A significant increase in successful property tax assessment appeals has Plumsted officials scrambling to get a bond ordinance in place before the end of the year.
The bonding is necessary in order to refund money to property owners who successfully challenged the assessed value of their property. A property owner’s total property tax bill is determined by taking the assessed value of a property (land and improvements) and multiplying that value by tax rates set by various taxing entities (i.e., local municipality, school district, county, fire district).
If a property owner believes his property is incorrectly assessed, he may appeal that assessment. If the assessed value drops, so does the overall property tax bill.
Plumsted officials anticipate the total amount of money to be refunded to property owners will exceed $300,000. In accordance with guidelines put in place by the New Jersey Division of Local Government Services (DLGS), the township will have to immediately absorb 25 percent (about $75,000) of those costs.
The remaining funds will be raised through the issuance of $240,000 in bonds. A bond ordinance was introduced at the Nov. 9 meeting of the Township Committee.
“What this means is that coming toward the end of this year, we are going to be on a very tight budget,” Mayor Ronald Dancer said. “We cannot absorb almost $300,000. We just can’t do that.”
Appeals of property assessments occur throughout the state on an annual basis. Yet, according to Dancer, the problem stems from the fact that the taxes to fund Plumsted’s schools and fire district, and Ocean County government, had already been paid.
With the property assessment appeals coming after the fact, the township has to absorb the difference out of its surplus (savings) account.
“When [those services] get their refunds and credits, we don’t get that money. We absorb that entire amount, but [the township accounts for] only 8 percent of the [property] taxes,” Dancer said.
“At year’s end, they have given these refunds and credits to the successful appealers and they don’t have the total amount of tax dollars we are supposed to have, because we’ve adopted our budgets back in May,” the mayor continued.
“You have a right to get your refund if you appeal, but the budget’s already been adopted and the school district is depending on ‘x’ number of dollars,” he said.
However, with the significant increase in the number of appeals and the amount of money to be refunded, Dancer said the township cannot take the loss this time.
With the housing market in steady decline for the last few years and property values decreasing, the number of property owners who are looking to contest their assessment has gone up dramatically.
In 2008, 62 Plumsted property owners successfully appealed their assessments, receiving a total of $31,187 in refunds and reducing the township’s assessment by $2.5 million.
This year, 176 appeals were granted, netting property owners a total of $293,428 in refunds and causing an $18.9 million reduction in the total assessment. Those numbers are not completely indicative of what 2011 will end up with, since the township anticipates an additional $1 million in assessment reductions and an additional $16,000 worth of refunds through pending appeals.
A two-thirds vote of the committee will be required to adopt the bond ordinance. The bonds will be paid off over three years by the municipality. In addition, the financing of the tax appeals can only occur one time.
In addition, and not because of any impropriety in Plumsted, the DLGS will review the hiring of new employees by the municipality. The condition of allowing the DLGS to approve the hiring of new employees was the result of misuse of funds in other towns, officials said.
“It does not mean we can’t hire [people]; there’s just a process here to make sure that municipalities aren’t abusing the system just because they got cash at the end of the year,” Dancer said.
The committee is expected to discuss the bond ordinance and vote to adopt it during a special meeting to be held later this month. Once the ordinance is adopted, issuance of the bond could take up to 20 days, cutting very close to the end of the year.