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Guest	Posted: Mon, Jan 19 2009, 9:38 pm EST    Post subject: Re: 2007 Property Tax Bill If commercial ratables are questionable before factoring in the cost of affordable housing obligations...
Guest	Posted: Mon, Jan 19 2009, 3:35 pm EST    Post subject: Re: Property Tax Bill ARutgersStudyYouMustRead wrote: http://www.greatswamp.org/Education/hamilton.htm Know What You Are Chasing Leonard W. Hamilton, Ph.D. Rutgers University -------------------------------------------------------------------------------- Return to Benefits of Open Space Contents previous chapter next chapter The Theory of the Ratables Chase Municipal officials frequently fall into a trap that is set by commercial and industrial companies. The argument is that these types of properties provide a high assessed value, while requiring very limited municipal services. Being nonresidential, they send no children into the schools, they take care of their own garbage collection, and they have more localized requirements for road maintenance and for police and fire protection. "We can help you balance your budget," they tell local officials, "if you let us come into your community." The argument, in the simple way that is presented to the municipality, suggests that commercial ratables will provide tax relief as follows: Assume that a new commercial property, valued at $2.5 million, will pay $50,000 per year in taxes, the same rate as 10 residential properties (valued at $250 thousand each with taxes of $5,000 each). The developers will argue that the 10 residential properties will send 15 children into the schools, will require trash pick-up, snow removal, and other municipal services, all of which will more than eat up their tax contribution. By contrast, they will claim that the commercial property's burden on municipal services will be minimal, perhaps $10,000 per year, leaving some $40,000 free and clear for municipal officials to use to balance their budget. Does this sound too good to be true? It should. There may have been a time in the 1960's and 1970's when there was evidence (poorly analyzed) to indicate that the strategy of attracting commercial ratables held the key to balancing municipal budgets. As a result, the "ratables chase" was on, and our communities became the laboratories that proved the illusory nature of this quick economic fix. A Specific Example In 1992, Paul Wehn and I examined the previous 20 years of tax data (1973-1992) and ratables for the 39 municipalities that make up Morris County, New Jersey. The municipalities vary greatly in the amount of commercial and industrial ratables that were added during this period of rapid growth, and so provided a good basis for determining any tax relief that might have resulted from attracting these ratables into a community. The most interesting comparison was between the 13 "Ratable Rich" communities and the 13 "Ratable Poor" communities: The Ratable Poor communities were 92 percent residential with only 8 percent of their assessed value in commercial property. Although they represented one third of the municipalities, they owned only 16 percent of the county's assets. The Ratable Rich communities were 65 percent residential with 35 percent of their assets in commercial properties. Although they represented only one third of the municipalities, they owned a whopping 58 percent of the county's assets. According to the argument for ratables, the commercial properties should be paying taxes at a rate that exceeds their burden on services, with the corresponding tax relief going to the residents of that community. If this is true, then the Ratable Rich communities in general should be paying proportionately less taxes than their Ratable Poor neighbors. But this is not the case: The Ratable Poor municipalities owned 16 percent of the county's assets and paid 16 percent of the taxes; the ratable rich municipalities owned 58 percent of the assets and paid 57 percent of the taxes. Thus, despite the addition of some $4.2 billion in ratables over a 20-year period, there was no evidence that the ratable rich municipalities had gained a tax advantage--dollar for dollar, their costs of running local government have remained the same as for the towns that preserved their residential character. This was evidenced not only by the overall costs, but by individual tax rates as well. Property tax rates went up, as expected, over the 20-year period, but there was no systematic relationship between the amount of increased residential tax levies and the amount of ratables added. One possible reason that the taxes did not go down in these ratable rich municipalities is that they spent the extra money to improve their communities, but the evidence argues exactly the opposite. Morristown was one of the biggest players in the ratables chase, adding nearly a half-billion dollars in ratables over the study period. It is the county seat, with a powerful chamber of commerce and excellent infrastructure and transportation. Despite all of this, it does not stack up very favorably among the 39 municipalities of Morris County, ranking 8th in taxes, 3rd in unemployment, 2nd in poverty cases, and 2nd in housing density. The ratables chase had simply not worked. Why the Ratables Chase Fails Miscalculation of the Real Costs The main reason why the ratables chase does not work is because of a miscalculation of the real costs. Whether this is an overly simplistic calculation of the costs or an outright misrepresentation of the data, the proposals that reach local planning boards almost never reflect a realistic appraisal of future costs to the municipality. The tendency of the fiscal analysis reports is to rely on the same sort of anecdotal fallacy that encourages couples to marry because "two can live as cheaply as one." Perhaps a bit more sophisticated in the case of commercial ratables, but the claim that costs to the municipality will be minimal is always wrong: The notion that a large commercial venture can blend, unnoticed, into the existing services of the community has no basis in fact. In calculating the costs to the community, I like to use the concept of locating the proposed commercial property on an island. The commercial enterprise cannot function on the island, so must begin to establish services. Let us examine a few: Garbage Even if the commercial property hauls away its own garbage, it is using up valuable dumping capacity and will hasten the day when the municipality must find new locations at a greater cost. Police The commercial property may hire its own security force, but the increased traffic and local population during working hours will increase the burden on local police and trigger the need for new cars and new officers sooner than if the commercial property were not there. Roads The increased traffic will result in additional repairs and improvements to roadways. Water and Sewer The commercial property may pay the same rates or even higher rates for use of these services, but history has shown that expansion of these facilities is always more costly than the initial service, and this increased cost will be passed on sooner because of the extra use. Fire Protection Many local fire departments are not equipped to serve larger commercial facilities, and new equipment will be needed. Even more costly, the influx of workers and their families into smaller communities may increase the need for services to the point that a paid, multi-shift fire fighting service will be needed to replace a volunteer organization. Government Commercial properties are complex. The additional direct administrative requirements to deal with a large commercial venture as well as the indirect requirements for dealing with the additional workers and their families will increase the staffing requirements of the municipality. Education Factories may not send children to school, but their workers do. A single, large commercial enterprise may double the size of a small community. The workers and their families have to live somewhere, and most of their children will enter the local school system. Current estimates from the U. S. Department of Commerce indicate that for each dollar contributed by commercial ratables, the local municipality must spend $2.05 in services. This sounds too bad to be true! But, alas, it is. Failure to Recognize the Economic Benefits of Open Space One of the premises put forth by the commercial developers is that their property can be dropped into a community without a ripple. Numerous studies have shown that this is not the case. When the open space near residential properties is transformed into commercial or industrial property, the value drops by as much as 30 to 50 percent. In the short term, this means that the property owner is being penalized by continuing to pay the same rate for a property that has decreased significantly in value. In the long term, with property sales and reassessments, the taxes will be adjusted lower to reflect the decline in property value and the overall tax base of the municipality will fall accordingly. This negative impact of commercial ratables can be seen in the 1993 report of the Morris County Board of Taxation. Overall, the total assets of the county began to decline in 1988, causing some towns to scramble to find new commercial ratables to buttress their budgets. This would probably be ill-advised, because the five towns that showed the biggest decline in value (about -8.5 percent) had added $832 million dollars in commercial ratables during our 20-year study period. By contrast, the five towns that gained the most (about +8.6 percent) had added only $248 million in commercial ratables. Buying land and leaving it vacant may be one of the best investments for a community. Like commercial ventures, open space does not send children to school either. But unlike commercial ventures, open space does not inflate the requirements for infrastructure and other community services, and it increases the value of adjacent properties. Paradoxically, commercial ventures are often bad for business. Yours, not theirs. A calculation that is never included in economic forecasts of commercial development is the demise of existing local businesses. Family-owned businesses that serve our local communities flourish in a village or town setting, but they are dwarfed by commercial and industrial giants that move in. In addition to providing unreasonable competition, they often physically obscure these businesses by forcing new traffic patterns, divided highways, and traffic signals that make it difficult to patronize or even see these businesses. In the typical evolution of a community from a village to a heavily commercialized city, business ownership becomes more and more consolidated into the hands of a few large holders, most of whom have no other connection or commitment to the local community. Coming Back with Hat in Hand The increased burden to the municipality and residential property owners does not stop with the initial miscalculations or even with the secondary ripples that are produced by changing the character of the community. With increasing regularity, the commercial ventures themselves are going to court for tax reductions--and winning! When it becomes apparent that the rosy fiscal projections that were presented to the planning board are not coming true, the owners of the commercial properties submit legal appeals for tax reductions. More than 16,000 such appeals were heard by the New Jersey State Tax Court in 1992, and these are only heard if the challenged assessment exceeds $750,000! Many communities that had been slapped with hidden costs when the commercial venture came on board were forced to turn the other cheek and find a way to meet their increased municipal costs with court-sanctioned decreases in revenue. More than likely, they will look for some new ratables to help them balance the budget. Many of these re-assessments may be legitimate (there may be unforeseen changes in markets, and countless other variables), but the fact remains that businesses are sharing less and less of the tax burden. In the 1950s, businesses paid about 45 percent of the taxes; now they pay 16 percent. Paying More for Less The character of the community that we live in is one of the most defining aspects of our lives. The more fortunate among us glow with pride when we speak of our house, our neighborhood, our work in the community, our schools, our recreational facilities, and so forth. These are the things that weigh heavily in determining that elusive substance we call our quality of life. If we could "buy" these things by paying more than our share of the tax burden as individuals and let commercial developers off the hook, it might be a small price to pay, but the negative consequences of Morristown's quest for ratables cited above is symptomatic of a more widespread phenomenon. Recent surveys of residents in the New Jersey, New York and Connecticut tri-state area have revealed deep dissatisfaction with the quality of life, and much of this dissatisfaction is grounded in the increasingly urban/commercial character of the places where people live. Some 47 percent of urban residents and 40 percent of suburban residents would like to move. Where? To less urban and more rural areas. To put a twist on a currrent saying, if you build it, they will leave. Robert Yaro, Executive Director of the Regional Plan Association that undertook one of these studies, commented that "...we've got to work in a concerted way to make this a better place to live and work, from having more civility in public places to creating more jobs and green space." If we are going to have commercial ventures (and of course, we must), then they should be honest, fully participating members of the community rather than hucksters that are invited in to make the bottom line look better for this year's municipal budget. In this role, they will be much less willing to mortgage the future of their municipality. Who Can Do the Calculations? You Can. There is a strong tendency for most citizens and municipal officials to accept the economic impact reports that are submitted by commercial development proposals at face value. After all, it was prepared by an expert (usually from a consulting firm) and would there be any reason to expect that an average citizen could do better? Well, yes. In fact, the report that appears in Appendix II is a specific example of how some simple recalculations can present a more realistic budget picture. Copperas Ridge, by the way, is now permanently green. A wag once said that there are liars, damn liars, and statisticians, and we would be wise to bear in mind that the economic impact reports are, in a sense, advertisements for the commercial developer--they will not necessarily point out all the warts and wrinkles. Local officials and citizens are likely to have a much better perspective of how the new neighbor would affect the community. Things You Need to Get Started: Basic Statistics About Your Town It will be helpful to know the total population, the number of students in the school system, the number of households, and related information. This may be available through Town Hall, the municipal library, or the local newspaper. Municipal Budget Data The municipal budget will also be available through Town Hall or the local newspaper. Usually a summary form is sufficient if it outlines the tax revenues and individual budget categories such as schools, police, fire, street department, etc. County and State Budget Data (may be optional) Many counties will publish an annual County Data Book that will include comparisons of the county's municipalities on all sorts of interesting measures such as average residential taxes, average income, proportion of citizens in different age groups, poverty levels, number of housing units, and so forth. Infrastructure Data This will be a bit more difficult to find, but it may be useful to know such things as the number of miles of roadways in the town, the total and remaining capacity of the municipal sewerage treatment plant, the remaining capacity of the landfill for solid wastes, traffic counts on major roadways, availability of public transportation, recreational facilities, and so forth. A Copy of the Developer's Economic Impact Report This report will include some of the important data about the size of the project, the number of housing units, the number of workers in a factory, and so forth. Go Figure: The next step is to begin to make calculations and estimates. It is important to avoid getting trapped in too much detail at this stage--be bold and make rough, but realistic estimates. For example, if a new office building is being proposed with 300 workers, here are some of the estimates that you can make: Workers have families that might average out to be a spouse and 1.5 children, so something on the order of 1,000 people will need to be accounted for in some way. Workers have to live somewhere. Are they already in your community, or will some proportion (say 1/3 or 2/3) be expected to move in? This might mean an additional 100 new homes being built, with each home generating tax dollars offset by school costs (roughly 1.5 children per house x average costs per student--roughly $10,000 these days). Once you have an estimate of where the workers will live, you can estimate how many car trips per day will result. In addition to the obvious to and from work, add in some additional lunch hour trips. This will allow a ballpark figure for traffic increase (and perhaps, a calculation of pollution increase). The calculations in the preceding steps can now be compared to the overall population in the municipality. If for example, your community has 10,000 people and 10 cops on the payroll, then it might be reasonable to add the cost of one additional cop for the additional 1,000 people. Would 100 new homes require additional fire fighting equipment? Or maybe even a switch from volunteer to paid firefighters? Maybe a new garbage truck? Once all these rough calculations have been made, you may want to make some changes, or include a couple of alternative scenarios for what might occur. It may be useful to calculate, for example, the average change in residential taxes that might be expected to cover the additional costs that you estimated in the above steps. Two things will become apparent as you begin to consolidate your calculations into an organized report and compare it point-by-point with that of the developer's consultants: The first will be that your calculations cannot possibly be accurate. The second will be that neither are theirs! The important thing is to examine as many of the financial impacts as possible to determine if the proposed project will benefit the community. Anything else is poor planning. -------------------------------------------------------------------------------- Return Reposted from a previous discussion. A great article that must not be missed.
Guest	Posted: Wed, Aug 22 2007, 10:41 am EDT    Post subject: Re: 2007 Property Tax Bill Link: http://cranburytownship.org/TC_minutes070907.html Meeting minutes excerpts: "... Mayor Stout reported the County had struck the tax rate for the Township for 2007 at a rate of $1.47 per $100 of assessed value and explained the amount represents approximately an overall increase of 17% from last year’s rate. Of the new rate, 0.255 is the County Tax Rate, 0.030 is the County Open Space Tax Rate, 0.350 is the Municipal Budget Tax Rate, 0.021 is the Municipal Open Space Tax and 0.814 is the District School Tax Rate. ..." .... "b. Path Forward for Village Green/Baseball Field The Township Committee discussed the path forward for the Village Green/Baseball Field on the Wright South property. Ms. Marcelli, Township Engineer, stated the project could be bid in late August with a bid award in October and indicated her office would have to perform soil boarings first. Ms. Marcelli asked the Township Committee’s direction on what of the following items should be included in the bid: seeding and grading, infield mix and warning track mix, pitcher’s mound grading and material, outfield, bleachers, outfield fence, backstop, irrigation, score board, dugouts and storage shed and bathroom. The Township Committee indicated the following items need to be included: seeding and grading, infield mix and warning track mix, pitcher’s mound grading and material and outfield. In addition the irrigation of the field should be included. Ms. Marcelli also stated regardless of when the field is seeded, the Township should allow a minimum of two (2) growing seasons prior to using the fields. Mr. Wittman stated he wants to be directly involved and work with both Ms. Stave and Ms. Marcelli in the process as there is still a lot of opposition from the public concerning the baseball field. " Note the last sentence: "...Mr. Wittman stated he wants to be directly involved and work with both Ms. Stave and Ms. Marcelli in the process as there is still a lot of opposition from the public concerning the baseball field. " BTW, I did not see the mentioning of the "skate park" project. This is another one that the residents should be aware of.
Jeff M.	Posted: Wed, Aug 22 2007, 9:33 am EDT    Post subject: Re: 2007 Property Tax Bill I agree with the above poster. I read the meeting minutes on the approval of teh new tax rate and on top of the revaluation the town taxes increased 17%. Then we have items like a skate park and baseball field and 12 new employees. Excluding those items would certainly decrease our tax increase and maybe have held it steady. It seems like we have given a blank check over and it is being used. 17% is way too much. We need some accountability.
EJ	Posted: Tue, Aug 21 2007, 9:35 pm EDT    Post subject: Re: 2007 Property Tax Bill Our taxes increased about 20%. The market value of the home was over-assessed by about $50,000 but a successful appeal of the assessment was unlikely so we didn't file one. For these tax rates, we should have city sewers - and we don't, trash pick-up - and we don't, and sidewalk repair - and we don't. The bottom line is the citizens of NJ have to find a political way of limiting annual property tax increases to a defined maximum - finding our own "California proposition 13". For example, if our annual property tax increases were limited to 3% or the prior year's inflation rate (whichever is lower) by law, our representatives would learn how to work with a reasonable budget and we wouldn't get ripped off like this. Keep in mind high property taxes eventually wear on the value of the property so we are actually "paying" more for this tax increase than meets the eye. Also remember that a new party will be in charge in DC in '09 and taxes will be going up even more after that. This probably will include even greater limitations on property tax deductions from federal income tax and consequently even further erosion of property values. With this massive increase in property taxes, my advice is don't vote for anyone who isn't committed to a moratorium on all tax increases for the time being.
Guest	Posted: Wed, Aug 15 2007, 2:14 pm EDT    Post subject: Re: 2007 Property Tax Bill The above post is correct. It seems to me it is way easier to throw one's hands up and say oh well we're still lower than WW. However, WW and others have looked to Cranbury on how to keep taxes low. It is the old jumping off the bridge arguement. Our property taxes are high because of the way the state runs things, but it is also our responsability to maintain costs at a local level. If that means not hiring 12 people, but only the 2 police officers that we really need then so be it. We should not look at WW and say wow, we really have a lot of room to increase taxes. Robbinsville did that with the new HS, a full time recreation director and other services. They went from being mid-range to being extremly high in no time.
Guest	Posted: Wed, Aug 15 2007, 2:01 pm EDT    Post subject: Re: 2007 Property Tax Bill No problem, I was not offended. I too love our town and the people of Cranbury. I just hope we stay as a leading community. My fear is that we tend to compare ourselves to our neighbors next door ie West Windsor etc. We need to learn from them and other towns across the nation, rather than be accepting and just follow them down a dark path of huge property taxes. The state of NJ does not collect any money from property taxes. They are set my our local government. Can it be the Budget? Possibly - It a mixture of Budget, planning, and tax accessment. I sure hope we have at least a 10 year plan. According to "Retirement Living" "More and more states are cutting property taxes in exchange for increases in sales or other taxes. Idaho, New Jersey, South Carolina and Texas took this step in 2006. In New Jersey the state increased the sales tax by 1 cent with half of it designated for property tax relief in 2006 and possibly the full amount in future years."
Guest	Posted: Wed, Aug 15 2007, 12:55 pm EDT    Post subject: Re: 2007 Property Tax Bill Sorry, if I offended you when I said that. My tongue was in my cheek when I said that. I was worried that Cranbury will become another high property tax NJ town (I am proud to be a Cranbury resident). We probably need a more tax conscious leadership.
Guest	Posted: Wed, Aug 15 2007, 12:41 pm EDT    Post subject: Re: 2007 Property Tax Bill Guest wrote: Cranbury residential property owners! Be prepare to accept the reality. If you cannot afford to pay the property tax, maybe it's time to consider moving to FL, AZ, PA, or NV; just kidding. What are you trying to say? Accept the reality that the commercial ratables not only decrease in value over time; increase need for more COAH homes; increase truck traffic; sooner rather than later start to "leapfrog" to other areas - maybe even PA. If we do not look to the future to find ways to curb the inevitable, this will lead to much higher residential property taxes and empty warehouses. That's great you are so accepting in paying higher property taxes, but you are in the minority. According to the tax Foundation, NJ residents pay the highest property tax in the nation. If you think this is great, more power to you. http://www.taxfoundation.org/taxdata/topic/89.html "Property taxes are meant to be equalized among homeowners to provide revenue to the locality, said Richard Roll, president of the American Homeowners Association. If property values go up there's no justification to increase property taxes unless there's a new cost to local budget, Roll said." http://money.cnn.com/2006/10/03/pf/property_taxes/index.htm
Guest	Posted: Wed, Aug 15 2007, 6:42 am EDT    Post subject: Re: 2007 Property Tax Bill Jeff M. wrote: Also, the addition of jobs in town also increases our low income housing requirements. So more jobs means more housing and kids. So far the town has paid Perth Amboy and others to take this obligation. However, there is a bill in the state senate that if passed will outlaw this practice. Indeed, there is an affordable housing plan on deck for 2008. Please see this Cranbury Press article cited below. Cranbury residential property owners! Be prepare to accept the reality. If you cannot afford to pay the property tax, maybe it's time to consider moving to FL, AZ, PA, or NV; just kidding. The Cranbury Press article: Affordable housing units on Old Cranbury Road that were originally scheduled to be complete by December 2007 won't be done until March 2008, according to Cranbury Housing Association President Mark Berkowsky. The 20 units on Old Cranbury Road are part of the third round of Cranbury's mandated affordable housing obligations, which requires the township to account for 160 new units. To help fulfill the requirement, the township is also planning to build between 20 and 40 units on a parcel along Route 130 South near Half Acre Road and one single-family house on Maplewood Avenue. In addition, the township is hoping to pay Perth Amboy $2.8 million through a regional contract agreement to build 80 units. In February, the township received a $29,700 Community Development Block Grant from Middlesex County to help offset that cost. ... http://www.pacpub.com/site/news.cfm?newsid=18660885&BRD=1091&PAG=461&dept_id=425419&rfi=6
Jeff M.	Posted: Mon, Aug 13 2007, 6:52 am EDT    Post subject: Re: 2007 Property Tax Bill Also, the addition of jobs in town also increases our low income housing requirements. So more jobs means more housing and kids. So far the town has paid Perth Amboy and others to take this obligation. However, there is a bill in the state senate that if passed will outlaw this practice.
Guest	Posted: Sun, Aug 12 2007, 11:44 pm EDT    Post subject: Re: 2007 Property Tax Bill Wow what a great article about ratables and warehouse effect on Cranbury. I would say that we are in the middle of the second ripple when commercial ventures continue going to court for tax reductions - and they win and we residence loose, and we loose big. Is there a plan to get out of this mess? Why did the TC decide this now if there was no good reason? And what is the option does someone on the TC have a plan? I have been very happy with the way Cranbury has been managed in the past, but this doesnt make sense to me. ARutgersStudyYouMustRead wrote: The increased burden to the municipality and residential property owners does not stop with the initial miscalculations or even with the secondary ripples that are produced by changing the character of the community. With increasing regularity, the commercial ventures themselves are going to court for tax reductions--and winning! When it becomes apparent that the rosy fiscal projections that were presented to the planning board are not coming true, the owners of the commercial properties submit legal appeals for tax reductions. More than 16,000 such appeals were heard by the New Jersey State Tax Court in 1992, and these are only heard if the challenged assessment exceeds $750,000! Many communities that had been slapped with hidden costs when the commercial venture came on board were forced to turn the other cheek and find a way to meet their increased municipal costs with court-sanctioned decreases in revenue. More than likely, they will look for some new ratables to help them balance the budget. Many of these re-assessments may be legitimate (there may be unforeseen changes in markets, and countless other variables), but the fact remains that businesses are sharing less and less of the tax burden. In the 1950s, businesses paid about 45 percent of the taxes; now they pay 16 percent.
ARutgersStudyYouMustRead	Posted: Sun, Aug 12 2007, 10:33 pm EDT    Post subject: Re: 2007 Property Tax Bill http://www.greatswamp.org/Education/hamilton.htm Know What You Are Chasing Leonard W. Hamilton, Ph.D. Rutgers University -------------------------------------------------------------------------------- Return to Benefits of Open Space Contents previous chapter next chapter The Theory of the Ratables Chase Municipal officials frequently fall into a trap that is set by commercial and industrial companies. The argument is that these types of properties provide a high assessed value, while requiring very limited municipal services. Being nonresidential, they send no children into the schools, they take care of their own garbage collection, and they have more localized requirements for road maintenance and for police and fire protection. "We can help you balance your budget," they tell local officials, "if you let us come into your community." The argument, in the simple way that is presented to the municipality, suggests that commercial ratables will provide tax relief as follows: Assume that a new commercial property, valued at $2.5 million, will pay $50,000 per year in taxes, the same rate as 10 residential properties (valued at $250 thousand each with taxes of $5,000 each). The developers will argue that the 10 residential properties will send 15 children into the schools, will require trash pick-up, snow removal, and other municipal services, all of which will more than eat up their tax contribution. By contrast, they will claim that the commercial property's burden on municipal services will be minimal, perhaps $10,000 per year, leaving some $40,000 free and clear for municipal officials to use to balance their budget. Does this sound too good to be true? It should. There may have been a time in the 1960's and 1970's when there was evidence (poorly analyzed) to indicate that the strategy of attracting commercial ratables held the key to balancing municipal budgets. As a result, the "ratables chase" was on, and our communities became the laboratories that proved the illusory nature of this quick economic fix. A Specific Example In 1992, Paul Wehn and I examined the previous 20 years of tax data (1973-1992) and ratables for the 39 municipalities that make up Morris County, New Jersey. The municipalities vary greatly in the amount of commercial and industrial ratables that were added during this period of rapid growth, and so provided a good basis for determining any tax relief that might have resulted from attracting these ratables into a community. The most interesting comparison was between the 13 "Ratable Rich" communities and the 13 "Ratable Poor" communities: The Ratable Poor communities were 92 percent residential with only 8 percent of their assessed value in commercial property. Although they represented one third of the municipalities, they owned only 16 percent of the county's assets. The Ratable Rich communities were 65 percent residential with 35 percent of their assets in commercial properties. Although they represented only one third of the municipalities, they owned a whopping 58 percent of the county's assets. According to the argument for ratables, the commercial properties should be paying taxes at a rate that exceeds their burden on services, with the corresponding tax relief going to the residents of that community. If this is true, then the Ratable Rich communities in general should be paying proportionately less taxes than their Ratable Poor neighbors. But this is not the case: The Ratable Poor municipalities owned 16 percent of the county's assets and paid 16 percent of the taxes; the ratable rich municipalities owned 58 percent of the assets and paid 57 percent of the taxes. Thus, despite the addition of some $4.2 billion in ratables over a 20-year period, there was no evidence that the ratable rich municipalities had gained a tax advantage--dollar for dollar, their costs of running local government have remained the same as for the towns that preserved their residential character. This was evidenced not only by the overall costs, but by individual tax rates as well. Property tax rates went up, as expected, over the 20-year period, but there was no systematic relationship between the amount of increased residential tax levies and the amount of ratables added. One possible reason that the taxes did not go down in these ratable rich municipalities is that they spent the extra money to improve their communities, but the evidence argues exactly the opposite. Morristown was one of the biggest players in the ratables chase, adding nearly a half-billion dollars in ratables over the study period. It is the county seat, with a powerful chamber of commerce and excellent infrastructure and transportation. Despite all of this, it does not stack up very favorably among the 39 municipalities of Morris County, ranking 8th in taxes, 3rd in unemployment, 2nd in poverty cases, and 2nd in housing density. The ratables chase had simply not worked. Why the Ratables Chase Fails Miscalculation of the Real Costs The main reason why the ratables chase does not work is because of a miscalculation of the real costs. Whether this is an overly simplistic calculation of the costs or an outright misrepresentation of the data, the proposals that reach local planning boards almost never reflect a realistic appraisal of future costs to the municipality. The tendency of the fiscal analysis reports is to rely on the same sort of anecdotal fallacy that encourages couples to marry because "two can live as cheaply as one." Perhaps a bit more sophisticated in the case of commercial ratables, but the claim that costs to the municipality will be minimal is always wrong: The notion that a large commercial venture can blend, unnoticed, into the existing services of the community has no basis in fact. In calculating the costs to the community, I like to use the concept of locating the proposed commercial property on an island. The commercial enterprise cannot function on the island, so must begin to establish services. Let us examine a few: Garbage Even if the commercial property hauls away its own garbage, it is using up valuable dumping capacity and will hasten the day when the municipality must find new locations at a greater cost. Police The commercial property may hire its own security force, but the increased traffic and local population during working hours will increase the burden on local police and trigger the need for new cars and new officers sooner than if the commercial property were not there. Roads The increased traffic will result in additional repairs and improvements to roadways. Water and Sewer The commercial property may pay the same rates or even higher rates for use of these services, but history has shown that expansion of these facilities is always more costly than the initial service, and this increased cost will be passed on sooner because of the extra use. Fire Protection Many local fire departments are not equipped to serve larger commercial facilities, and new equipment will be needed. Even more costly, the influx of workers and their families into smaller communities may increase the need for services to the point that a paid, multi-shift fire fighting service will be needed to replace a volunteer organization. Government Commercial properties are complex. The additional direct administrative requirements to deal with a large commercial venture as well as the indirect requirements for dealing with the additional workers and their families will increase the staffing requirements of the municipality. Education Factories may not send children to school, but their workers do. A single, large commercial enterprise may double the size of a small community. The workers and their families have to live somewhere, and most of their children will enter the local school system. Current estimates from the U. S. Department of Commerce indicate that for each dollar contributed by commercial ratables, the local municipality must spend $2.05 in services. This sounds too bad to be true! But, alas, it is. Failure to Recognize the Economic Benefits of Open Space One of the premises put forth by the commercial developers is that their property can be dropped into a community without a ripple. Numerous studies have shown that this is not the case. When the open space near residential properties is transformed into commercial or industrial property, the value drops by as much as 30 to 50 percent. In the short term, this means that the property owner is being penalized by continuing to pay the same rate for a property that has decreased significantly in value. In the long term, with property sales and reassessments, the taxes will be adjusted lower to reflect the decline in property value and the overall tax base of the municipality will fall accordingly. This negative impact of commercial ratables can be seen in the 1993 report of the Morris County Board of Taxation. Overall, the total assets of the county began to decline in 1988, causing some towns to scramble to find new commercial ratables to buttress their budgets. This would probably be ill-advised, because the five towns that showed the biggest decline in value (about -8.5 percent) had added $832 million dollars in commercial ratables during our 20-year study period. By contrast, the five towns that gained the most (about +8.6 percent) had added only $248 million in commercial ratables. Buying land and leaving it vacant may be one of the best investments for a community. Like commercial ventures, open space does not send children to school either. But unlike commercial ventures, open space does not inflate the requirements for infrastructure and other community services, and it increases the value of adjacent properties. Paradoxically, commercial ventures are often bad for business. Yours, not theirs. A calculation that is never included in economic forecasts of commercial development is the demise of existing local businesses. Family-owned businesses that serve our local communities flourish in a village or town setting, but they are dwarfed by commercial and industrial giants that move in. In addition to providing unreasonable competition, they often physically obscure these businesses by forcing new traffic patterns, divided highways, and traffic signals that make it difficult to patronize or even see these businesses. In the typical evolution of a community from a village to a heavily commercialized city, business ownership becomes more and more consolidated into the hands of a few large holders, most of whom have no other connection or commitment to the local community. Coming Back with Hat in Hand The increased burden to the municipality and residential property owners does not stop with the initial miscalculations or even with the secondary ripples that are produced by changing the character of the community. With increasing regularity, the commercial ventures themselves are going to court for tax reductions--and winning! When it becomes apparent that the rosy fiscal projections that were presented to the planning board are not coming true, the owners of the commercial properties submit legal appeals for tax reductions. More than 16,000 such appeals were heard by the New Jersey State Tax Court in 1992, and these are only heard if the challenged assessment exceeds $750,000! Many communities that had been slapped with hidden costs when the commercial venture came on board were forced to turn the other cheek and find a way to meet their increased municipal costs with court-sanctioned decreases in revenue. More than likely, they will look for some new ratables to help them balance the budget. Many of these re-assessments may be legitimate (there may be unforeseen changes in markets, and countless other variables), but the fact remains that businesses are sharing less and less of the tax burden. In the 1950s, businesses paid about 45 percent of the taxes; now they pay 16 percent. Paying More for Less The character of the community that we live in is one of the most defining aspects of our lives. The more fortunate among us glow with pride when we speak of our house, our neighborhood, our work in the community, our schools, our recreational facilities, and so forth. These are the things that weigh heavily in determining that elusive substance we call our quality of life. If we could "buy" these things by paying more than our share of the tax burden as individuals and let commercial developers off the hook, it might be a small price to pay, but the negative consequences of Morristown's quest for ratables cited above is symptomatic of a more widespread phenomenon. Recent surveys of residents in the New Jersey, New York and Connecticut tri-state area have revealed deep dissatisfaction with the quality of life, and much of this dissatisfaction is grounded in the increasingly urban/commercial character of the places where people live. Some 47 percent of urban residents and 40 percent of suburban residents would like to move. Where? To less urban and more rural areas. To put a twist on a currrent saying, if you build it, they will leave. Robert Yaro, Executive Director of the Regional Plan Association that undertook one of these studies, commented that "...we've got to work in a concerted way to make this a better place to live and work, from having more civility in public places to creating more jobs and green space." If we are going to have commercial ventures (and of course, we must), then they should be honest, fully participating members of the community rather than hucksters that are invited in to make the bottom line look better for this year's municipal budget. In this role, they will be much less willing to mortgage the future of their municipality. Who Can Do the Calculations? You Can. There is a strong tendency for most citizens and municipal officials to accept the economic impact reports that are submitted by commercial development proposals at face value. After all, it was prepared by an expert (usually from a consulting firm) and would there be any reason to expect that an average citizen could do better? Well, yes. In fact, the report that appears in Appendix II is a specific example of how some simple recalculations can present a more realistic budget picture. Copperas Ridge, by the way, is now permanently green. A wag once said that there are liars, damn liars, and statisticians, and we would be wise to bear in mind that the economic impact reports are, in a sense, advertisements for the commercial developer--they will not necessarily point out all the warts and wrinkles. Local officials and citizens are likely to have a much better perspective of how the new neighbor would affect the community. Things You Need to Get Started: Basic Statistics About Your Town It will be helpful to know the total population, the number of students in the school system, the number of households, and related information. This may be available through Town Hall, the municipal library, or the local newspaper. Municipal Budget Data The municipal budget will also be available through Town Hall or the local newspaper. Usually a summary form is sufficient if it outlines the tax revenues and individual budget categories such as schools, police, fire, street department, etc. County and State Budget Data (may be optional) Many counties will publish an annual County Data Book that will include comparisons of the county's municipalities on all sorts of interesting measures such as average residential taxes, average income, proportion of citizens in different age groups, poverty levels, number of housing units, and so forth. Infrastructure Data This will be a bit more difficult to find, but it may be useful to know such things as the number of miles of roadways in the town, the total and remaining capacity of the municipal sewerage treatment plant, the remaining capacity of the landfill for solid wastes, traffic counts on major roadways, availability of public transportation, recreational facilities, and so forth. A Copy of the Developer's Economic Impact Report This report will include some of the important data about the size of the project, the number of housing units, the number of workers in a factory, and so forth. Go Figure: The next step is to begin to make calculations and estimates. It is important to avoid getting trapped in too much detail at this stage--be bold and make rough, but realistic estimates. For example, if a new office building is being proposed with 300 workers, here are some of the estimates that you can make: Workers have families that might average out to be a spouse and 1.5 children, so something on the order of 1,000 people will need to be accounted for in some way. Workers have to live somewhere. Are they already in your community, or will some proportion (say 1/3 or 2/3) be expected to move in? This might mean an additional 100 new homes being built, with each home generating tax dollars offset by school costs (roughly 1.5 children per house x average costs per student--roughly $10,000 these days). Once you have an estimate of where the workers will live, you can estimate how many car trips per day will result. In addition to the obvious to and from work, add in some additional lunch hour trips. This will allow a ballpark figure for traffic increase (and perhaps, a calculation of pollution increase). The calculations in the preceding steps can now be compared to the overall population in the municipality. If for example, your community has 10,000 people and 10 cops on the payroll, then it might be reasonable to add the cost of one additional cop for the additional 1,000 people. Would 100 new homes require additional fire fighting equipment? Or maybe even a switch from volunteer to paid firefighters? Maybe a new garbage truck? Once all these rough calculations have been made, you may want to make some changes, or include a couple of alternative scenarios for what might occur. It may be useful to calculate, for example, the average change in residential taxes that might be expected to cover the additional costs that you estimated in the above steps. Two things will become apparent as you begin to consolidate your calculations into an organized report and compare it point-by-point with that of the developer's consultants: The first will be that your calculations cannot possibly be accurate. The second will be that neither are theirs! The important thing is to examine as many of the financial impacts as possible to determine if the proposed project will benefit the community. Anything else is poor planning. -------------------------------------------------------------------------------- Return
mercedes	Posted: Sun, Aug 12 2007, 10:06 pm EDT    Post subject: Re: 2007 Property Tax Bill I know we are talking about rateables for commercial? But, really what does that mean to a resident? I'm not sure I understand.
Jeff M.	Posted: Sun, Aug 12 2007, 9:19 pm EDT    Post subject: Re: 2007 Property Tax Bill Guest, I'm sorry, but you are wrong. There was nothing improper or illegal in the way the town had been operating. There is no law requiring a reassessment. There was no management outside the law or any other improper action. It was in the Resident's interest to continue with the way it was until such time that the town was mandated by the county. The wharehouses had an option and could have appealed to the county for a lower assessment. If the town had been doing anything improper then they would have been forced to do a reassessment just like Washington Twp, WW and Hightstown. The town council is not responsible and answerable to the wharehouses. They are accountable to the residents many of whom have lived in town longer than my 35 years of being alive. Now, some of these individuals are in a position to be losing their home. Is that a fair action to support a big commercial interest? Perhaps you have enough money where you feel this is no big issue. However, there are many long time and senior residents who can not afford this action. So where the wharehouses could have appealed for a reassessment to the county if they felt they had been treated unfairly and received a lower assessment. Our seniors now have no option to get a reduction, but have to pay a higher burden. How is this fair to a fixed income individual? Our emergency services spend more time responding to wharehouse calls than resident calls. Our police force has grown to deal with these issues. Our roads are congested due to the wharehouses. They are rateables and these outcomes were expected for their tax dollars. However, as the other poster pointed out wharehouses depreciate so the residents will shortly be supporting these companies and services.
Guest	Posted: Sun, Aug 12 2007, 6:14 pm EDT    Post subject: Re: 2007 Property Tax Bill yes, give us residence a break not the warehouses. I to am OK with my individual assessment. I'm not OK as a resident having to pay a bigger portion of the tax and all the money making warehouses just got another big tax break. This is not the last assessment that you will go through as a resident here in Cranbury, its going to happen more frequently. Based on the comments in the CP it looks like we are all in for more frequent tax assessments, some say 5yrs may be the next. And yes, if you have a New house or old, in both cases you will be paying a bigger part of the tax pie. Its because your house appreciates and the warehouses buildings depreciate. Hence the tax burden keeps shifting over time to you as a resident. It doesn't matter that warehouses make millions in revenue and own large tracts of land in Cranbury, frankly the 2mil Warehouse on 5 acres overtime is paying less in tax then you in a new million dollar house on 0.5acre. I for one would rather incent and have more 2mil dollar homes in cranbury on 5 acres then more warehouses. In the past we corrected this inequality by the fact that our last tax assessment was in 1984. We can't go back in time and stop the assessment, that ship has sailed. But we as residence should be asking ourselves why we weren't informed of the big picture (Tax shift burden) And how big a shift it was, but it will keep getting bigger over time. So my questions deals with what we can do to help the TC with this inequity for the future of Cranbury. I for one was under the impression that the the assessment would make it a FAIR increase for residence and warehouses. And the TC said that there would be a CAP on the increases, do you realize how hard this hits retired long time Cranbury residence (not fair)? We use to have three really good reasons to boast to our friends why we live in cranbury. 1) the school, 2) the town 3) the taxes and now the premium for my house has been reduced because of #3. So I'm going to the next meeting to find out why.