News
Borough Sees Rise In Property Tax Appeals
By John Burton
RED BANK - In a weakened real estate market property owners here and across the state are appealing their property tax burden. Borough officials have noted there has been an appreciable increase in the number of property tax appeals seen by the municipality's assessor and borough attorney, and this is a trend experienced by most of the state's 566 communities, also noted William Dressel, executive director for the New Jersey League of Municipalities, an advocacy and information organization for the state's towns.
"It's been steady over the last three years," last week noted Thomas Hall, the borough attorney. Over the course of those three years, he explained, the borough has undergone a complete revaluation of all property contained within the borough's borders, which triggered some property owners to challenge the reval's findings. "And then just the collapse of the real estate market," Hall continued, "It's been a lot."
But given that the reval was a few years ago, "Now it's the economy," as the driving force for what Red Bank is seeing on that front, said Hall, whose job it is to represent the borough in these proceedings before the County Board of Taxation, or, should it proceed to that level, before a judge in Trenton.
"It is definitely something that we have witnessed from municipalities up and down the state," last week offered Dressel. "And it is definitely causing a problem for many communities." When a property owner appeals his tax burden, it would be based upon the previous year's assessment or what is determined to be the true market value of the property, explained Hurbert C. Cutolo, a Manalapan lawyer who has handled numerous tax appeals, especially for condominium owners. "Because the real estate market is so depressed, typically you do have unit owners filing appeals because the value of their homes have dropped so dramatically," Cutolo observed.
During this recent spate of appeals the borough has witnessed, Hall has noticed, "it seemed to be a lot more residential appeals before the county board this year," he said, but qualifying his observation by adding, "This is very unscientific," on his part.
"If they're entitled to a reduction you surely should get one from the municipality," Cutolo said.
In the case of commercial properties, the discussion can become much more complex as it has to factor in the revenue the site has or could generate, Hall and others spoken to for this story noted.
The majority of appeals in Red Bank are addressed through a negotiated settlement between the parties, where the sides take into account the arguments and the cost of protracted legal wrangling, apparently agreeing that discretion is the better part of valor, in this regard.
Cutolo said his firm has filed 1,000 tax appeals for his clients throughout the region and, "I've never filed a reduction appeal where we didn't get a reduction," he said. (But he added, he is selective about the appeals he pursues, and said he does amble amount of research prior.)
With each settlement, a lessening of what the property owner would have to pay, that means a loss of revenue for the municipality at a time when local governments are increasingly strapped for cash even as they pare down services and cut staffing. Dressel also noted every time a property owner is successful in reducing his tax bill, that amount comes out of the municipal portion of the bill; the county and school amounts of the bill remains the same.
"So, you find yourself in a situation where you may have to increase taxes, or do tax anticipation notes to pay for the loss of revenue," he said referring to local governments.
That loss of money for local services also puts pressure on the tax base in these communities putting even more budgetary pressure on them, Hall observed.
Dressel and Red Bank Mayor Pasquale Menna point to the lack of meaningful reform from Trenton as compounding an already difficult situation.
As it currently stands property taxes are the way schools and local government are financed in this state, like it or not. "But the inability of the Governor [Chris Christie] and the Legislature to provide any management reforms," and to remove some state imposed mandates, on top of the already reduced state aid to towns, has only worsened the problem, Dressel argued.
Menna agreed. "The problem is that the system is inequitable, bankrupt, it's criminal that it has not been revised," Menna said.
And the fault falls on members of both parties, said Menna, who is a Democrat, as legislators fail to convene a constitutional convention to address the overriding problem, public education funding. That and the necessity of combining school districts and other basic services under a countywide umbrella would address the high tax burden, and would likely reduce appeals, he argued.
Locally, Menna said, it is in the commercial tax appeals are "where municipalities are getting clobbered." Towns are depleting there reserves set aside to address the appeals, meaning allocating additional money or striking a deal with property owners for next year for reductions. (Menna is an attorney who represents municipalities, including before the Board of Taxation.)
In Red Bank that reserve is, "getting down low," Menna acknowledged. "So we're defending as much as we can."
Cutolo said concerning future commercial appeals, "I think you will see an increase in the next couple of years if the markets do not pick up."
