April 25, 2011
Re: S-2762, Commercial and Industrial Property Tax Refunds
The League Legislative Committee has reviewed S-2762, which permits a municipality to pay commercial and industrial property tax refunds for tax year 2010 over subsequent three local budget years. The committee has recommended to the sponsor, Senator Buono, some further clarifications to the bill that would be in the best interest of municipalities.
Although there was a sentiment among some of the members to expand the bill to include residential properties, we support the need for the legislation to address property tax refunds for commercial and industrial properties. We believe that by limiting to commercial and industrial properties it will be a substantial improvement to the situation for many communities.
We, respectfully, requested that the bill be expanded to include additional tax years, with a sunset after 2015. We recently conducted a survey that measured the extent to which property owners filed and won tax appeals in 2010. One hundred fifty (150) municipalities, representing both large and small municipalities in all 21 counties, reported property value declines of more than $87,900,000, which resulted from 19,788 tax appeals filed in 2010. Those responding to the survey indicated that 13,760 appeals were filed in 2009, compared to 19,788 in 2010, representing an increase of 43.7%. While a municipality often experiences an increase in tax appeals because they have conducted a revaluation, only 5 of the 150 municipalities, which participated in our survey, indicated that their 2010 appeals resulted from revaluations. As a way of comparison 23 of the participating municipalities conducted revaluations in 2009, when fewer tax appeals were presented to the County Tax Boards. Therefore, the 2010 spike in appeals should be attributed to the economic down-turn, which lowered property values and placed increased stress on the income of property owners, all around our Garden State.
Although the survey was a snapshot picture in time, it can be used to project what might follow in 2011 and beyond, since the reductions, which were granted by the County Tax Boards will have a multiplier effect. While New Jersey and this nation struggle to recover from one of the worst economic crisis since the Great Depression, municipalities must be given the tools to prevent increasing property taxes on already strained tax payers. Successful tax appeals impact fund balances and place additional pressures on the local budget.
On a technical note, any action on S-2762, as currently drafted, will occur too late to assist most municipalities. For most municipalities, 2010 property tax appeals have been adjudicated, and refunds to the taxpayer will have been accounted for in the municipality’s adopted budget. There is no mechanism in place to readjust either the adopted municipal budget or payments given to the successful property owner. However, by expanding the years covered, S-2762 will be an effective tool for municipalities to use in addressing commercial and industrial property tax appeals.
We look forward to working with Senator Buono on addressing our concern and will keep you apprise. If you have any questions or need additional information on S-2762 please contact Lori Buckelew at firstname.lastname@example.org or 609-695-3481 x122.
Very truly yours,
William G. Dressel, Jr.