South Brunswick Tax Appeals Continue to Rise

As property values continue to decline, tax appeals in South Brunswick have increased exponentially this year. In 2012, 391 tax appeals were filed in the township, up from about 180 appeals in 2011.

"Anytime you get the number of tax appeals that we have, it becomes a major problem," said Mayor Frank Gambatese. "We're now up to 391 appeals, after we lost $100 million last year, so it's a major concern. There's not much we can do, with the true value of homes dropping to 45 percent."

In 2011, approximately 100 companies successfully sued the township for a tax reduction, which resulted in the loss of over $100 million in ratables. Of that total, $98.5 million came from commercial and industrial tax appeals. 

The township ratable base dropped 4.3 percent to approximately $3.6 billion in 2010. South Brunswick experienced another decline in ratables of about $5.4 million (2.3 percent) last year. 

"With property values dropping, if a person buys a house for $500,000, it's immediately now assessed at 45 percent of its true value, which comes down to about $250,000," Gambatese said. “So it's an immediate drop for someone who paid $500,000, but would have to sell it for much less than what they paid. So these are all worrisome things."

Over the last seven years, the township's ratable base has decreased by over $180 million. The drop in assessed value has a greater impact on the tax rate for the municipality and school than any other factor, according to township officials.

"We've had our revenue stream cut for the last several years because of the amount of tax appeals," said Public Affairs Coordinator Ron Schmalz. "That's an issue that affects us and the Board of Education."

The drop in ratables had a significant impact on the school budget, as the Board of Education started out the budget process for the 2012-13 school year looking at a deficit of $5.4 million, or a 7-cent tax increase. The decrease in total assessed value alone accounted for a 2-cent increase in the municipal budget. 2009-10 was the last time the township didn't experience a drop in ratables, and the school tax levy remained flat. 

Over the last six years, the school tax levy has increased by about $300,000, with the 2012-13 budget maintaining the tax levy at the same level for the third consecutive year in South Brunswick.

"Every time somebody gets their assessment reduced, think of that as a swimming pool with a leak," said South Brunswick Superintendent Gary McCartney at a . "Five of the last seven years, we sprung a leak."

Tax appeals by both homeowners and business owners have experienced a staggering increase during the recession.  In New Jersey, appeals surged by 221 percent from 2008 to 2011, according to a report in SmartMoney Magazine.

"Monroe has over 1,300 tax appeals, which is an astronomical amount," Gambatese said. "Now tax appeals are spreading from the industrial sector to commercial. You have lawyers walking around developments encouraging people to appeal their taxes."

The Township Council has taken steps to try and reduce the impact of tax appeals by lowering the threshold for settlements on tax appeals.

"We think a lot more of these appeals should not be negotiated, but should be brought to the county for appeals that we don't agree with," Gambatese said.

Previously, any settlement that was greater than $50,000 had to be brought by the South Brunswick Tax Assessor to the Township Council for approval. At a meeting in April, the council lowered the settlement limit from $50,000 to $25,000. The new threshold is aimed tax appeals mainly on the commercial end.

"Over the last few years the assessor has been doing a good job, but administration wasn't aware what was going on with the appeals and the values were dropping more than we knew," Schmalz said last month. "So now the assessment can't be lowered more than $25,000, otherwise the council needs to know about it. When it was $50,000, once you have 10 settlements, we're talking about a half million dollars that we didn't know about."

The township previously sought to settle when officials thought South Brunswick would lose more money on the appeals in court.

"Once we settle they can't sue us for a reevaluation for two years, so our tax assessor tries to make a settlement with them," Gambatese said earlier this year. "Especially if he feels going to court would lose more money than the settlement that we're able to come up with." 

As a result of the increase in appeals, the township Tax Assessor has come before the council during each meeting for a status report.

"We have to keep a close eye on this," Gambatese said. "The assessor has been instructed to come before us each week to let us know the status of the appeals before him. Last week we went over 31 appeals. Some of these we don't want settled. We want them taken to appeals court. But there's not much we can do. Every town is faced with the same issue."

The ultimate impact of the rising number of tax appeals will be felt next year, when the new township and school budgets are presented.

"We have to try and keep a handle on this so we know what the impact will be for next year's budget," Schmalz said. "Declining property values is not only affecting this community. It's a statewide problem and a national problem."