Posted: 15 Mar 2011 05:15 AM PDT

N.J. property tax hikes approached $1B in 2010

New Jersey property tax bills went up by more than 4 percent on average in 2010 despite the much-publicized 2 percent cap on property tax hikes Governor Christie signed into law last summer.

FILE PHOTO ILLUSTRATION

That's because the new tax cap didn't go into effect until Jan. 1, meaning the old, 4 percent cap - with its many exceptions - was still in place for local governments for all of 2010.

And that allowed local school boards, town councils and county governments to collect nearly $1 billion more - or 4 percent - from local property-tax payers last year, raising the average property tax bill by $295 to $7,576.

In North Jersey, property tax bills went up, on average, even more in 2010; to $10,057 in Bergen County, and $8,459 in Passaic County. And those increases occurred even as the state budget eliminated funding for 2010 property tax rebate checks.

Here's a closer look at New Jersey's property tax bills and some of the key areas to watch as Christie and lawmakers debate the issue moving forward:

Fast facts

Here's a look at the total property tax revenue that was collected by New Jersey school boards, town councils and county governments from 2006-2010.

2010: $25.01 billion, up 4 percent

2009: $24.05 billion, up 3.6 percent

2008: $23.2 billion, up 4.9 percent

2007: $22.1 billion, up 5.8 percent

2006: $20.9 billion, up 6.9 percent

Source: New Jersey Department |of Community Affairs

Why do property tax bills keep going up? New Jersey, with its 21 county governments, 566 municipalities and 611 school boards, has a lot of local governments to fund. And those governments have been faced with many rising costs, including employee salaries, health care, utilities and fuel, among others. Those costs get passed on to property owners, who have paid a combined $4.1 billion - about 20 percent - more to local governments since just 2006.

What is being done to control property taxes? Last summer, Christie and the Legislature enacted the 2 percent cap on local property tax hikes that went into effect on Jan. 1. Local governments used to operate under a 4 percent cap that was easy for governments to get around, but many exceptions were eliminated in the new cap law. Now, to raise taxes by more than 2 percent, a government will have to go before the voters for permission unless their tax hikes are the result of rising health-care and pension costs, debt or for an emergency. Christie is also pressing lawmakers to pass a series of local government reform bills and cut benefits for public workers to reduce the costs that drive property taxes.

What about state aid? Most local governments have relied on help from the state budget in the form of grants and aid to help balance their own spending plans. But state revenue collections - primarily generated from business, income and sales taxes - have been hit hard by the recession and state spending has gone down as a result. Last year, instead of raising business, income or sales tax rates, Christie and the Legislature cut state aid to local governments by more than $1.2 billion as part of a broader effort to reduce state spending. But local governments still spent nearly the same amount as they did in 2009, even without the $1.2 billion in state aid, by raising an extra $962 million more from property-tax payers - effectively shifting more of the burden onto property owners.

What about property tax rebates? Property-tax payers were hit with a $295 increase in their bills last year even as the state budget eliminated the rebate checks of $1,000 or more that they had been receiving for several years from Trenton. That means the $17,411 average property tax bill Tenafly homeowners paid in 2009 was effectively only $15,875 when the average rebate check of $1,536 was factored in. The same Tenafly homeowner paid $17,622 in property taxes in 2010 - nearly 10 percent more than 2009 without the rebate. Christie is planning to fund significantly scaled-back property tax rebates through a credit this year, and his new budget would increase the rebate credit more if lawmakers approve his cuts to public worker benefits.

What do property taxes pay for? The revenue from property taxes pays for all of the services that New Jersey residents demand from their local governments, including public schools, prompt trash and snow removal, 911 dispatching and emergency services, neighborhood police patrols, libraries, senior centers and many other local services. In all, local governments spent a combined $42.6 billion in 2010 to deliver those services, well above the state's $29.4 billion budget.

E-mail: reitmeyer@northjersey.com

New Jersey property tax bills went up by more than 4 percent on average in 2010 despite the much-publicized 2 percent cap on property tax hikes Governor Christie signed into law last summer.

That's because the new tax cap didn't go into effect until Jan. 1, meaning the old, 4 percent cap - with its many exceptions - was still in place for local governments for all of 2010.

Here's a closer look at New Jersey's property tax bills and some of the key areas to watch as Christie and lawmakers debate the issue moving forward:

E-mail: reitmeyer@northjersey.com

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Some will see hikes in property-tax bills

Posted: 14 Mar 2011 12:39 PM PDT

by Mary Jo Pitzl - Mar. 14, 2011 12:00 AM
The Arizona Republic

Deep in law that hands out tax breaks to businesses is a potential tax increase for many Arizona homeowners.

Beginning next year, owners who live in their homes must sign an affidavit affirming as much to retain a state subsidy that cuts their property-tax bill by up to $600 a year.

If they rent out their house or fail to return the affidavit, they will lose the subsidy and face a higher bill.

The idea is that, by weeding out people who wrongly get the subsidy, the savings will be used to offset a property-tax break for businesses.

No one knows how many homeowners this will affect, though legislative analysts estimated that 25 percent of the rental homes in the state are misclassified and 6.5 percent of homes are second homes. Officials involved in Arizona's real-estate community fear the new requirement could trigger undeserved property-tax hikes.

Tom Farley, CEO of the Arizona Association of Realtors, as well as the county assessors who will have to enforce the new procedure, suspect many property owners will ignore or overlook the requirement to sign the affidavit, which will be attached to the notice of valuation mailed to all property owners each year.

"We think innocent people are going to get hit," Farley said.

That, they say, could result in angry taxpayers and add more costs for local governments to correct the problem.

Shifting burden

The requirement to declare that a property is owner-occupied, as opposed to a rental, is part of the tax-cut and jobs bill Gov. Jan Brewer signed into law last month.

One section of the legislation reduces the rate at which business and agricultural properties are assessed for taxation.

Because of the way Arizona's property taxes work, a cut in one category forces an increase in another - in this case, residential properties - so that there is no net loss in tax dollars collected. But lawmakers, not wanting to see residential taxes rise, increased the amount of the state subsidy, which has been 40 percent of the property-tax bill.

To cover the cost of the business-tax breaks and the increased rebate, lawmakers had to find money to fill the gap. The solution: Crack down on property owners who wrongly claim the rebate.

To do that, the legislation puts the burden on owners to attest that they actually live in the house they own. If they don't, the county will reclassify it as a rental, and the homeowner rebate will no longer be used to reduce the property-tax bill.

Currently, property owners indicate if a home is their residence when they buy a home, and they continue to receive the tax break indefinitely. The new legislation will require them to affirm that every other year, beginning in 2012.

Lawmakers figure they can save $39 million a year by withholding the rebate from people who rent out their properties.

Unintended tax hikes

Real-estate agents and others fear unintended consequences.

Farley told lawmakers people give scant attention to the property-valuation notices the county mails each year.

This year's batch went out in late February.

"It's a small little notice," he said of the current form, which is the size of a post card.

When it is mailed out next year, with an affidavit form included, Farley worries it will still be overlooked.

"We think most people will do what we've been conditioned to do, which is put it in our income-tax file or throw it away," he said.

Others agree.

"I'm sure there will be a lot of non-compliance because people don't pay attention," said Paul Petersen, information officer for the Maricopa County Assessor's Office.

Once the program begins, people will have 60 days to return the affidavit or the assessor will classify the property as a rental.

And that, said Cochise County Assessor Philip Leiendecker, is when the "mushroom cloud" will hit.

Although affidavits may not get noticed, higher taxes will, he predicted.

It's unclear if the new policy will affect property taxes due in fall 2012 or if there will be a delay until 2013. Counties are waiting for guidance from the state Department of Revenue, which must create the affidavit and related instructions.

Lawmakers, such as Rep. Debbie Lesko, R-Glendale, said there will be a remedy. People have up to three years after getting a tax bill to provide the proper documentation to restore the homeowner rebate.

Doubtful outcome

County assessors say that they're bracing for higher costs and bigger headaches when the affidavit requirement takes effect.

The new legislation assumes county governments will front the costs of creating, mailing and processing the forms.

After that, the legislation states that counties will be reimbursed from the higher tax collections from rental properties.

But many assessors question whether the policy will yield the $39 million that budget analysts predict.

"The results on the financial end won't be worth it," said Ron Gibbs, chief deputy assessor in Yavapai County.

First, some rentals are eligible for the homeowner rebate.

If a house is rented to a direct relative of the owner, it qualifies. Second homes, or vacation homes, also qualify as long as they are not used for more than three months.

Second, assessors say they've already weeded out many properties that shouldn't be getting the state subsidy.

In Cochise County, Leiendecker estimates 85 to 90 percent of the residential properties are properly classified as owner-occupied.

In Maricopa County, the Assessor's Office last year removed 4,700 rental properties from the rebate list.

Still, no one has a good handle on how many homeowners are wrongfully benefiting from the long-standing state rebate.

That's all the more reason to use the affidavit, said Kevin McCarthy, executive director of the Arizona Tax Research Association, a business-supported advocacy group.

He also said the process, although almost guaranteed to cause unwarranted angst with some taxpayers, should provide a clearer view of how taxes work.

"I think it would be healthy for people to understand this system is in place and their taxes are being subsidized by the state of Arizona," McCarthy said.

Possible fix

Assessors as well as real-estate agents say they're talking with the Governor's Office about changes that could avert some of the headaches they foresee.

But to avoid problems, they would need legislation this year.

Leiendecker said it would be simpler to have homeowners pay the full tax and then apply the rebate to their income taxes.

That would provide a consistent statewide standard and avoid the risk of, say, winter visitors - who don't qualify - benefiting from the homeowner rebate.

"The snowbirds are not filing income tax in Arizona," he said.

There's no sign of a follow-up bill, as lawmakers are bearing down on the state budget and aiming for an April adjournment.

Rep. Steve Farley, D-Tucson (no relation to Tom Farley), said the new law wrongly puts the burden on the property owner to prove he or she merits the homeowner rebate.

"This has the potential for massive unintended consequences," he said. If people claim a benefit to which they're not entitled, he said, they "put the burden back on the government to investigate."

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H.B.'s 1966 tax for employee pensions raises ire

Posted: 15 Mar 2011 07:51 AM PDT

Some property owners are up in arms over a fee on their property tax bills that requires residents to pay some public safety employee pensions.

But the tax that some are so incensed about has not only been on their bills for 45 years, residents are the ones who put it there.

Some homeowners are up in arms over a tax they have to pay on their properties that goes toward some public safety employee retirements.

JEBB HARRIS, THE ORANGE COUNTY REGISTER

Pension timeline:

1948: The city starts paying for employee pensions through a contract with CalPers

1966: Voters approve public employee retirement tax

1978: Proposition 13 is passed, which limits the amount cities can collect on property tax to 1 percent of assessed value

1994: Some council members want to repeal the tax but the move fails. O.C. declares bankrupcty.

2001: The city, dinged by the Howard Jarvis Taxpayers Association, pays $12 million to taxpayers.

The pre-1978 public safety employee retirement benefits tax was approved by voters in 1966 in an effort to help the city recover some pension costs. After Proposition 13 was passed in 1978, the city could no longer collect this tax for any employees hired after 1978.

The city currently collects about $4.4 million to pay for pre-1978 public employee pensions.

Take a suffering economy, mix in the Bell scandal and add heightened scrutiny over public employee pensions and you have the perfect recipe for a fired-up public ready to challenge any fee, tax or expense that may even hint at the possible misuse of public funds, experts say.

"When the economy was good, and state coffers where filled, no one cared about these things," said Fred Smoller, director, Masters of Public Administration at Brandman University. "Now, with unprecedented cutbacks, people are hostile to any fees, even ones they been paying, that they feel are wrong."

Residents who called the Register to complain about the bill would not give their names but one woman did send her property tax bill after demanding to know why she was paying for employee retirements.

She pays about $43 for the retirement tax on a property assessed at about $291,000. Her total property taxes owed is $3,340, so her contribution to employee retirement is about 1 percent of her property taxes a year.

The question this resident hammered on: Can they do this?

The employee retirement levy, approved by voters in 1966, was challenged by some public officials in 1994 – the year Orange County went bankrupt and many experienced economic struggles that mirror today's financial woes.

Two council members wanted the tax removed in 1994, according to an Aug. 19 article in the Los Angeles Times that year. The effort failed when the majority of the council said the tax was "fair."

But the city is following the rules, as is to be expected after the city was busted in 2001 for breaking them, according to an Orange County Register article from March of that year.

The city had to pay out $12 million for overcharging on their property taxes to fund public employee retirement. They were going over the state-allowed threshold laid out by Proposition 13.

Proposition 13, passed in 1978, caps the property tax rates at 1 percent of the cash value of the property at the time it was bought. It also requires that any local special taxes have to be approved by two-thirds of the voters and it gives the state the power to allocate property tax revenues among cities.

Because of the 1 percent limit, the city could no longer collect the public safety employee retirement tax after 1978. However state law does allow them collect the tax for any contracts negotiated before 1978.

City spokeswoman Laurie Payne said it can't be determined how long the residents will be paying in to the fund because there are too many factors to consider.

The city collects .015 on every $100 of assessed property value. On a property worth about $500,000, residents can expect to pay $75 a year to fund retirements. The city collects about 42 percent of what it is legally able to, officials said.

Huntington Beach can legally collect .049 on every $100 of assessed property value, which would mean a resident with a $500,000 would pay about $246 a year.

Payne said whether or not the city collects the maximum is a council decision. So far, city leaders have opted to keep the tax rate on the lower end.

City staff suggested the council increase the tax in August to .016, which would bring in about $250,000 in revenue. The motion failed with some council members saying they did not want the burden to fall on taxpayers considering the economic climate.

According to former councilman David Sulllivan, Huntington Beach is the only city to collect this kind of tax from its residents. City officials said they could not confirm this statement.

Payne said she estimates the city has received less than a dozen complaints in recent years regarding the public safety employee tax levy.

However employee pensions, in general, have been a hot topic in the media statewide.

"Public employee pensions are eating up a larger share of operating expenses," Smoller wrote. "Local government can either pass these costs on to taxpayers, or cut services and lay off people, or privatize."

Huntington Beach is expected to pay $20 million this fiscal year to cover the city's payments to CalPERS. That rate is expected to increase to $26 million by fiscal year 2012-14.

The city has $108.6 million in unfunded liability for public safety employee pensions with another $42.2 million for other public employees.

Contact the writer: 714-796-7953 or jfletcher@ocregister.com

Article

Some property owners are up in arms over a fee on their property tax bills that requires residents to pay some public safety employee pensions.

But the tax that some are so incensed about has not only been on their bills for 45 years, residents are the ones who put it there.

Property Tax

Tuesday, March 15, 2011

“N.J. property tax hikes approached $1B in 2010” plus 2 more