From the Record:
The commercial real estate slump may be dragging down landlords’ rental incomes, but it may also help reduce their tax bills.
Faced with values that have plunged over the last two years, commercial real estate owners are expected to appeal their properties’ assessments in record numbers this year, hoping to trim their property tax bills.
Since the commercial real estate market’s peak in October 2007, values of office buildings, warehouses, shopping centers, apartment complexes and hotels nationwide declined 41 percent by December, according to ratings agency Moody’s Investors Service.
This year and next, New Jersey’s cities and towns will see “a virtual tsunami of tax appeals,” said Frank E. Ferruggia, an attorney who specializes in the process at McCarter & English LLP in Newark. Successful commercial appeals mean lower assessments and reduced taxes, putting more of a burden on homeowners.
Last year, New Jersey’s Tax Court docketed 13,635 tax appeals, most of them involving commercial properties, an increase of 22 percent compared to the 11,201 in 2008 and triple the caseload for appeals in 2001, according to an Oct. 30 state Tax Court report. Last year’s increase doesn’t include 1,991 additional appeals that were filed but not docketed because of the court’s backlog.
The Tax Court report predicted an increase this year because of declining real estate values. As of last Monday, the Tax Court had received roughly 8,000 appeals, up from the 6,823 the court received during the same time last year, said Lynne Allsop, court executive.
“They’re sucking wind. There’s no question about it. Between lower rents and higher vacancies, they’re really getting squeezed from all ends,” said Carl Rizzo, an attorney at Cole, Schotz, Meisel, Forman & Leonard P.A. in Hackensack, referring to property owners he represents.
Losing property tax revenue from commercial properties leaves municipal leaders with tough choices. Towns can raise the tax rate as the tax burden shifts to other taxpayers because of reduced assessments. They can borrow money through issuing bonds to replace lost revenue. Or they can cut expenses.