- Property Taxes
- Property Tax in New Jersey
- Local Government Costs
Local Government Costs
The Division of Local Government Services in the State's Department of Community Affairs uses a nationally recognized standard to gauge the increasing costs of local government programs and services. This Implicit Price Deflator measures the impact of inflation on local budgets, just as the Cost of Living Index measures its impact on family budgets.
From September, 2000 to September, 2012, the costs of local government increased 44.3%. For several years during the last decade the State provided municipalities with ‘level funding' of major property tax relief programs. In 2008, 2009 and 2010, because of State budget problems, the appropriation was significantly reduced. What had been a distribution of $1.58 Billion in 2001, became only $1.294 Billion in 2011. This under-funding has forced municipalities to rely almost exclusively on the property tax to adjust to the cost increases.
Property Tax Reform
Governor Christie's 2010 "Special Session" was the third major attempt at property tax reform in the last decade. In 2004 Governor McGreevey's "FAIR" (Fair And Immediate Relief) plan included relief for our hardest hit taxpayers; stricter spending caps; and a plan to advance towards a Citizens' Convention for Property Tax Reform Convention bill. Today, all that remains of that plan is the caps. In 2006 Governor Corzine's Special Session for Property Tax Reform produced property tax credits that have been reduced, and property tax caps that have been tightened.
The centerpiece of Governor Christie's "toolkit" reforms has been the new 2% levy cap. The cap does nothing to enforce discipline on State budget makers and reduce State reliance on local funding. But the new levy cap was followed by major pension and benefits reforms and by a temporary cap on arbitration awards for public safety personnel. Other cost saving measures may advance.
Since the enactment of the ‘toolkit' reforms local property tax increases have been held to 2.4% in 2011 and to 1.4% in 2012. Keeping property tax increases down to such low levels over the past two years would not have been possible without real bi-partisan reforms enacted by the Governor and the Legislature. For things like the 2% cap on arbitration awards and pensions and benefits reforms, the Governor and Legislative leaders deserve our thanks and recognition. It took political courage to advance those reforms. Last year's increase in school aid was also welcome.
Mayors working with local governing bodies all around the State also deserve credit for making the tough decisions in tough times. They have:
- Applied best practices
- Cut spending
- Deferred investments
- Emptied reserve accounts
- Engaged in tough negotiations
- Pruned budgets
- Pursued savings
- Reduced the workforce
- Shared services
They did this as property values declined, tax appeals increased, development and economic activity stalled, employment slumped, and property tax relief funding was diverted to the State budget.
Common Sense Exceptions
Operating under the 2% levy cap municipalities are allowed certain common sense exceptions. Hopefully, many of the ‘Sandy' emergency costs will be off-set through FEMA reimbursements. But pension costs, as well as ‘inside the cap' costs like insurance premiums, utility bills, reserves for uncollected taxes, funding of tax appeals and motor fuels, continue to rise by much more than 2%. Likewise, the costs of State mandates continue to add up.
In 2013, as in every year, the municipal budget maker has to be concerned with all costs, whether inside the cap or not. So for the vast majority of municipalities that do everything they legally can to control costs there are only three alternatives. They can cut essential services. They can ask the voters, already facing their own family financial concerns, to approve higher property taxes. Or they can be given the Energy Receipts specifically meant for property tax relief.
That would give municipalities more of the resources they need to meet constantly increasing costs, without asking voters to sacrifice either financially or in terms of effective municipal services.
Next Advance in Property Tax Relief
Fair-minded people now recognize that the next advance in property tax relief has to involve ending the State's taking of Energy Tax Receipts and CMPTRA funds that are meant to be distributed to municipalities for property tax relief.