For Real Property Tax Relief, Drop The Tool Box

The Record, Nov 4, 2010

THE GOVERNOR has been on the stump for months proclaiming that the property tax crisis could be solved if the Legislature would only speed up its work on passing his tool kit of reforms for towns to better deal with the impacts of the new 2-percent property tax cap.

In a case of “If you hear something enough, it must be true,” many mayors and newspapers have joined his hallelujah chorus.

The tool kit is worthwhile and important. Many of the rules imposed on municipalities are antiquated and deserving of updating. But the simple fact is that nothing in the tool kit is the cure to our property tax mess.

Most of the tool-kit items are minor adjustments that would have minimal – if any – impact on property tax bills. Even reform of the binding arbitration process for police and fire personnel contracts, arguably the most important tool, would make, at most, a tiny dent in property taxes.

Yes, there is a problem with the way arbitration currently works. It’s a system that pits local officials who may have never been in front of a state-appointed arbitrator before against public union attorneys who go before arbitrators for a living. And while arbitrators are given guidance by the law as to how they must structure awards, there are no hard requirements for them to take into account local fiscal realities.

Towns are at a distinct disadvantage. That much is fact. But the belief that arbitration is the reason property taxes are increasing – as espoused by the governor, mayors and in editorials by this newspaper – is a myth. And it’s a myth that can be very easily debunked with a simple review of the numbers.

No worse off

Through Oct. 15, the average arbitrator award in the 21 arbitrator cases decided so far this year stood at 2.5 percent. What was the average pay increase in the 38 contracts settled through negotiations? Also 2.5 percent. In other words, taxpayers have been no worse off if the police or fire personnel in their town negotiated their contract or had it settled by an arbitrator.

And this isn’t an anomaly. Over the past decade, arbitrator awards have actually been slightly lower than negotiated settlements – 3.83 percent versus 3.93 percent.

So, if arbitration isn’t to blame for New Jersey’s high property taxes, what is the culprit?

For starters, the governor cut state aid to Bergen County towns by $21.1 million this year, a loss of nearly 20 percent. Our schools lost more than $102 million, or 41 percent of their aid – with some districts receiving no aid whatsoever. That’s a tremendous one-time revenue loss that can be made up by only so many cuts before essential services go on the chopping block. The only pressure-release valve was increasing property taxes.

How we operate

But we also must consider how Bergen County operates. We have a full-service county government. But we also have 70 municipalities, each with their own slate of services, and police and fire departments. The cost of these micro-governments adds up, and quickly.

In the 1870s, Bergen County consisted of 12 townships. No one will advocate for turning the clock back that far, but certainly home rule has come at an extreme cost.

But the mayors who are most adamant that their smaller-is-always-better approach are not responsible for higher costs are fooling themselves and taxpayers. Towns could certainly save money by looking across their often very closely situated borders to share police and fire costs with neighboring communities without sacrificing service.

And moving many services to a countywide level could save even more.

In Gloucester County, where many services are delivered at a county level, the benefits of consolidation and sharing actually has been calculated – a savings of 18 cents off the average tax rate. On the average Gloucester County home valued at $146,000 that means roughly $270 in lower property taxes. Imagine what the savings could be in a dense, high-value county like Bergen.

The governor needs to remember that a major part of governing is to seize the opportunities to cooperate and create coalitions – I have reached out to his office to discuss our shared commitment to ethics reform, but have yet to receive a call back.

On this issue of shared services, my Democratic colleagues and I stand ready to work with the governor to promote real and lasting property tax reform.

Maybe, this time, he’ll return our call.