Measure Would Shift Property Tax Appeal Calendar, Create More Certainty In Local Budget Process
TRENTON – Legislation sponsored by Senator Jeff Van Drew (D-Cape May, Cumberland, Atlantic) to pilot a new system for real property assessment that would provide more certainty in the municipal budget process by changing the tax appeal calendar was given final approval yesterday by the full Assembly. It now heads to the desk of Governor Chris Christie.
The bill (S-1213) is aimed at staving off dramatic and unexpected revenue losses experienced by municipalities due to successful tax appeals by residents and businesses. Since appeals are often decided after a municipality has crafted its budget, towns and cities are left scrambling to fill the budget gap.
“The current system for property assessment is flawed as it creates an environment of unpredictability for local officials. Successful tax appeals can make anticipated revenue plummet, leaving local officials scrambling to make up for the loss. In cases of excessive appeal reductions, municipalities have been forced to borrow money to pay their bills, which can further harm their financial position,” said Senator Van Drew. “This program is intended to create a more accurate and predictable system for local officials, by implementing an assessment appeal structure that takes place before the budget process is completed.”
The number of tax appeals filed in New Jersey has increased exponentially in recent years, partly because of a weakening housing market. According to an analysis published in The Star-Ledger in March, the state saw nearly four times the number of appeals last year as it did in 2007, hitting the highest mark in almost 20 years. In total, municipalities across the state lost more than $3.8 billion in their tax base in 2011 due to reduced assessments, according to the report.
The key to the legislation is in changing the calendar for assessments and appeals so that appeals are decided before the adoption of a municipal budget. Changing the property tax assessment calendar to ensure municipalities know what they owe in refunds before budgets are made will help localities. However, moving the assessment calendar will not be effective if revaluations are not kept up in a timely manner. Towns and cities often wait too long to perform property revaluations for a variety of reasons. To remedy the problem of untimely revaluations, the pilot program would give demonstration counties authority to require municipalities to perform timely revaluations when necessary.
“Local governments must be able to work within a predictable system in order to properly budget operational costs,” said Senator Van Drew. “Putting in place a structure that creates more certainty will allow local governments to budget under an improved system, but will also better ensure that taxpayers are not forced to shoulder increasing debt loads due to bonding or to endure spikes in property taxes.”
Four counties would be permitted to participate in the demonstration program – up to two in the first two full tax years after the bill’s enactment and two more in the third and fourth years after enactment. The central premise of the demonstration program is a collaborative effort between the county tax board and municipal assessors and is based on the utilization by all of a demonstration county’s municipalities of the same property assessment software, the MOD-IV/CAMA system.
Under the bill, the assessment and appeal process would be moved up. Property tax appeals would be heard in the months of February, March and April under the bill, rather than in May, June and July under the current structure. The final tax list would be filed on May 5, in advance of the June mailing of tax bills. The tax list is currently finalized on Jan. 10, well after tax bills have been sent and revenue estimated by a municipality.
No state funds would be necessary for the implementation of this demonstration program. The county board of taxation in a demonstration county would absorb the cost of assessment data conversion through assessment appeal filing fees collected by the board.
The Senate approved the bill by a vote of 36-0 in October. The Assembly approved the bill by a vote of 77-0.