Councilman James Solomon, along with the city tax assessor and representatives Appraisal Systems, the company hired perform the revaluation last year, laid out options residents might use to challenge the results of their new assessments.
While the city’s estimated tax rate fell from $78.80 per $1,000 of assessed value last year to $16.20 this year, assessed values for downtown and portions of the Heights skyrocketed, resulting in sometimes massive increases in estimated taxes.
“This is not news that I want to bring to you,” said Solomon before a room full of concerned residents.
A real estate agent as well as an attorney, Solomon said he wanted to give the residents the facts and what options they had to deal with the situation.
The revaluation raised assessed values to market rate for the first time since the last revaluation was done in 1988.
In some cases, this has resulted in massive increases in estimated taxes which must be paid by the end of the year. The new rate will also apply to future years. One property downtown saw its taxes rise from $16,000 to $41,000. Since payments for the first two tax quarters in February and May are based on 2017, many property owners will need to raise substantial sums in order to pay their taxes in August and November.
Some residents asked if there was a way for the city to stagger these payments to give those with the biggest increases more time. Mayor Steven Fulop said state law will not allow the city to set up such a plan, since it would cause an imbalance in the budget.
Solomon, however, said homeowners have several options to possibly mitigate the potential impact through an informal and later a formal appeal process.
Residents have some wiggle room for filing appeals because not all the assessments numbers have yet been released. Once the assessment reports are complete, residents will have only 45 days to file an informal appeal.
This involves residents meeting with representatives of the assessment company to make their case as to why their assessment is wrong. Residents cannot base their informal or formal appeal on other property assessments, but only on the criteria used for assessing their individual properties.
The company uses a pretty standard formula for assessments, but not based on the sales values of similar homes.
The criteria includes the total square footage of the property, exterior and interior conditions, the type or class of buildings, the heating and cooling system, the kitchen, and improvements. The value is also based on whether a home is in a flood zone as recognized by FEMA or not.
Buildings with combined residential and commercial elements are assessed differently by income from the property.
If the interior of a home was not inspected during the assessment, this will have to be done as part of the informal appeal. If it has, then residents can bring photos or any other documents to make their case.
But Solomon warned a formal appeal process is much more complicated and will require an attorney. This will involve a formal hearing in court and doesn’t guarantee a reduction. In fact, Solomon said, a formal appeal could actually increase the assessed value.
Residents question abatement policies
Mayor Fulop told residents that the $1.62 per $100 of assessed value is based on a small tax increase, and he hopes to keep taxes flat this year. But residents could see a tax increase in the county and school taxes.
A typical tax bill includes 50 percent to the city, about 26 percent to the county, and 24 percent to the school district. So an increase in the county or schools would not be reflected in the estimate residents received as a result of the revaluation.
A number of residents questioned the city’s policies regarding tax abatements, and claimed the abated properties have been excluded from the impact of the revaluation process.
Fulop defended the abatement process, saying that abated properties pay more to the city than conventional taxes (but are excluded from paying school taxes and a majority of county taxes.)
He said payments in lieu of taxes increase on these properties over time.
“The city actually loses money when a property comes off an abatement,” Fulop said.
“Nobody wants to squeeze 90-year-olds out of their homes.” – Mayor Steven Fulop
The mayor also tried to explain to disgruntled residents why the city took 30 years to conduct a revaluation. Had the city done one sooner the impact would have been far less severe.
“I can’t tell you what the thinking was 30 years ago,” Fulop said. “But once they delayed this for four years, and then eight years, it became more difficult to conduct one. Nobody wants to squeeze 90-year-olds out of their homes.”
New Jersey has a process that differs from New York State and California.
Both those states require a property to be assessed at the sale price at the time of the sale. Under that system, a resident who has lived in a home for decades would be assessed at the rate when he or she purchased the property.
But in New Jersey, all similar property is supposed to have the same assessed value whether a person has lived in a home one year or 30. The state requires municipalities to conduct regular revaluations in order to make sure that happens. Unfortunately, many places such as Jersey City, Paterson and other urban centers have not performed timely assessments, creating havoc for some residents when it does.
Fulop, who canceled a revaluation started in 2013, blamed former Gov. Christopher Christie for ordering the current revaluation.
Federal tax impact
These residents are also confronted by a change in federal tax law which limits to $10,000 the amount of local taxes they can use as deductions for federal income tax.
While there are some proposals around the state for how residents might be able to get around the federal law, Fulop said he is not promoting them because it is still unclear if they will comply with federal law. If they don’t, people who use them might be in worse shape later this year than they are currently.
Some residents asked if the city had any plans for increasing other revenues such as the hotel tax or perhaps implementing a payroll tax similar to what is done in Newark.
Fulop said the city’s hotel tax is about at the maximum allowed under state law.
Property values will decline
Terry Tan, a downtown resident, said he had hoped that the city would come up with strategies and was disappointed by the lack of one.
“It isn’t enough to just blame Trenton,” Tan said. “That won’t help people who might be facing foreclosure. Who can come up with $40,000? We have to find a way out of this mess. We have to look at what other states have done.”
Tan predicted that there will be a downturn property values, and people looking to get out will have to reduce their prices to attract buyers.
Fulop agreed that there is likely to be a “correction” in the market, but also said he has faith property values will rebound.
Al Sullivan may be reached at email@example.com.