A local government official is fighting the current system of how property tax assessment appeals are returned.
Spotswood Borough Council President Curt Stollen introduced a resolution to his board onApril 18 that challenges the fact that when county, school board and special district tax appeals are granted, the municipality solely must reimburse the property taxpayer 100 percent of the appealed tax levy.
“Most people don’t realize that if the rate is reduced, the taxpayers of that town are on the hook for the amount the town collected for that appeal,” Stollen said. The municipal tax collector makes the adjustment from the appeal as a credit on the fourth-quarter tax bill, resulting in the municipality’s fund balance for the preceding year to be diminished or even depleted.
“At the end of the budget cycle, there is a hole in the budget,” Stollen said.
Other negative effects of successful tax appeals include the municipality’s funding the full cost of the legal defense of the assessment, a loss in ratables and a further decline in the property tax base used to support municipalities, county governments and school systems.
The resolution cites a recent League of Municipalities’ survey that measured the extent towhich residents have filed and won tax appeals in 2010. The 150 municipalities in 21 counties that participated in the survey reported property value declines of more than $87.9 million, which resulted from almost 20,000 tax appeals filed last year. Average property value reductions are close to $5,000 per appeal.
This was an increase of 43.7 percent from 2009, when about 13,000 appeals were filed.
The resolution states that a municipality often experiences an increase in tax appeals because it has conducted a revaluation; however, only five of the municipalities surveyed believe that was the case. Twenty-three of the municipalities conducted revaluations in 2009 when fewer tax appeals were presented to county tax boards. Therefore, the resolution attributes the spike in appeals last year to the economic downturn, which lowered property tax values and placed an increased stress on the income of homeowners across the state .
A concern noted in the resolution is that a multiplier effect will occur; when neighbors learn of their neighbor’s tax reduction, tax assessors could be forced to adjust property values based on the appeal information.
“Towns spend tons of money on revaluations that become worthless … because in the past decade, we’ve seen such a swing in property values,” Stollen said. “Trying to hit the value of a property is like trying to hit a bobber on the waves.”
Assemblyman Michael Patrick Carroll (R-25th District) introduced A-3412 in October to amend the system. Carroll could not be reached by press time.
Also in the works is Senate bill S-2762, which will permit municipalities to pay commercial and industrial property tax refunds for 2010 over three local budget years, instead of right away.
“There are difficulties in administering taxation in this type of system,” Stollen said. “We need to expand the discussion. Is there a different way this can be administered?” Contact Jennifer Amato at [email protected].