Dear Mayor:

The report of the Joint Committee for Constitutional Reform and Citizens Property Tax Constitutional Convention includes a total of eleven recommendations. Six of those call for the Legislature to do nothing. Maintenance of the status quo, in many instances, is not necessarily a bad thing. Accordingly, those recommendations, as well as the other five, deserve careful scrutiny.

In our letters to and testimony before this Committee, the League reminded the Members that in the 1990’s, Legislators in both parties and in both Houses recognized the fact that increases in population, prices, wages and employee benefits – increases over which mayors and governing bodies have little, if any, control - erode the ability of local officials to keep a lid on property taxes with “level funding.”  Appreciating that fact, they put laws on the books that were supposed to preserve the property tax relief benefits of the most significant of these programs, into the future.

For the past five years, understanding the State's fiscal problems, we have not asked the Legislature to honor its statutory commitment to full municipal property tax relief funding. Still, it is important to remember that, with the passage of this year’s budget, our local property taxpayers have been denied $283.7 million of relief, over those past five years.

We also reminded the Committee that a large percentage of municipal, school district and county spending is mandated by State law. The underlying demand for local public services continues to increase, and the costs continue to rise with inflation and population growth. Without commensurate increases in relief funding, increases in property taxes are inevitable.

Accordingly, we asked the Committee to consider giving the voters the opportunity to: Constitutionalize the promise to annually adjust property tax relief funding to account for inflation, as required by State statute, and to account for increased population; Constitutionally expand and increase payments in lieu of taxes to more adequately reimburse local governments for money lost due to state mandated property tax exemptions; Constitutionally expand the types of unfunded mandates that can be nullified by the Council on Local Mandates; and, if they judge it necessary, authorize a special convention for property tax reform, and allow the convention to propose statutory, as well as Constitutional changes.

On other matters, we advised the Committee: to carefully scrutinize any proposed changes to the uniformity clause; to review all State mandated property tax exemptions; to reject, as a solution to the property tax crisis, another form of property taxation; and that local option taxes, while serving as useful tools, do not represent a comprehensive state-wide solution to a chronic and oppressive state-wide problem like our over-reliance on the property tax.

The Committee’s first five recommendations to maintain the status quo dealt with: 1) senior and disabled citizens’ property tax deductions and veterans’ deductions and exemptions; 2) the uniformity clause; 3) state mandated property tax exemptions; 4) local option taxes; and 5) the debt limitation clause.

The five recommendations requiring action would: 1) establish a tax policy study commission to analyze, among other things, possible amendments to property tax exemption statutes; 2) extend the roll-back period and impose a conveyance tax on certain farmland sales; 3) consider establishing an Office of State Controller, provided that its functions would not duplicate current oversight functions; 4) along with the Administration, develop a workable tax levy cap; and 5) replace the current homestead rebate with “a system of credits and the benefit should be increased to 20% for as many taxpayers as resources allow.”

That last recommendation is the most significant. But, the people of New Jersey need more assurances of the long-term stability and ‘inflation adjustability’ of the funding. Particularly regarding the "20%" reduction, more detail is needed. When we hear 20%, knowing the average bill is about $6,000, we figure about a $1,200 reduction, on average. But when we read the phrase “as resources allow,” we worry. For the past five years, resources have not “allowed” the State to honor its statutory promise to adjust municipal and school district property tax relief funding to account for inflation.

With regards to the ‘cap,’ workability is the key. We remember Governor McGreevey’s FAIR  reform plan, which included increased rebates, progress towards a citizens convention and more stringent caps. Two years later, all that remains are the caps. That hardly seems fair to us. We will closely monitor this recommendation, as it materializes as a bill. A cap could be useful in sustaining a property tax reduction. But here again, questions abound. The first and foremost being, “Sustain what?” Based on our preliminary analysis of the reports, we do not yet know if the enactment of the recommendations will reduce New Jersey’s highest in the nation 46% reliance on property taxes to anywhere near the National average of 30%. 

The Committee’s final recommendation reads as follows. “The Legislature should review and adopt the recommendations of the Joint Committees to avoid the need for a Citizens Constitutional convention.”

We disagree. The Legislature should allow the people to judge the sufficiency of the special session enactments by putting the Citizens Convention question on next November’s ballot. If the people are satisfied with the results of this exercise, they will vote “No” on the question. But, if they are not, putting the question on the ballot will give them hope for real and sustainable property tax reform.