Princeton Creates Model For School Funding Through New PILOT Revenue Agreement

PRINCETON, NJ – On Monday, Princeton Council adopted a resolution directing 100 percent of surplus PILOT (Payment In Lieu Of Taxes) funds from the Avalon Thanet Circle apartment development to the Princeton School District.

This annual contribution could range from $300,000 to $500,000 or higher, depending on the apartments' future performance. The funds given to the school district will be available after the Municipality deducts necessary sums required to pay the debt service. Five percent of the PILOT revenue will go to the County and a small administrative fee will also be charged.

Funds from the PILOT program will help the district with "cost and expense for maintaining the public facilities," according to the resolution.

Members of the Board of Education were present during Monday's meeting to witness the adoption of the resolution.

BOE president Dafna Kendal thanked Council president Mia Sacks for working with the school Board to bring the resolution before the governing body.

On Tuesday, Sacks and Kendal released a joint statement, saying:

"Princeton's Municipal government and Board of Education share one town. We also share a strong commitment to the value of public education as the cornerstone of a functioning democracy. As Princeton wraps up the Third Round of state-mandated affordable housing and embarks on the Fourth Round, it is essential that both public bodies work closely together to plan responsibly for anticipated growth. This PILOT revenue-sharing agreement is a good start, and we look forward to ongoing collaboration on a variety of issues to provide maximum benefit to Princeton taxpayers."

The decision comes amid ongoing debate about PILOT agreements in Princeton. Some residents have criticized these financing instruments, claiming they deprive schools of their fair share of property tax revenue.

Contrary to critics' claims, PILOTs have not negatively impacted the annual school budget. Under New Jersey state law, Princeton's school budget increases are generally capped at 2 percent annually, with the municipality legally required to fund the full amount regardless of how revenue is collected.

While critics argue that non-PILOT taxpayers must compensate for developers' reduced tax payments, this perspective overlooks several key factors. Developers still make PILOT payments, many developments might not have occurred without these incentives, and some projects utilize land previously owned by tax-exempt nonprofits. Additionally, PILOTs encourage developers to provide community benefits such as improved affordable housing units, public improvements and enhancements. (You can read more about PILOT FAQs here.)

The PILOT agreement comes at a critical time for the local school district, which lost 3 percent in state aid for the 2025-26 school year and risks losing more than $1 million in federal funding, "because we do not want to compromise our educational programming to accommodate an agenda that does not reflect our community's values or serve all of our students," Kendal explained.

Councilman Brian McDonald, who previously served on the Princeton BOE, thanked the Council for helping the district financially through the PILOT program.

"I'm very grateful for the time my fellow council members and the mayor have put into this. There's no question that our local schools and schools throughout the country are facing tremendous challenges right now, and one of the challenges our local schools face is a financial one," McDonald said. "This is an important way of acknowledging the schools and providing them with critical resources that help to educate our town's children, and do so in a manner consistent with what we've done for decades here."

With several school districts in New Jersey seeing state aid cuts and towns moving to build more housing, will the Council and school district collaboration prove to be a model for the state? Only time will tell.

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