Only real reform will reduce New Jersey property taxes
Wednesday, July 28, 2010
SPECIAL TO THE TIMES

Facing an unprecedented revenue gap this year, Gov. Christie introduced, and the Legislature passed, a budget that cut municipal property-tax relief funding by about $450 million from last year's already reduced totals. Difficult times demand difficult choices. And New Jersey policy makers had few alternatives.

But let the record be clear: With these cuts, New Jersey has, once again, balanced its budget with municipal revenues. In order to avoid increasing state-administered taxes, the state has used municipal property-tax relief funding to bridge the gap.

In fact, most of the Consolidated Municipal Property Tax Relief Act (CMPTRA) and all of the Energy Tax Property Tax Relief (energy tax) funding is revenue replacement funding. It is supposed to replace revenues that were originally collected by municipalities for local use. Those alternative revenues delivered municipal property-tax relief for a long time, before various "reforms" took them away from our cities, towns, townships, boroughs and villages -- always accompanied by the statutory vow that local property taxpayers would be "held harmless."

Further, pursuant to a 10-year-old state law, which has long been honored more in the breach than in the observance, CMPTRA and the energy tax are supposed to be annually adjusted to account for the effects of inflation. Instead, they were cut by $271 million in the state's new budget.

Realizing that a 20 percent cut in revenue replacement funding, instead of a statutorily required increase, would present a serious challenge to local budget makers, Gov. Christie intended to provide local officials with meaningful tools to limit the otherwise devastating impact of the cuts. The governor's "Tool Kit to Meet Today's Fiscal Challenges" was supposed to provide "long overdue Â??ndate relief and regulatory flexibility for beleaguered towns and schools." It was supposed to include new tools to accomplish six objectives: collective bargaining reform; pension and benefits reform; civil service reform; management reform; a constitutional cap on increases in spending for direct state government services; and a constitutional cap on property-tax increases.

With the cuts assured in the state's new budget and with bipartisan agreement reached on new property-tax caps, New Jersey mayors -- from municipalities, large and small, and from all around our Garden State -- still wait for State House policy makers to enact meaningful local government cost containment reforms. And little mention is made of a cap on state spending.

The governor was right when he said, "New caps without the tool kit are unworkable." Having put the cuts and caps in place, the state establishment in Trenton needs to get serious about the struggle against oppressive, regressive property taxes.

Real reform takes more than caps and cuts, neither of which do anything to address New Jersey's worst in the nation property-tax burden. The caps will only slow the growth of the burden. They will not reduce it. And the cuts are no help at all.

Yet, once again, just as happened following the 2006 Special Session for Property Tax Reform, caps and cuts have gained bipartisan support. But management reforms, mandate relief and a commitment to honor the promise of revenue replacement funding have been deferred, pending further discussion.

No elected official ever wants to raise taxes. But the state sets tax policy for all New Jersey governments. And only state action can provide true local property-tax reform.

Local officials need real solutions to real cost drivers, whether they are inside or outside any arbitrary cap. They need to know that the state will honor its promise of property-tax relief revenue replacement funding. Absent cost containment initiatives and an end to the diversion of municipal revenue replacement funding, these new caps will only shift the burden of deciding whether to slash vital municipal services or increase property taxes from local elected officials to the citizens who elected them.

Only real reform can provide immediate and sustainable property-tax relief. Only the state can deliver real reform.

William G. Dressel Jr. is executive director of the New Jersey League of Municipalities.

 

Bill Dressel
Executive Director
NJ League of Municipalities