property taxes

[Guest]

Will the property taxes be reassessed again in Cranbury? I have noticed that last year when the reassessment was done, some home assessments went from approximately $300,000 to over $700,000 and in some cases it went over a million dollars. Many home owners saw dramatic increases in their property taxes as a result of this.

Now that the economy is in a recession and that home values have declined dramatically, will there be another assessment to make it comparable to the current market conditions?

[Guest]

I would hope so.

The reassessement was done near the peak of the housing bubble!

[tax]

If the homes are reassed as a town there will be no impact for the residents whether the value is high or low. Because the chances are that most homes will decrease in the same value as they increased. That is to say a home valued today at 500K and another at 700K will likely depreciate by the same percentage points 10-15%. To make up for this decline in value and to bring in the tax revenue the rate will have to rise accordingly.

The Homes are assessed at X today and the rate is y.

If the homes decrease as a group today then the assessment is (X-10%) and the rate y will increase proportinately. The reason being that the rate change will have to occur in conjuction with the overall assessed based. That assumes there is no budget increase or decrease which is of course independent of this discussion.

If you end up with only a portion of homes re-assessed as the TC had wanted then you really have 3 or even 4 pillars of homes.

Pillar 1- Businesses who apply annually for a reassessment
Pillar 2- The 25-30% of homes who the town evaluated for reassessment.
Pillar 3- The homes who were not reassessed and keep their assessed value.
Pillar 4- The homes where people called in for a reassessment assuming there were such homes.

Thus, in that scenario Pillar 3 people are paying a higher share of their taxes since there was not an overall reassessment.

Those in Pillar 1,2 and 4 benefit from a reduced tax payment as they are now accessed at value B.

In that case the people in pillar 3 with a value of stated value of A will be be paying more in taxes the other property owners. The difference caused by the depreciated value B of properties in Pillars 1, 2, and 4 who were re-assessed.

Now, you could say well what about next year then the people in pillar 3 could be re-assessed. However, the market is not constant and the only equitable way to reassess the properties would be to use this year's market data which is not legally possible.

So, there is no real benefit to reassessing the properties at this stage as it won't change your tax payments. If you reassess in 10 years or 15 years you'll see a change as there is a wider margin to work with as opposed to a one-two year swing.

[anotherguest]

> If the homes are reassessed as a town there will be no impact for the residents whether the value is high or low.

We were fed the same argument before the last town wide reassessment, yet almost everyone saw a big tax increase. The reason was the differences between commercial and the residential increase in value. Residential property was assessed at the height of the bubble, whereas commercial did not increase that much. This shifted the burden towards the residential side. Now after the bubble burst, I'm assuming that the value of residential property went down much more then the commercial, which would shift the balance back.

Could anyone post the numbers here? What was the assessment separated into residential and commercial over the last few years?
What is the current trend? Only then can we get an idea if a town wide reassessment would bring any relieve to homeowners.

I'm very surprised nobody did an honest estimate of the changes before the last re-evaluation. Maybe we can get one now?

But the worst thing would be a partial reassessment, which would be unfair and shifting the tax burden to the other part. How would the part be selected? A lottery?

[tax]

The reason the TC statement was wrong before is that there was a 20 year gap between assessments. During that time there was major development that went into place both commercially and residentially. In the last year or 2 there has been very little. So that's why you see bigger increases or decreases. You also can't simply assess residential. You can choose an area of town and reassess all properties, which is what the TC tried to do. In that scenario, you are creating a bigger problem as I mentioned.

So if we were to assume a 10% drop in residential which is about where Cranbury is then we'd need to assume a smaller drop in commercial in order to give us residents a benefit. Given that there is a lot of open space and that warehouses are in nature depreciating, I would be concerned that one may find a larger drop in commercial yet again. If businesses had not applied to re-assess then they would benefit through this process. Let's not forget it was the TC with no planning that brought upon the first reassesment from the fear of the commercial properties.

If we find the commercial is less than residential, then you may find a percentage point or two raise simply from that natural change. Where we are today I think that is the most likely scenario. However, if we did find a large residential drop and a small commercial drop, the difference between the two pillars would likely mean a very small savings if any on the individual tax bill.

In other words, it's best not to incur a large cost at this point in time because the benefit to the homeowners is not likely to generate anything material. In fact, it could possible continue to work against us.

[Guest]

I have seen Cranbury home sellers who were able to reduce the assessed value of their homes in order to reduce property tax, which makes the homes easier to sell.

[Guest]

[tax]

[Guest]

My understanding is the 16.9 percent residential tax increase of 2007 was primarily driven by a shift of the tax burden from commercial to residential (under the threat of lawsuits from commercial real estate interests). This seems consistent with the Rutgers study on the other property tax thread.

Reassessments also tend to shift the tax burden from newer construction to older homes.

[Guest]

My understanding is the 16.9 percent residential tax increase of 2007 was primarily driven by a shift of the tax burden from commercial to residential (under the threat of lawsuits from commercial real estate interests). This seems consistent with the Rutgers study on the other property tax thread.

Reassessments also tend to shift the tax burden from newer construction to older homes.