Are you fairly taxed? NJ targets towns on assessments

• State concerned with "fairness" in assessing property owners.
• East Brunswick says it's "doing it right" despite 3-decade-old assessments.
• South River says Sandy damage put revaluations on hold.

The state Department of Treasury is investigating three municipalities, including Dunellen, to determine if they will be ordered to perform tax revaluations for the first time in three decades.

Dunellen was targeted by the state because it has not reassessed property since 1982. The borough's last revaluation  was in 1977.

That means the ratio of assessed property values in Dunellen has fallen to 24.6 percent of their true value, according to the state.

The state also listed the top 32 municipalities — 14 in Union County, nine in  Middlesex County and none in Somerset and Hunterdon counties — overdue for revaluations.

The Central Jersey towns next in line for investigations are Westfield and South River, the Treasury announced in a news release.

Dunellen Borough Administrator Bill Robins referred all questions to John Bruder, the borough attorney. Bruder did not return a call seeking comment.

The other towns in the Treasury's initial investigation are Jersey City and Elizabeth. According to the Department of Treasury, the three municipalities are in the three counties, Hudson, Union and Middlesex, "in which tax boards have consistently failed to require towns to uniformly and fairly assessed properties."

Sebastian D'Elia, spokesman for Union County, said the county tax board has no comment on the Treasury's report. Two-thirds of the county's 21 municipalities are on the state's list of the top 32 communities that are delinquent in updating assessments.

Irving Verosloff, Middlesex County's tax administrator, did not respond to a call for comment.

The ratio is important because it indicates "tax fairness," said Joseph Perone, a spokesman for the Treasury.

For example, because tax assessments are based in part on market value, a house that is bought for $200,000 is assessed near that amount, while a similar house next door that has not been on the market may be  assessed at only half that amount.

The state considers that when the ratio drops below 85 percent, the municipality may be in "noncompliance," said Dennis Shilling, acting director of Treasury's Division of Taxation.

The state will investigate the assessments in those three communities and then hold public hearings to determine if a revaluation or reassessment will be ordered. No dates have been scheduled for those hearings.

Towns with the oldest revaluations

Tax primer

Residents should realize that a property tax revaluation does not necessarily mean that taxes will go up.

In a typical revaluation, taxes will rise on one-third of the properties, taxes will remain the same for one-third and taxes will go down for one-third.

If the total value of property increases in a municipality and spending remains the same, the tax rate will fall.

But property taxes in New Jersey, among the highest in the country, are never easy to understand.

Property tax appeals down in Central Jersey

The tax rate is calculated by taking the amount of money needed to be raised by taxes and dividing it by the overall assessment of property in the municipality, then multiplying by 100.

For example, if a municipality needs to raise $10 million a year and the total assessed value of property is $500 million , then the tax rate would be $2 per $100 of assessed value. ($10 million divided by $500 million multiplied by 100).

In that example, a house assessed at $100,000 would have a municipal property tax bill of $2,000.

If a revaluation increases the total assessed overall value of property in the municipality by 20 percent to $600 million, but the municipality in the next year needs to raise $11 million, then the tax rate would be $1.83 per $100 of assessed value.

The tax bill for a $100,000 home with an assessment that rose 5 percent to $105,000 would have a $1,921 tax bill.

In Union County, the ratio of assessments to true value is 35.9 percent. In Middlesex, that ratio is 54.3 percent. The ratio in Somerset County is 95.6 percent, while Hunterdon County's ratio is 93.3 percent.

That means that the total property tax assessment in only three Somerset County towns (Bridgewater, Franklin and Bernards) is more than the total property tax assessment in Union County, $24.2 billion to $23.4 billion..

Maintaining an assessment ratio near 100 percent reduces the number of tax appeals, Somerset County Tax Administrator Robert Vance said earlier this year.

That's the primary reason why the  number of tax appeals continues to drop in Somerset County, where most towns update property assessments every year, Vance said.

Municipalities used to perform property revaluations at intervals of several years, Vance said. That resulted in homeowners suffering "sticker shock" when they received their assessments, a common occurrence as property values shot up in the real estate boom in the 1990s and early 2000s.

But now most Somerset County municipalities update assessments every year to maintain a better ratio between the property's market value and its assessment. Only one Somerset County municipality, Montgomey, had an assessment to "true value" ratio of less than 90 percent in 2014.

In July, a state tax court ordered Weehawken to perform a revaluation because a group of waterfront residents, including former New York Giant Amani Toomer, filed suit against the town, claiming that they were paying a disproportionate share of property taxes because their assessments were based on an expensive waterfront development.

East Brunswick Finance Director L. Mason Neely said there was more to determining whether a revaluation is needed than looking at the tax ratio. He said the township was “doing it right” despite using 32-year-old assessments.

Neely said the purpose of state laws on tax assessments is to ensure that the tax burden is distributed fairly among property owners.

A better indicator of fairness is not the ratio, which the state Department of Treasury is using in its investigation, but whether assessments are uniformly distributed, he said.

To gauge uniformity, Neely pointed to each municipality’s coefficient of deviation, one of several measurements that officials use to determine whether a municipality should consider a revaluation.

The coefficient is a measurement showing how much individual property sales in a municipality vary from the town’s overall ratio. A deviation greater than 15 percent — which would mean that some properties in a municipality could be taxed 30 percent more than comparable properties in their community — indicates a lack of uniformity.

While the state flagged East Brunswick for having assessments that are just 26.64 percent of true value, the township’s general coefficient this year is 11.85.

We Can't Afford New Jersey - Tax Crisis

The result, Neely explained, is that if one were to plot the ratios of all the properties in the township on a bell curve and draw a line down the middle, 98 percent of all properties would be within 11.85 points of the center.

“That means all residences are assessed uniformly and clustered together,” he said. “If everything is uniform, then the ratio is irrelevant."

A revaluation, he said, could cost the township $3 million.

"Why would you spend $3 million to deal with 2 percent of the properties?" he said. "That sounds to me like that’s a waste of money.”

Local reaction 

Linden was one of the 32 municipalities listed by the state with the worst record of conducting revaluations.

On that list are 14 Union County communities, including Clark, Elizabeth, Fanwood, Garwood, Kenilworth, Mountainside, Roselle, Roselle Park, Scotch Plains, Springfield, Union and Winfield.

Besides Dunellen and East  Brunswick, the Middlesex County communities on the state list are Edison, Middlesex Borough, Old Bridge, South Brunswick, South Plainfield, South River and Woodbridge.

In Linden, the last revaluation was done in 1989, according to the state, and the last reassessment was conducted in 1972. According to the state calculations, property in Linden is assessed at 51.7 percent of its true value.

Linden Tax Assessor Michael Frangella said conducting a revaluation isn’t something that has come up recently in discussions with the mayor and City Council. 

Eleven Union County municipalities have assessment ratios lower than Linden, with tiny Winfield at the bottom with an 8.36 percent ratio, the lowest in the state, .and Elizabeth at 13.40 percent.

Frangella, who has worked in the tax assessor’s office for 21 years, said if he’s ordered to conduct a revaluation, he will do it.

Old Bridge is adopting a wait-and-see attitude.

"We haven't received any revaluation order or any notice from the county tax board or state of New Jersey," Business Administrator Christopher Marion said. "Because we haven't, we have no plans to conduct a revaluation or reassessment. If we do receive a notification or order, we will sit down with our team and address whatever needs to be addressed."

While the state said in a news release that Old Bridge's last revaluation was in 1972, Marion said the last revaluation was done in 1984. The last year a reassessment was conducted was 1990. 

In Woodbridge, the last revaluation was completed in 1986. Assessments are just 27.5 percent of true value.

A spokesman for Mayor John McCormac, who served as state treasurer under Gov. Jim McGreevey, declined to comment because township officials had not seen the state report.

For South River, a tax revaluation may have to wait until the borough fully recovers from Sandy.

“As a lawyer, I am aware that the borough hasn’t had a reval in several years, and revals are not on the radar,and it’s all because of Sandy,”  Mayor John Krenzel said. “Right now, we’re trying to recover from that. We’re still going through houses being bought out and torn down. All of this is going to affect the value of properties in South River.

"At this point, there is no point in talking about a reval," Krenzel added. "Even if the county orders us to do something, I’m going to argue no — not until we finish our first round of buyouts and not until we know if we’re going to have a second round of buyouts.” 

Staff Writer Mike Deak: 908-243-6607; mdeak@mycentraljersey.com