Lawsuit with West Windsor settled, shifting $2 million in tax obligations.
By: Jill Matthews
PLAINSBORO The township has settled its school tax lawsuit against the state and West Windsor, the result of which will shift about $2 million in school tax obligations over two school years from Plainsboro taxpayers to West Windsor taxpayers, Plainsboro officials say.
While the settlement does not change the tax apportionment formula used for regional school districts which was one of the main issues in Plainsboro’s suit it does establish procedures that allow for a mutual review process between the two municipalities when determining tax ratios.
The state uses a complex formula for regionalized school funding apportionment based on real estate assessments and tax ratios. Tax ratios are determined by comparing a property’s assessed value to its market value.
"Are we totally satisfied? Probably not," Plainsboro Mayor Peter Cantu said. "The settlement basically is one that benefits Plainsboro taxpayers in that it avoids probably a $1 million taxation shift this year and probably another $1 million (next) year."
Still, the agreement is an important step toward achieving tax fairness and relief for Plainsboro taxpayers, Mayor Cantu said.
"This settlement not only provides relief for Plainsboro taxpayers over the next two years but, more significantly, establishes procedures that will improve communications with West Windsor regarding the sales data used each year to establish the ratio," Mayor Cantu said. "This will provide a mechanism for fairness going forward."
As part of the agreement, the two municipalities agreed to establish procedures to share information on property sales each year, a move intended to minimize disagreements between the two on what sales information should be included or excluded in future tax ratio calculations.
Properties can be excluded from ratio calculation for myriad reasons.
"My reaction to it is that it was a fair and good compromise," West Windsor Mayor Shing-Fu Hsueh said. "To me, it’s win-win. This will allow West Windsor and Plainsboro to move forward together."
Mayor Hsueh could not confirm Plainsboro’s assessment that $2 million will shift to West Windsor taxpayers because he said he did not know how Plainsboro officials calculated that number. He said the exact tax impact will not be known until the school system determines its upcoming budget.
"There will be some tax impact, no question about that," Mayor Hsueh said. "How that will go I really don’t know."
Plainsboro announced that it had filed a lawsuit against the state and West Windsor in mid-November.
The complaint alleged that the funding method used is unconstitutional and violates a provision requiring all property to be assessed according to the same standard of value. The complaint also alleged that the method violates a constitutional provision requiring a "thorough and efficient system of free public schools."
The complaint also alleged that West Windsor inappropriately omitted two significant commercial property sales from its list of usable sales for computing its tax ratio, which shifted additional school tax burden to Plainsboro taxpayers.
Because Plainsboro had no commercial property sales in the past year, the market value of commercial sales was assessed based on increased residential property sales. Since 51 percent of Plainsboro is commercial property and only 49 percent is residential, and because commercial property values have not increased as fast as residential properties have, Plainsboro residents had been given an unfair burden of the school taxes, Plainsboro officials argued. In West Windsor, on the other hand, 70 percent of properties are residential compared to 30 percent commercial.
After Plainsboro filed suit, West Windsor filed a counter-suit alleging Plainsboro had employed the same sort of assessment techniques regarding sales.
In reaching the settlement, both municipalities and the state Division of Taxation agreed on which sales would be appropriate to establish this year’s tax ratio. Under the agreement, Plainsboro’s assessment ratio increased 2.59 points to 61.57 percent of true market value, while West Windsor’s decreased 1.35 points to 59.73 percent of true market value. Because of the changes, Plainsboro said it expects to shoulder about $1 million less in school tax burden for the 2004-2005 school year and to receive a similar benefit for the 2005-2006 school budget.
Though the settlement did not include a change in the formula used by the state to apportion school taxes in regional districts, Mayor Cantu said the township would continue to lobby for changes in that procedure.
"We still believe the state’s process is flawed, and we will continue to press for a legislative solution," the mayor said.

