Budget proposals already reflect increased home values
Many residents will remember the precipitous
drop in housing values that occurred when central
New Jersey was hit by recession in 1992.
û û Homes that had sold for $200,000 in 1987 fell to
$180,000, townhouse and condominiums selling for
$150,000 a few years before sat on the market with
asking prices below $100,000.
û û When home prices fluctuate that much, it causes
headaches not just for homeowners, but also for mu
nicipal and school officials.
û û That’s because they must predict how much mon
ey tax rates will generate in the next year or year-
and-a-half when developing budgets and budget pro
posals.
û û In hopes of avoiding dramatic changes in real es
tate assessments due either to rapid price inflation
during economic growth or drops due to recessions
the township and county began using "rolling as
sessments," a method of tracking real estate sales that
helps keep the tax assessments more accurate.
û û Officials also hoped to end the periodic reassess
ments and revaluations of property that was done to
determine property values. Many residents also un
doubtedly recall how much their taxes jumped fol
lowing such revaluations.
û û But many people seem to be looking at rolling as
sessments as some sort of "hidden tax" because a
property owner’s taxes will increase each year the
value of the property does even without a change
in the tax rate.
û û When reporting on the school board’s budget, the
Beacon provides a calculation of the difference in
taxes for a property assessed at $250,000, the value
the assessor’s office says is about the average for as
sessed property in Hillsborough.
û û The question comes up, then, as to why we don’t
reflect that inflation in the value of the "average
property," and base tax increases on the difference.
That is, if property values rose 10 percent, we should
be including that additional amount of tax in the in
crease to give a more accurate picture.
û û We don’t and there are two reason why.
û û First, the added taxes due to increases in property
value, while certainly costing the homeowner more,
are not the responsibility of the school board or town
ship. It would be inaccurate to hold the school budget
responsible for the 10 percent increase in taxes result
ing from higher assessed values.
û û But the main reason we don’t and shouldn’t
is that it’s already included in the tax rate figures.
û û When calculating tax levies, Business Adminis
trator Thomas Venanzi and Township Finance Direc
tor Randy Bahr begin by ascertaining the gross as
sessment of Hillsborough.
û û As difficult as it may be to put a dollar figure on
every property in town, Mr. Venanzi’s job is doubly
complicated by the fact he is budgeting across two
tax years the school’s year begins July 1 and ends
June 30, so he is often planning as much as 18
months in advance.
û û But by looking ahead in that manner, the tax cal
culations use the anticipated gross evaluation for next
year, thereby reducing the tax rate needed to raise the
money necessary to operate the schools.
û û Bear in mind the converse is true if we enter a
time of declining property values tax rates will
seem to climb faster, but not because of any action
taken by any governing agency.
û û From a different perspective, if we need to raise
$40 million, and the gross valuation of property is $4
billion, the tax rate would be $1 ($4 billion divided
by 100; divided by $40 million) yielding a $2,500
tax bill on that $250,000 property. If the valuation
grows to $5 billion, the rate drops to $0.80 a
$2,000 bill on property assessed at $250,000 to
raise the same amount of revenue.
û û Practically speaking, the township’s valuation
doesn’t grow by 20 percent in a year and the budgets
are not fixed, but that’s the idea.
û û This year’s school budget figures are based on the
anticipated valuation of the township for the second
half of this year and the first six months of 2002
which includes the higher property values homeown
ers are experiencing, so the effect of the inflated
property values already is reflected in the tax rate.
û û When we report on the projected budgets for the
township, and the accompanying tax rate, we do so in
the interest of providing readers with information
they can use to evaluate the spending priorities of the
township and school district.
û û To honestly discuss the budgets, residents need to
have an apples-to-apples comparison, so to speak.
û û Of course, whether or not a $250,000 property is
still an average assessment in Hillsborough is another
question.