual errors. Some figures and calculations depend on assumptions about rental income and growth that may be adjusted as additional information becomes available.

Background

The NJ Local Redevelopment and Housing Law (aka Redevelopment Law) is intended to promote reinvestment and redevelopment of properties or areas that are in a state of decline, disinvestment, or abandonment, and restore them to more productive and beneficial use to the community. To make redevelopment projects financially viable, the Redevelopment Law provides for property tax abatement which is regulated in The Long Term Tax Exemption Law (LTTE, N.J.S.A. 40A:20-1). A redeveloper can apply for a LTTE, and the municipality may approve such an application, and enter into what is called a PILOT (Payment in Lieu of Taxes) agreement.

An area of redevelopment is not automatically entitled to a PILOT agreement. While being located in a designated redevelopment or rehabilitation area is a threshold legal requirement to qualify, PILOTs are never guaranteed and are granted strictly at the discretion of the local municipality’s governing body.

Key Realities of NJ PILOTs

• Municipal Discretion: A municipality is under no legal obligation to grant a PILOT to a redeveloper. Approval must be negotiated, and the governing body must pass a specific ordinance to authorize it for a specific redevelopment project.
• The “But-For” Clause: To get a PILOT, a redeveloper generally must prove that the project would be financially unfeasible without the tax abatement. Municipalities often use these agreements to offset costs for challenging sites that might otherwise remain blighted.
• Entity Requirement: A redeveloper must be designated as an Urban Renewal Entity (typically an LLC) formed under the New Jersey Long-Term Tax Exemption Law.

Typically, the NJ LTTE Law sets strict rules on the level of the “Annual Service Charge” (aka ASC), the amount a redeveloper has to pay to the municipality in lieu of regular property taxes as follows:

• The ASC cannot fall below 10% of the project’s annual gross rental revenue, for units rented at market rate.
• For affordable housing, the ASC cannot exceed 15% of the annual gross rental revenue generated from these lower rent units.
• A weighted average ASC can be determined in the case of a mix of affordable rate and market rate rental units.
• The ASC is to be increased periodically (aka step up schedule) over the lifetime of the PILOT agreement, from 20% to 40% to 60% and finally to 80% of regular property taxes.

Under the traditional Long Term Tax Exemption Law, redevelopers are locked into the above strict formulas for their PILOTs. BUT, there is a loophole in the LTTE Law, per N.J.S.A. 40A:12A-66(a):

• If a project uses Redevelopment Area Bonds (RABs) to finance any portion of the project, the municipality is allowed to bypass the strict statutory guidelines under N.J.S.A. 40A:20-12. In essence, the municipality can agree to customized annual service charges, which can significantly reduce the Annual Service Charge otherwise owed.

For example, by issuing a very small nominal bond (e.g., a $300,000 bond for a $44 million redevelopment project), the project is technically “partially financed by bonds”, even if the bond portion is less than 1% (or more precisely only 0.68%) of total project cost. This allows municipalities and redevelopers to:

• Avoid Minimum PILOTs: Bypass the standard requirement that a PILOT must equal a minimum percentage of the total project cost or annual gross revenue.
• Eliminate Termination Clauses: Lock in the tax abatement without the statutory requirement that redevelopers be allowed to voluntarily terminate the tax agreement after one year.

This is a controversial and aggressive use of a legal loophole in the LTTE statute.

While technically following the letter of the bond law, this tactic is, albeit legal, highly controversial for several obvious reasons:

1. It circumvents legislative intent: The New Jersey Legislature intended RABs as a tool to fill “project financing gaps,” meaning bonds were meant to fund necessary public infrastructure or overcome verified financial shortfalls, not to act as an excuse to secure favorable tax exemptions.
2. It subverts local tax bases: Because the PILOT is calculated at an artificially low rate rather than standard property taxes, the county and local school districts are deprived of millions (or in this case tens of millions) of dollars in revenue over the lifespan of the abatement.
3. It has questionable validity: This practice has been broadly criticized: the New Jersey State Comptroller, accounting professionals, and state legislators have all flagged this practice as undermining the legislative intent of the LTTE and shifting tax burdens onto homeowners and school districts (see extensive citations at the end of this article).

Hopewell 57 PILOT Agreement

PILOT agreements often look attractive to both the municipality and redevelopers alike as they enable and incentivize both parties to successfully revitalize an area in need of redevelopment.

In 2016, Hopewell 57 was designated as an “Area in Need of Redevelopment,” but it took until 2024 to pass Redevelopment Ordinances #887 and #891. These two ordinances cleared the way for the construction of 120 multi-family units (1-2 bedrooms each) at Hopewell 57. The Borough and the Redeveloper entered into the Redevelopment Agreement dated November 12, 2024 confirming the award of the Hopewell 57 project to the Redeveloper.

Subsequently, in December of 2025, Hopewell Borough and the Redeveloper entered into a PILOT agreement. This PILOT agreement has long-term implications for Hopewell Borough. All revenue (the ASC, or Annual Service Charge referred to above) that is generated by the PILOT Agreement is collected by Hopewell Borough. The sum of all Annual Service Charges over the next 30 years in the current PILOT Agreement amounts to $11.6 million, with provisions that could increase the total to about $14.0 million.

• Hopewell Borough will keep 95% of this revenue.
• Mercer County will get 5% of this revenue, far less than it would normally receive if the Hopewell 57 property owner paid regular Property Taxes, like all the rest of us in the Borough do.
• The Hopewell Valley Regional School District will receive NO FUNDS from the PILOT.

Under normal circumstances, the PILOT Agreement would adhere to N.J.S.A. 40:20-12; it would follow strict rules to set the ASC. The project consists of 120 rental units, 96 units at market rental rates, and 24 units at affordable rental rates. Based on the financial information provided in the PILOT documents, the ASC would be roughly 9.48% of the annual gross rental revenue. (Note: about 91.4% of annual rental income is from regular market rental units, and 8.6% of annual rental revenue is generated by the 24 affordable housing units.)

The current PILOT Agreement between Hopewell Borough and the Redeveloper includes a commitment to finance the $44,000,000 project with a minimal bond in the amount of $300,000 (this is only 0.68% of total project cost). The bonds were classified as very important to the financial viability of the project, which is a dubious assertion at best, and possibly an attempt to exploit the loophole noted above. The math is straightforward: with or without this bond (less than 1% of the project cost), the financial viability of the redevelopment project is the same. Said differently, if the entire financial success of the project hinges on a $300,000 bond contribution, the project is in jeopardy from the start.

Hopewell Borough Council needlessly agreed to a much lower Annual Service Charge. Instead of the approximately 9.48% it could have collected without the bond issuance, the Council used the bond to trigger N.J.S.A. 40A:12A-66, and it consequently agreed to collect a mere 3.21% Annual Service Charge during the first 15 years of the PILOT agreement.

To restate this for clarity: It appears that Hopewell Borough Council utilized a loophole in the LTTE Law to allow the Redeveloper to avoid the required higher ASC payments. This represents a questionable financial gift to the Redeveloper, especially given that the ultimate real-world tax burden created by the new residents (infrastructure needs, municipal services, and schooling costs) will be borne by the other Hopewell residents as “regular” taxpayers. This decision by Council could save the Redeveloper up to $42 million, leaving other borough residents to pay the tax bill.

The table below shows the PILOT revenue streams (with and without a bond), compared to the regular property tax schedule.

Key Takeaways

The Redeveloper gets the benefit of huge savings — aka, profits (up to $42 million over 30 years):

• Under the current PILOT Agreement (which includes a small bond), signed off by our Council, the Redeveloper is obligated for $11.6 million total ASC payments, over a period of 30 years. This agreement includes provisions to adjust ASC payments starting from year 16 through year 30 to meet certain minimum PILOT payment levels, which could potentially increase the total payments to about $14.0 million over 30 years.
• If the PILOT Agreement did not include the $300,000 Bond, the 30-year total payments would follow strict legal requirements, and total at least $19.4 million over 30 years. The inclusion of this nominal bond triggered special provisions in the law and will save the Redeveloper an additional $5.4 million in payments over 30 years ($19.4 million minus $14.0 million).
• If Hopewell Borough had not agreed to the current PILOT Agreement with the Redeveloper, the regular Property Tax bill would amount to roughly $53.5 million over 30 years (includes 1.9% inflation per annum). If the Redeveloper were to remain the owner for 30 years, the Redeveloper would save up to $42 million in foregone property taxes.
• The provisions of the PILOT are extraordinarily favorable to the Redeveloper, and the current projections offered by the Redeveloper appear overly optimistic. The absolute floor for PILOT payments over 30 years is approximately $3.6 million (ASC × 30 years). The $14.0 million figure is based on the projected ‘greater of’ formula for the assessed value; the $11.6 million figure is calculated from ASC at 3.21% of Annual Gross Revenue for years 1–15, followed by the laddering percentage for years 16–30. Page E-2 of the PILOT agreement indicates that annual income is based on 100% occupancy with no rent concessions, beginning January of the first full year of operation. This is an aggressive assumption by any standard. Industry-standard underwriting assumes some vacancy (typically 5%) and includes lease-up concessions for new luxury construction. Recent New Jersey market reports underscore the point: luxury (Class A) multifamily vacancy in Northern New Jersey has climbed to 10.7% as new supply has outpaced absorption, with concessions widely deployed across newer Class A assets (Matthews Q3 2025). Marcus & Millichap forecast Northern New Jersey overall vacancy at 5.1% even in a ‘resilient’ market scenario (Marcus & Millichap, March 2024). While these specific data points are Northern New Jersey rather than Central New Jersey, they illustrate a broader statewide pattern of luxury oversupply that the Hopewell 57 pro-forma does not appear to account for. Even modest vacancy in early years would have a substantial impact on PILOT revenue projections.

The Hopewell Valley Regional School District receives zero dollars from the PILOT Agreement.

The Hopewell Valley Regional School District burden: Independent estimates suggest the actual student impact may be considerably higher than the Redeveloper’s projection of 20 new students, possibly in the range of 40–50 new students, based on comparable multi-family developments in the region. At a minimum cost of $25,000 per student per year, the School District will need additional funds, up to $1.25 million (for extra classrooms, teachers, buses, etc). This is, as usual, collected via regular property taxes levied on our already heavily taxed properties, so all of the other property taxpayers in the school district will have to pay for the Hopewell 57 school students. If Hopewell 57 were required to pay regular property taxes, the District School Tax portion would have been $28.76 million over 30 years, but under the PILOT Agreement, the District gets nothing.

Mercer County will only get 5% of PILOT payments ($580–700k).

Mercer County is another financial “victim” of this PILOT Agreement; the County will only receive 5% of the revenue that Hopewell Borough is projected to collect from the Redeveloper. Since the Borough will likely receive $11.6–14.0 million over 30 years, about $580–700k will be forwarded to the Mercer County Tax Collector. If regular property taxes were levied on Hopewell 57, the County would have collected $10.65 million in County Tax, far more compared to the $580–700k it is going to receive from Hopewell Borough for the next 30 years. This is another shortfall for the County – a shortfall that we, the taxpayers, will need to pay for via increased tax bills for the next 30 years.

Local Municipal Tax

Per the current PILOT agreement, Hopewell Borough is projected to receive at least $11.6 million in Annual Service Charges over 30 years. If Hopewell 57 was subject to regular property taxes, the municipal tax portion would have been about $11.6 million as well. So at least this number is the same either way.

Conclusion

These above numbers are life-changing, especially to a small community like Hopewell Borough. Does the Hopewell 57 site Redeveloper deserve this much of a tax break? The extra costs to prepare the site for new construction involve demolition, environmental remediation, and flood/stormwater remediation; the total cost for all these activities could be substantial, perhaps $5–6 million. About $13.7 million is needed to support the affordable rental units, over a 30-year period. In total, it may take up to $20.0 million in ‘tax breaks’ over 30 years to make the project financially viable. The current PILOT agreement saves the Redeveloper up to $42.0 million, over 30 years. Some of the environmental remediation might qualify for Federal or State government grants. Those grants will go to the Redeveloper, not Hopewell Borough. The overall tax savings of up to $42 million seem excessive, compared to the actual $20.0 million (over 30 years) that might be needed to keep the project financially viable.

Based on the above, the PILOT agreement should collect $33.5 million in Annual Service Charges over 30 years. This number provides the $20 million in ‘tax breaks’ needed to reduce the $53.5 million property taxes that would otherwise be owed without a PILOT agreement. The current PILOT agreement in place will only collect up to $11.6–14.0 million.

There are many unanswered questions:

• Did our elected officials act in the best interest of the Hopewell Borough taxpayer? What motivated their fiscal decisions?
• Was there a process to determine the extra amount of funds needed to make the project financially viable? Such costs could include: extra costs to demolish the current Hopewell 57 structure, costs to perform additional environmental remediation, costs for extra prep needed to get the site ready for new construction, extra costs for flood/stormwater issues, and costs related to a financial compensation to support 24 units with affordable (reduced) rents. If this amount was determined, what was the number? Did this amount form the basis for the huge tax abatement laid out in the PILOT Agreement? If not, how was the level of tax abatement determined?
• What exactly did the $300,000 bond pay for? Was it strictly necessary? Could the project have moved forward without that bond?
• Did Borough Council explore federal, state, or private grant opportunities for the redevelopment of Hopewell 57 that would have imposed a smaller financial burden on local taxpayers?
• The Redeveloper was represented by the same law firm that employs Hopewell Borough’s Mayor. Even with the Mayor’s recusal, does this relationship raise concerns under New Jersey’s Local Government Ethics Law (N.J.S.A. 40A:9-22)? Did the recusal extend to all relevant stages of the redevelopment process, including ordinance preparation, planning board appointments, and PILOT negotiations? Should the Mayor have been more circumspect in his handling of this matter?
• Can the Borough still negotiate a better result for Hopewell Borough residents and taxpayers, as it relates to the Hopewell 57 project and the PILOT?

Citations & Sources

Primary New Jersey statutory law

• Local Redevelopment and Housing Law (LRHL) — N.J.S.A. 40A:12A-1 et seq.
• Redevelopment Area Bond Financing Law — N.J.S.A. 40A:12A-64 et seq., particularly:
  • § 40A:12A-65 (Definitions)
  • § 40A:12A-66(a) — the provision that exempts bond-financed redevelopment projects from the minimum Annual Service Charge and step-up requirements of N.J.S.A. 40A:20-12, and from the voluntary termination provisions of N.J.S.A. 40A:20-13
  • § 40A:12A-67 (Issuance of bonds by municipality)
  • § 40A:12A-68 (Payments in lieu of taxes constitute lien)
• Long-Term Tax Exemption Law (LTTE) — N.J.S.A. 40A:20-1 et seq., particularly:
  • § 40A:20-5 (Urban Renewal Entity qualification requirements)
  • § 40A:20-9 (Financial agreement form and contents)
  • § 40A:20-12 (Tax exemption duration; minimum and maximum Annual Service Charges; statutory step-up schedule)
  • § 40A:20-13 (Voluntary relinquishment of tax exemption status)
• Local Government Ethics Law — N.J.S.A. 40A:9-22 et seq.

Hopewell Borough documents (can be found in our Knowledge Hub or on the Borough website)

• Borough of Hopewell Ordinance #887 (Adopted July 1, 2024) — Establishing the M-F Multi-Family Redevelopment Overlay Zone for Block 12, Lot 7 and Block 18, Lot 1
• Borough of Hopewell Ordinance #891 (Adopted November 7, 2024) — Amending the redevelopment plan to increase maximum building height from 3½ stories / 45 feet to 4 stories / 55 feet
• Redevelopment Agreement between the Borough of Hopewell and Hopewell 57 Urban Renewal Entity, LLC dated November 12, 2024
• PILOT / Financial Agreement Ordinance, Borough of Hopewell and Hopewell 57 Urban Renewal Entity, LLC dated December 4, 2025
• Hopewell Borough Council meeting minutes and roll-call votes (December 2025)

Authoritative critique of NJ PILOT practice

• Office of the New Jersey State Comptroller, A Programmatic Examination of Municipal Tax Abatements (A. Matthew Boxer, State Comptroller, August 18, 2010) — the canonical state-government analysis of PILOT programs, identifying foregone school district revenue (95%/5%/0% revenue split), inadequate oversight of “but-for” determinations, and the regional tax burden shift onto homeowners.
• New Jersey State Comptroller press release accompanying the 2010 report.
• PKF O’Connor Davies, “Benefits and Pitfalls of PILOT Agreements for NJ Municipalities” — professional accounting firm analysis affirming the school district and county revenue losses identified in the Boxer Report.

Pending legislative reform

• New Jersey Senate legislation sponsored by Sen. Troy Singleton (LD-7) proposing to require that school districts receive a share of PILOT revenue, introduced in response to the Boxer Report findings. Coverage:
• Sen. Troy Singleton, “Towns Allowed To Leave Schools Out Of PILOT Payments. A Proposed Law Would Change That.”
• Gothamist, “‘PILOT’ tax breaks have long spurred NJ development. Should they help schools, too?” (2026)
• Press of Atlantic City, “Towns allowed to leave schools out of PILOT payments. A proposed law would change that.” (2019)
• Singleton Bill to Require Towns to Share PILOTs With School Districts Advances (Nov 2025)

Hopewell Valley regional context

• Sherry Carey, “Perplexed About PILOTs? Here’s Why They Matter for Hopewell Valley,” MercerMe — Local analysis of PILOT mechanics applied to Hopewell Township developments, illustrating the regional pattern of PILOT-driven school district revenue loss. (January 2026)
• Planet Princeton, “Fact Brief: Do PILOTs hurt taxpayers, schools and libraries?” (April 2026)
• Hopewell Valley Regional School District Budget Page — see the “User Friendly” 2026/27 budget doc for details.
• NCES — Audited federal finance data for HVRSD per pupil costs (plainschools.com)
• MercerMe — Analysis of HVRSD costs per pupil, and why comparisons fall short

Additional civic and educational analyses

• “Long-Term Municipal Tax Abatements 101,” Patch (Gloucester Township, NJ, 2013) — accessible explainer drawing on the Boxer Report findings.
• Civic Parent series on Jersey City tax abatements — case-study material on the long-running PILOT critique in Hudson County.

Open documents (pending OPRA requests and counsel review)

• The full executed Financial Agreement between the Borough and Hopewell 57 Urban Renewal Entity, LLC
• The borough’s formal “but-for” findings supporting the PILOT
• The bond resolution and any documents underlying the $300,000 Redevelopment Area Bond cited as triggering N.J.S.A. 40A:12A-66
• December 2025 Council roll-call vote on the PILOT ordinance, including recusal record (hopewellboro-nj.us)
• NJDEP environmental remediation status reports for the property