The Impact of Corporate Tax Appeals on South Brunswick

As the recession continues to affect the number of new businesses opening across the state, the impact of tax appeals by existing businesses has resulted in a large chunk of lost revenue for South Brunswick.

The success of South Brunswick companies in challenging their property values resulted in the loss of over $100 million in ratables last year, according to township officials. Approximately 100 companies successfully sued the township for a tax reduction last year, said Mayor Frank Gambatese.

"Revenue is the major problem we're having," Gambatese said. "With the economy being the way it is and residential property values dropping, these corporations whose property values really don’t drop in a given year, what happens is they see the value of homes in the residential part of town drop, and then they feel that they're paying too much taxes. The impact of this significant. We lost over $100 million in ratables, so the amount of taxes we receive, which should go into revenue, has dropped significantly.

"This affects not only us, but also the schools and the county."

The township ratable base dropped 4.3 percent to approximately $3.6 billion last year. Over the last seven years, the township's ratable base has decreased by $180 million. For the first time in 20 years, South Brunswick's total assessed value dropped for two consecutive years. 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.

"During the last three years alone, 8 percent of our ratable base has been diminished from the net affect of tax appeals," said Chief Financial Officer Joseph Monzo, at a Township Council meeting earlier this month.

The corporate tax appeals are a near slam-dunk in court due to the impact of declining residential values, according to Gambatese.

"You can't win those cases, because when you go into court they say residential values are down to 46 percent of their true value, while corporations are at 100 percent," he said. "But corporations don't sell their houses like residents do. You can't sell those warehouses very easily, so that's the problem. There are more and more lawsuits in every town, and more and more lawsuits put in by companies in every town, and they have every right to do that."

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.

The overall impact from the appeals for lower property taxes have driven increases in South Brunswick's municipal and school budget for the past few years, according to township officials.

"The decrease in total assessed value alone accounts for a 2-cent tax increase," Monzo said of this year's municipal budget. 

Gambatese said the township has attempted to lessen the financial impact of the corporate tax appeals by working on settlements with the individual companies.

"We try to meet with them and come up with a reasonable reduction that they will settle for," he said. "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. Especially if he feels going to court would lose more money than the settlement that we're able to come up with." 

With more successful appeals to point to, an increased number of law firms are encouraging residents to join together in mass tax appeals, Gambatese added.

"I just got a letter in my development from a law firm saying your house is assessed at such and such and we feel it should be reduced in value, so we'd like to handle a class action lawsuit for the entire development," he said. "So if they got everybody in the development to sign up, with 300 houses, let's say it's reduced by $20,000, then that's a significant loss in the tax revenue we receive. So this is what's happening everywhere in the state and there will be no end to it until the economy starts to pick up."