Bill Will Provide Long-Term Reform by Capping Local Levy Increases
TRENTON – By a vote of 28 to 10, the full Senate today approved the centerpiece of the legislature’s six-month long special session on property tax reform – a measure that will provide $2.3 billion in property tax relief to homeowners and renters, while mandating a four percent cap on local tax levy increases. Bill S-20/A-1, sponsored by Senate President Richard J. Codey (D-Essex) and Senate Majority Leader Bernard F. Kenny, Jr. (D-Hudson), will provide homeowners with the largest level of relief in state history, while also helping to stem property tax growth in the years to come by providing one of the most far-reaching spending controls.
“When the dust settles, what will be remembered is that we did in fact deliver on our promise to provide property tax relief and reform,” said Sen. Codey. “I want to thank the Governor for his stewardship of this process. The people of New Jersey can now look forward to unprecedented property tax relief that will be sustained by the four percent tax levy cap. I’m confident that in the long-run, these caps will help change our culture of unchecked spending.”
Under the bill, $2.05 billion will be shared by 1.8 million households, meaning 95 percent of all New Jersey households will receive property tax relief in the following forms:
* 20% credit for homeowners with an income up to $100,000
* 15% credit for homeowners with an income between $100,000 – $150,000
* 10% credit for homeowners with an income between $150,000 -$250,000
The bill also stipulates that seniors and the disabled will not be shortchanged and will continue to receive the higher of two amounts – either the new credit formula above or the amount they would have received under the existing homestead rebate program. In the event that the Division of Taxation cannot get the direct credit program up and running accurately and expeditiously this year, the new relief will temporarily be provided in the form of rebate checks. Seniors, however, will continue to receive rebate checks in 2007, and may elect to continue to receive rebate checks thereafter. The bill will also double the amount of money allocated in the state budget for relief for renters this year.
“The credit program, when combined with the tax levy cap and other government efficiencies, will ensure sustained property tax relief,” said Sen. Kenny. “In time, this relief will generate lasting reform through reduced government spending.”
In order to help control government spending and sustain the relief program over the long-run, the bill mandates that municipalities, counties, school districts, and other local government units may not submit a budget that requires an increase of more than four-percent in the adjusted tax levy over the previous year’s budget.
The bill grants school districts and local government units a number of exemptions in order to accommodate unanticipated expenditures or drops in revenue for circumstances such as increased enrollment, reductions in unrestricted state aid, increases in health care costs to a limited degree over the next five years, debt service payments or certain pension contributions. Should a local government unit or school district encounter other extraordinary circumstances, they would have to apply to the Local Finance Board or the Commissioner of Education, respectively, for a thorough review of the request before any additional exemptions would be granted, or they would have to receive the approval of 60 percent of voters in that jurisdiction.
Sen. Codey noted that the caps are designed to bring New Jersey’s property tax rates in line with the rest of the nation, particularly over the long-haul, as local governments have time to re-negotiate pre-existing contracts and plan budgets around the new requirements.
With approval from both legislative houses having been received, the bill is now headed to the Governor’s desk for his signature.