October 1, 2010
LEAGUE ON MUNICIPALITIES’ SURVEY MEASURES IMPACT OF DECLINING PROPERTY VALUES ON LOCAL BUDGETS
A recent League of Municipalities’ survey has measured the extent to which residents have filed and won tax appeals, in the current year. The one hundred fifty (150) municipalities that participated in the survey reported property value declines of more than $87,900,000, which resulted from 19,788 tax appeals filed in 2010. These County Tax Board decisions result in the municipalities being required to give such taxpayers a credit on their fourth quarter tax bills, thereby significantly reducing revenues anticipated in this year's budget.
Those responding to the survey indicated that 13,760 appeals were filed in 2009, compared to this year’s 19,788. That represents an increase of 43.7%. Often you will experience an increase in tax appeals because a municipality conducted a revaluation. However, only 5 of the 150 municipalities, which participated in our survey, indicated that this year’s appeals resulted from revaluations. By way of comparison, 23 of the participating municipalities conducted revaluations in 2009, when fewer tax appeals were presented to the County Tax Boards. Thus 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 homeowners, all around our Garden State.
The municipalities responding to the League’s survey reflect a statewide picture, as the 150 respondents were from all 21 counties, representing both large and small municipalities.
County Tax Appeals Filed (sample 150 towns)
The survey indicates that, during this year, the various County Tax Boards have granted average property value reductions of close to $5,000, per appeal. One of the questions on the survey specifically asked if successful tax appeals would have an impact on the municipal budgets. Fifty-six percent of those responding indicated it would have an impact on fund balances and place additional pressures on local officials during 2011.
2011 Fund Balance Impact
Although the survey is a snapshot picture in time, it can be used to project what might follow in 2011. The reductions, which were granted by County Tax Boards this year, will have a multiplier effect. When neighbors learn of their neighbor’s tax reduction, it increases the likelihood of more numerous appeals. In the alternative, Assessors could be forced to adjust property values, based upon the appeal information.
Successful tax appeals have a three-fold negative impact on municipal budgets. First, the municipality, as the collector of School district and county taxes, must fund the full cost of the legal defense of the assessment. Second, since State law guarantees to the county and the school district 100% of their levies, the municipality bears the full cost of any re-imbursements resulting from the appeal (as well as the full burden for any uncollected taxes). And third, the end result will be a further decline in the property tax base used to support Municipalities, County governments and School systems.
In light of the revenue limitations that have been placed on all levels of local government by the Legislature (2% cap), such declining values will compound and add additional stress to local public officials, as they grapple with the issues confronting the tax paying public.
The League continues to support the Governor’s “Tool Kit”, particularly changes to binding arbitration. The League will also encourage the Legislature to recognize the budgetary impact of the large and growing number of successful property tax appeals. There must be methods and programs designed to smooth the problem during this transitional period, as municipalities all around the State see their tax base shrink.
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For further information contact: William G. Dressel, Jr. at (609)695-3481, extension 122 or firstname.lastname@example.org