By John Garippa, Esq., as published by Real Estate New Jersey, November/December 2006
As we approach the end of 2006, property owners and tax managers need to be aware of two steps they can take in their continuing quest to control their ever-rising property taxes. The first relates to tax assessors who often view the end of the year as an opportunity to settle tax appeals. Assessors in New Jersey place every assessment on a tax roll in January of each year. They certify the roll and report it to the county board of taxation in that first month of the New Year. Once the roll is certified, no assessment can be changed without filing a tax appeal.
The tax appeal process can be long and expensive. It requires hiring counsel and appraisers, and the process may take several years. However, an opportunity exists for the tax assessor to change the tax roll without the necessity of filing an appeal if that change takes place before the new rolls are certified to the county board of taxation.
The assessor's incentive to change those rolls arises from the fact that if property is over-assessed, it best serves the jurisdiction's interests to change the assessment early rather than refunding the taxpayer's money later. Under New jersey's tax system, the municipality sends the tax bills and collects the tax revenue. The tax bill includes not only a municipal levy, but also a levy for the county and the school district.
In the case of refunds, the municipality has the entire burden to pay the refunds, even though the previously collected funds were transferred to the county and the school district. By changing and lowering assessment os the tax rolls prior to collection of the funds, the municipality avoids having to pay refunds on money from which it doesn't benefit.
The second step deals with Chapter 123 equalization ratio studies, which have just been published for every taxing jurisdiction in New Jersey. The results are sobering for many assessors. These studies compare sales prices of all properties sold in a municipality in the past two years with the last assessed value of these same properties. For example, if the assessed values of properties sold average 50% of the sales prices of those same properties, then the equalization ratio for that period of time will be 50% for all properties in the municipality. As the ratio drops or rises from year to year, it will affect taxpayers' assessments. The sales ratio studies accomplish the goal of assessing all property at a uniform market level.
Every New Jersey taxpayer enjoys a constitutional right to be assessed using the current year's equalization ratio. The most recent equalization studies indicate that many taxing jurisdictions' ratios dropped by more than 15% in the current year, which means that taxpayer whose assessment this year remains the same as it was last year will find her property assessed at 15% over the property's previous fair market value. Taxpayers need to remember that while the dollar amount of the assessment may remain constant over a number of years, the fairness of that assessment can only be determined by measuring it against the yearly changing equalization ratio.
Reaching out to the assessor and starting a discussion at year-end may pay big dividends. Taxing jurisdictions don't advertise equalization ratio changes. Diligent taxpayers can obtain copies of the current Chapter 123 ratios for all of the municipalities in New Jersey by contacting the New Jersey Division of Taxation. Once armed with that new ratio and the news of its drop by a significant percentage, the opportunity to discuss a change in the current assessment of a property becomes most appropriate.
When that discussion takes place, be prepared to provide meaningful data to the assessor on market value. Too often, taxpayers fail to provide the tax assessor with objective market data on the value of their property.
Under current New Jersey law, the assessor must file a report with the county board of assessment indicating the reasons behind a change in assessment. When taxpayers prepare an appropriate market report before meeting with the assessor, they set the table for a meaningful change in their assessment.
Reducing property assessments remains a difficult business. Taxing jurisdictions require greater amounts of revenue each year and tax assessors come under great pressure to keep the tax rolls as high as possible. However, sometimes a confluence of events occurs that can help the taxpayer. This year presents that happy confluence.
