Walk South Avenue on a Saturday morning and you will pass at least one building that did not exist ten years ago. Fanwood Crossing's three phases. Station Square's townhome-style rentals behind the train tracks. Another apartment-and-parking phase now moving through the pipeline near the station. For a borough that covers just over one square mile, that is a lot of new roofline.
Buyers touring homes near downtown almost always ask some version of the same question: if all this gets built and occupied, does my tax bill go up to pay for it? The honest answer is more interesting than yes or no. Those buildings are not taxed the way your house is taxed, and understanding why explains something real about what you are buying into if you choose Fanwood over the next town on your list.
The split you assume is not the split that applies
Start with how a conventional New Jersey property tax dollar gets divided. In Fanwood, the borough's own published guidance on its redevelopment agreements lays out the standard breakdown plainly: of every dollar collected in traditional taxation, the school district takes 60 percent, the county takes 20 percent, and the borough itself keeps only 20 percent. That is the arrangement governing your house, my house, and every single-family home on a residential block in Fanwood.
New construction inside a designated redevelopment area does not follow that formula. Under New Jersey's long-term tax exemption statute, a municipality can enter into a PILOT agreement with a developer, a payment in lieu of taxes, instead of collecting conventional property tax on the finished building. The borough's PILOT fact sheet is specific about why this matters to Fanwood's budget rather than to the school district's or county's: municipalities retain far more of a PILOT payment than they would collect under conventional taxation on the same property. The 60/20/20 split does not apply to a PILOT dollar. It applies to conventional tax dollars only, and PILOT payments are, by design, not conventional tax.
Why the land under the building still pays the old way
Here is the detail that keeps this from being a giveaway to developers at the school district's expense. A PILOT payment covers only the value of the improvement, the building itself. The land underneath continues to be taxed conventionally, at the same rate and the same 60/20/20 split as before. Fanwood's own fact sheet on the redevelopment agreements is direct about the consequence: the school districts and county are not harmed, because they keep collecting on the land at the same level they always did. The borough is the only party trading away the standard split, and it is trading it away on the improvement value only, in exchange for a bigger cut of a bigger number.
That distinction shows up in the actual dollar figures the borough has published for its own projects. In 2019, the earliest year with a full accounting on record, Fanwood Crossing I at 254 South Avenue, 24 residential units above 3 ground-floor retail spaces, paid $107,072.04 total, split between an $86,714.64 PILOT payment and $20,357.40 in conventional land tax. Fanwood Crossing II at 246 South Avenue, the larger of the three phases with 40 units and 5 retail spaces, paid $133,693.73, with $99,566.00 as PILOT and $34,127.73 as conventional land tax. Fanwood Crossing III on La Grande Avenue, 16 two-bedroom apartments with no ground-floor retail, paid $70,933.15, split as $53,433.95 PILOT and $17,449.20 land tax.
| Project | Units | Total 2019 Payment | PILOT Portion | Conventional Land Tax |
|---|---|---|---|---|
| Fanwood Crossing I (254 South Ave) | 24 + 3 retail | $107,072.04 | $86,714.64 | $20,357.40 |
| Fanwood Crossing II (246 South Ave) | 40 + 5 retail | $133,693.73 | $99,566.00 | $34,127.73 |
| Fanwood Crossing III (233 La Grande Ave) | 16 | $70,933.15 | $53,433.95 | $17,449.20 |
Those are 2019 figures, the first full year on record for these agreements, and PILOT payments typically escalate over the life of the deal. The structure has not changed since, and with agreements that can run up to 30 years, the mechanism illustrated by these numbers is still the one operating on South Avenue today.
Where the extra money actually goes
This is the part that should change how you think about the borough's finances rather than your own. The two existing PILOT projects, Fanwood Crossing and Station Square, have generated more than $400,000 a year in added revenue to the borough, on top of what the pre-development land would have produced under conventional taxation. That is money the school district and county were never entitled to under either scenario, because it comes from the improvement value that only exists because the PILOT made the project financeable in the first place.
That revenue is not abstract. The borough's own materials point directly to where some of it lands: the annual debt service on Fanwood's new library is expected to run about $160,000 a year, and the PILOT structure is part of what makes covering that kind of capital cost possible without leaning harder on the conventional tax rate that funds it, and by extension your rate.
This is also why the borough's 2026 municipal budget looks the way it does. Fanwood's Borough Council introduced a 2026 municipal budget totaling $13,319,347 in April, an increase of just $226.86 for the average household. That is a modest number for a town that has spent the past decade adding density downtown. A meaningful share of the reason is that new construction isn't drawing from the same well as your house. It runs on its own arrangement, one that sends more dollars to the borough's side of the ledger without asking the school district or county to give anything up.
What this means for your own bill
None of this changes how your existing single-family home is assessed or taxed. Fanwood's current effective property tax rate runs around 2.84 percent as of 2026, with a median annual bill in the neighborhood of $12,916, a figure driven by the standard 60/20/20 formula, your home's assessed value, and the budgets set each year by the borough, the county, and the Scotch Plains-Fanwood school district. A new apartment building two blocks away on a PILOT agreement is not quietly redistributing cost onto your tax line. If anything, it is one of the tools helping keep the borough's own piece of that formula from climbing as fast as it might otherwise.
There is a horizon worth watching, though. PILOT agreements are not permanent. New Jersey's tax abatement law allows terms of up to 30 years, and when an agreement expires, the property returns to full conventional taxation, distributed under the same 60/20/20 split as everything else in town. Fanwood Crossing's first two buildings have been fully occupied and generating PILOT revenue since 2015, which means the clock on at least some of these agreements is already more than a decade in. When that reversion happens, the school district and county start collecting on the full improvement value for the first time, not just the land, which is a meaningfully different number than what they've been receiving. That is a long-term structural shift worth understanding if you're planning to own in Fanwood for the next couple of decades, less something to worry about for a purchase happening this year.
A couple of questions that come up often
Does a PILOT deal mean the school district gets shortchanged while the building fills up? No. PILOT payments apply only to the value of the improvement. The land underneath keeps generating conventional tax revenue at the standard rate, split the same way it always has been, so the school district and county continue receiving what the land was already producing before construction started.
If I buy a house near one of these buildings, will my assessment reflect the new construction next door? Your assessment is based on your own property's characteristics and the borough's periodic reassessment cycle, not on what a PILOT building nearby is paying under its separate agreement. The two run on entirely different mechanisms.
If you're weighing a move into Fanwood against one of the neighboring Union County towns and want a clearer read on how a specific property's tax history compares, or what a downtown-adjacent address might mean for your long-term numbers, Jayne Bernstein can walk through the details property by property. Request your home valuation to start that conversation.
