New Jersey Real Estate Report

From the Star Ledger:

Gov. Chris Christie warns N.J. districts school aid could be cut 15 percent in next budget

With school districts still reeling from the midyear budget cuts he announced last week, Gov. Chris Christie said today he has asked districts to prepare for a 15 percent reduction in state aid in the budget he will propose next month. If enacted, it would be the largest-ever cut in state aid to schools, officials said. Frank Belluscio, spokesman for the New Jersey School Boards Association, said it would be the first reduction in aid to schools of any kind in at least 30 years.

Christie and Acting Education Commissioner Bret Schundler said at a meeting with school officials in Union County that their goal is to keep K-12 education aid flat in the upcoming budget, which Christie will propose March 16 and must be signed into law by July 1. But they said, with an $11 billion deficit looming, they wanted to give advance warning so school officials would not be caught off guard if steep cuts are necessary.

“This is about us telling the truth,” the Republican governor said. “I’m not going to spend this state further into debt and I’m not going to tell you a happy story on July 1st, only to come to you in February and say, ‘Well, more bad news.’ I think that’s much more unfair to school districts.”

Total formula aid to schools is currently about $7.5 billion, according to a spokeswoman for the state Department of Education. A cut of 15 percent of that would be about $1.1 billion.

“I don’t know how we would survive it,” said Perth Amboy Superintendent John Rodecker. “There would be massive layoffs. It would in turn mean that everything we’ve built up to this point, to make us what I consider to be an outstanding school district, would be lost.”

From the Star Ledger:

N.J. loses $70B in wealth during four years as residents depart

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest.

Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced.

“The wealth is not being replaced,” said John Havens, who directed the study. “It’s above and beyond the general trend that is affecting the rest of the northeast.”
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“This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey.
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Wealthy residents are a key driver for everything from job creation and consumer spending to the real estate market and the state budget, said Jim Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. In New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state’s income tax, he said.

“That’s probably why we have these massive income shortfalls in the state budget, especially this year,” he said.

Until the tax structure is improved, he said, “we’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.”

He added the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005.

From the Philly Inquirer:

Affordable-housing changes pushed in New Jersey

A plan to eliminate the state Council on Affordable Housing and put towns in charge of their own housing obligations is necessary to streamline an unwieldy bureaucracy, supporters said yesterday.

But as a Senate committee began hearing testimony on the proposal, opponents said it would deliver a serious setback to efforts to increase the number of affordable homes in New Jersey.

The housing bill, which drew a large crowd to a hearing yesterday, would move many of the council’s powers to the state Planning Commission.

“So much money goes down the drain in terms of all these planning mechanisms that’s not going into affordable housing,” said Sen. Ray Lesniak (D., Union), who sponsored the bill with Sen. Christopher “Kip” Bateman (R., Somerset).
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Affordable-housing activists held a news conference before the hearing to say the measure would roll back New Jersey’s affordable-housing policies by 35 years and exacerbate racial and socioeconomic segregation.

The council was created under the Fair Housing Act of 1985, after state Supreme Court rulings that each of New Jersey’s 566 municipalities has a constitutional obligation to provide a “fair share” of the region’s need for low- and moderate-income housing.

A 2008 revision to COAH’s Third Round rules established a need for an additional 115,000 affordable housing units to be built in New Jersey by 2018 and increased the ratio of how many such units need to be built for every market-rate unit and new job created.

Towns, which were required to submit plans on how they would comply with the increased obligations, widely contested the state’s accuracy in calculating the number of affordable housing units for which they were responsible. Dozens joined the New Jersey League of Municipalities in a still-unresolved legal challenge to the rules.
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The bill also would allow the restoration of certain Regional Contribution Agreements (RCAs), which had allowed wealthier towns to pay poorer communities so they could transfer their affordable-housing obligations.
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Nicole Plett, a member of the New Jersey Regional Coalition, spoke out against such agreements, saying they concentrate poverty in cities such as Trenton, Perth Amboy, and Camden, and continue to make New Jersey one of the most economically and racially segregated states.
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Gov. Christie has said he wants to “gut” COAH, and the proposed legislation bears some similarities to recommendations made in a report last month by his transition team.

From the APP:

Tolls on N.J. interstates weighed

Interstates 78, 80, 195, 287 and 295 are likely targets to become toll roads, transportation experts predict in response to a report submitted to Gov. Chris Christie that suggests that the state explore placing tolls on certain highways.

The report, released on Jan. 22, also suggests having voters decide whether to raise the state’s gasoline tax, after all revenue that is supposed to be dedicated to the state’s Transportation Trust Fund has been returned to that purpose.

The report, which notes that the Transportation Trust Fund will run out of money in 2011 to pay for any highway, bridge or mass transit projects in fiscal year 2012, made six general recommendations about how to raise revenue but did not go into details.

Revenue from the state’s gas tax will raise enough money just to cover the estimated $895 million debt payment in July 2011, the report said.

It recommends exploring “limited tolling of select interstate highways to pay for improvements to those highways,” but didn’t identify highways to be considered.

Transportation experts said the most likely candidates for tolling would be east-west interstates I-78, I-80 and I-195, along with other high-volume highways such as I-287 and I-295. Doing that requires federal approval, which would require state officials to demonstrate why toll money is needed to fix that specific highway.

From the Star Ledger:

Corzine passes real estate legislation

Two days before Gov. Jon S. Corzine was due to leave office he signed two pieces of real estate related legislation into law, according to a release.

The state’s housing crisis influenced state politicians to sponsor real estate laws that both benefit victims of foreclosures and buyers looking to take advantage of the down market.

The first measure now makes it legal for real estate brokers to pass some of their profits onto their clients.

Before this latest move, it was illegal for real estate agents to entice potential clients with the promise of a cash. New Jersey was one of 11 states that didn’t allow the incentive.

The act allows an individual real estate agent to decide whether to pay their clients or not, and stream lines business policies for some nationwide real estate brokerages.

From Bloomberg:

Loan Modification Recipients Fall Short, Drop Out

About 25 percent of homeowners who received trial loan modifications through President Barack Obama’s main foreclosure prevention plan are failing to keep up with their new reduced payments, the Treasury Department said.

At least 196,000 borrowers have missed some or all of their required payments, according to comments Treasury officials made on a conference call today and calculations from government data. An additional 115,000 homeowners who started trial repayment plans last year have either dropped out or been kicked out of Obama’s Home Affordable Modification Program, the officials said.

“None of these programs have really been a success,” said Vivek Sriram, a mortgage strategist for RBC Capital Markets in New York. “With the high unemployment rate, it’s tough to solve the problem because these people will redefault even if their loan terms are fixed.”

The U.S. has shed 7.2 million jobs since the recession began in December 2007, with almost half those losses occurring after Obama took office in January 2009. The mortgage program, which Obama said would target as many as 4 million Americans struggling to hold onto their homes, has successfully modified 66,465 loans as of Dec. 31, according to data released today by the Treasury.

From UPI:

Mortgage modification numbers still small

Only a few U.S. homeowners enrolled in a federal foreclosure prevention program have achieved permanent loan modifications, statistics indicate.

Data released Friday by the U.S. Treasury Department showed that only 7 percent of those in the Obama administration’s Making Home Affordable program have moved from its trial phase into a permanent loan modification — about 66,000 of the 850,000 homeowners enrolled, The Washington Post reported.

Government and industry officials have said the main reason is that many of the homeowners in the program’s trial phase have been unable to provide enough documentation to prove they qualify and are at risk, but housing advocates counter that in some cases, homeowners have indeed provided the necessary paperwork but are in limbo while waiting for their lenders to act, the Post said.

From Bloomberg:

Corzine Leaves $8 Billion Gap as N.J. Governor Readies Exit

Jon Corzine, only the second sitting New Jersey governor to lose a general election since 1947, makes his farewell speech tomorrow with the third-most indebted U.S. state facing spending cuts as steep as 25 percent to close a record $8 billion budget gap.

The one-term Democrat is leaving with tax revenue down 12 percent since taking office in 2006, local property levies up 9 percent to the highest-in-the-nation average of $7,045 and his Republican successor, former U.S. prosecutor Christopher Christie, proposing state-aid reductions that may force towns to fire teachers, close libraries and stop maintaining parks.

Corzine, 63, the former chairman of Goldman, Sachs & Co., vowed to use his Wall Street experience to repair the state’s finances after his election. After winning increases in taxes and proposing to raise highway tolls 800 percent, he faced mounting voter disapproval as the global recession that started in 2007 pushed New Jersey’s unemployment rate to a 32-year high.

The governor’s inability to erase chronic deficits and the economic slump have left chaos for his successor, said John Mousseau, who helps oversee $1.4 billion at Cumberland Advisors Inc. in Vineland, New Jersey.

“Governor-elect Christie has a hell of a problem ahead of him,” Mousseau said. “Were the expectations higher for Governor Corzine? Obviously.”
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The governor “was unwilling to make the tough decisions he needed to make,” said Senator Kevin O’Toole, a Republican member of the Senate Budget Committee from Wayne. “There was this great hope that he’d be an imaginative, aggressive Wall Street genius who was going to fix state finances in New Jersey. Governor Corzine was ill-equipped to deal with Trenton and with state politics.”
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Christie, 47, takes office Jan. 19 as New Jersey faces an $8 billion deficit in the fiscal year beginning July 1, more than a quarter of the budget and its biggest shortfall ever, according to the nonpartisan Office of Legislative Services. To narrow the gap, he asked state department heads to prepare scenarios for cuts of 15 percent to 25 percent.

From the Philly Inquirer:

Looming unemployment-tax hike divides N.J. officials

A tax increase that could cost employers $1 billion is needed to replenish New Jersey’s depleted unemployment-insurance fund, according to Gov. Corzine’s labor commissioner.

With large shortfalls in the fund expected for several years, David Socolow said, the state needs to let an automatic tax increase take effect July 1 to rebuild reserves. Once the fund recovers, a process likely to take several years, taxes would begin to fall to previous levels.

“The time has come to let the trust fund replenish automatically and get that over with, so that it can be restored to full solvency and employers can then return to lower tax rates,” Socolow said this week.

He has publicly warned of a tax increase since at least April, but some Republicans say the state cannot afford another.
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The fund, which temporarily aids workers who lose their jobs, is expected to have a $1.2 billion deficit on March 31. That would move the tax rate on employers, beginning in July, to the highest level allowed.

The increase would add about $1 billion to the current $1.7 billion levy on businesses, according to the Department of Labor and Workforce Development.
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With the impact of the recession still being felt in the labor market, the projected March 31 shortfall is so large that the tax rate is set to slide from its second-lowest level - Column B of the tax chart - to the highest, Column E plus 10 percent.

For the hardest-hit employers, that could mean a tax increase of nearly $700 per employee. At the lowest end of the scale, the increase would be closer to $270 per worker. A business’ rate varies according to its history of firing or laying off workers. Workers also pay into the program, but their rates are not set to change.

From the Today’s Sunbeam:

Bill in New Jersey Legislature calls for real estate professionals education

A measure sponsored by Senate Majority Leader Steve Sweeney, which would require real estate professionals to complete continuing education courses as a condition of their license renewal was approved last week by the Senate Commerce Committee.

“The real estate market crisis of the past few years was caused, in part, by home buyers securing loans and purchasing properties that they simply could not afford,” said Sweeney, D-3rd Dist.

“The role of a professional real estate agent is to guide potential buyers, and help them to select the property that best fits their needs, that is also within their price range. As the federal government continues to work to improve the real estate market, it is imperative that real estate professionals know ins and outs of the market, so that they can best advise their clients on making responsible purchases.”

Sweeney’s bill, S-2068, would require real estate brokers and agents to complete continuing education requirements as a condition of their license renewal. The New Jersey Real Estate Commission would be responsible for determining the course content, and the number of credits needed to gain the biennial license renewal.

“Buying a home is the most expensive purchase that most people ever make, and those purchases should be guided by professionals who have the needs of their clients in mind,” Sweeney said.

From the NY Times:

Obama Announces New Jobs Programs

President Obama on Tuesday will announce three proposals intended to turn around the nation’s beleaguered job market, including strengthening investments to small businesses that have struggled to expand because of the credit crunch in America.
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The speech, according to a senior administration official, will outline a series of steps to help small businesses grow and hire new staff. The president also will call for increasing the investment in infrastructure through building and modernizing highways, railways, bridges and tunnels. He also will propose a new program that provides rebates for consumers who retrofit their homes to become more energy efficient.

“We don’t think there is one silver bullet, one plan, one speech or a singular piece of legislation that alone will solve double digit unemployment,” Mr. Obama is expected to say in his remarks, according to a senior administration official.

It is Mr. Obama’s latest effort to draw attention to the economy. In his speech, the president will outline how he intends to jumpstart the job market by spending the excess in government bailout money.

The president also will call for using some of the $200 billion in Troubled Asset Relief Program to help pay down the $1.4 trillion budget deficit. One week after taking his economic message on the road, Mr. Obama is in Washington on Tuesday, offering an outline for his plan for Congress to help boost the job market next year.

“The president is absolutely committed to getting every American who is unemployed and wants a job back to work,” Christina Roemer, the chairwoman of the White House Council of Economic Advisers, said in an interview Tuesday on MSNBC.

From the Star Ledger:

N.J. investigations unit reports huge payouts by local government

They receive paid days off for Christmas shopping, donating blood and weddings. And when these public employees retire, they can cash in tens of thousands of dollars worth of unused sick time and vacation days.

Extensive taxpayer-funded benefits for some local government employees are straining the budgets of New Jersey municipalities, according to a report the State Commission of Investigation released today.

Despite a recession that has depleted tax revenue and forced layoffs, the report says, municipalities continue to spend tens of millions of dollars on big payouts to retiring workers.

“The gravy train continues to roll without impediment for select groups of employees on the public payroll,” it reads. “Startling amounts of taxpayer-funded booty continue to be dispensed across New Jersey without regard for the common good.”

The SCI, which examines crime and corruption and reports to the Legislature, said it discovered $39 million in extravagant payouts after reviewing 75 towns, counties and local authorities. State employees can receive a maximum of $15,000 for unused sick time, but such limits aren’t standard at the local level.
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The SCI report is a black eye for municipalities who have clamored for more state assistance to help cope with the recession. Lawmakers on both sides of the aisle expressed outrage over the expensive perks.

“It shocks the conscience,” said Assemblyman Lou Greenwald (D-Camden), who pledged legislation to cap severance payments. “The taxpayers have every right to be offended.”
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Montclair State University Brigid Harrison expects political power struggles if the state cracks down on employee benefits at the local level.

“Counties are often political fiefdoms,” she said. “County freeholders or executive boards get to pad the ranks of public employees with political supporters.”

From the Daily Record:

Do we really love home rule?

A recent poll says residents are not as enamored with their home towns as some think.

A Quinnipiac University poll asked residents if they would support merging school districts and municipalities to lower property towns. Some 73 percent said yes. Only 22 percent said no.

That response does not surprise us. Of course, a majority of New Jersey residents probably would agree to just about anything if the offer was accompanied by the words, “reducing property taxes.”

Notwithstanding, the results are interesting.

It is true that merging some towns and school districts is not going to solve the state’s property tax crisis. No one should think that. But merging jurisdictions and eliminating high-paid public jobs, and the benefits that go with them, would help.

Most of those who like home rule are those doing the ruling. That is why we do not see mergers.

Just about every recent governor has talked about reducing the more than 1,100 combined school districts and municipalities in New Jersey, but the talk does not go very far.
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The record is clear. With rare exception, towns are not going to combine themselves. (One exception may be the Chesters in Morris County where a merger is being considered.) Before that, the last municipality to voluntarily “go out of business” was Pahaquarry in Warren County. The town had fewer than 50 full-time residents and most of it was parkland.

From the NYT:

U.S. Will Push Mortgage Firms to Reduce More Loan Payments

The Obama administration on Monday plans to announce a campaign to pressure mortgage companies to reduce payments for many more troubled homeowners, as evidence mounts that a $75 billion taxpayer-financed effort aimed at stemming foreclosures is foundering.

“The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview Friday. “Some of the firms ought to be embarrassed, and they will be.”

Even as lenders have in recent months accelerated the pace at which they are reducing mortgage payments for borrowers, a vast majority of loans modified through the program remain in a trial stage lasting up to five months, and only a tiny fraction have been made permanent.

Mr. Barr said the government would try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments. The Treasury Department also will wait until reductions are permanent before paying cash incentives that it promised to mortgage companies that lower loan payments.

“They’re not getting a penny from the federal government until they move forward,” Mr. Barr said.

From the Star Ledger:

N.J. budget deficit grows to $1B for current fiscal year

The state today said it is facing a $1 billion hole in this year’s budget — a shortfall five times bigger than previously disclosed — and will cut funding for schools, municipalities, higher education, hospitals and pension plans to help close the gap.

A Treasury spokesman said the state collected $412 million less in taxes than expected through October.

“It is going to be a gut-wrenching experience,” said Bill Dressel, executive director of the New Jersey League of Municipalities.

The crunch has already led to a disagreement with Gov.-elect Chris Christie, who has called for spending freezes. On Tuesday, Corzine and Christie clashed over emergency funding for food banks and soup kitchens.
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That revelation is the latest budget problem facing New Jersey as it grapples with fallout from the deepest economic downturn since the Great Depression. Two days after he lost the election, Gov. Jon Corzine said the state needed to find $400 million in savings to cover shortfalls that included $190 million in anticipated taxes that did not materialize.

In addition, the state already will start off next fiscal year’s budgeting process with an $8 billion hole, according to a report from a nonpartisan legislative office.

The depth of the state’s current $1 billion shortfall was not revealed until today, when it was included in a required statement sent to Wall Street bond investors. It means officials now have to tell people who were expecting money they will not be getting it.
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It is the second straight year the state has been forced to make mid-year budget adjustments to deal with revenue shortfalls in the billions.

From the APP:

N.J. budget deficit could reach $1.5 billion

New Jersey’s budget problem worsened in October, with a $222 million shortfall that exceeded its deficit in tax collections from July, August and September combined.

In a prospectus sent Wednesday to prospective bondholders, the state says its deficit could be $1 billion. It said that could be closed in part through “up to $400 million actions affecting major cost centers, including: school aid, municipal aid, higher education, hospitals and the state contribution to the pension plans.”

However, the 5.1 percent, $412.7 million year-to-date tax shortfall would, if maintained over the course of the next eight months, leave collections almost $1.5 billion behind budget.

Odds are it won’t, as tax collections fluctuate. Sales tax revenues are greatly influenced by the Christmas shopping season; income taxes could see a bump from Wall Street bonuses, but that won’t be known until April and May.

From New Jersey Newsroom:

As N.J. budget shortfall grows, local, school aid at risk

With the deficit for the current 2010-11 state budget growing toward $1 billion, the outgoing Corzine administration could be forced to cut aid to cities, towns, schools, and hospitals as well as state contributions to public employee pension plans.

The grim outlook became public Wednesday in a state report sent to Wall street bond investors.

“Largely due to continuing revenue shortfalls and the need for supplemental appropriations, the projected deficit by the close of the current fiscal year (June 30) is now estimated at $1 billion,’’ said Sen. Barbara Buono, chairman of the Senate Budget and Appropriations Committee. “Obviously, many worthy and deserving programs that are in need of state funding will have to make do without it. We have no choice – there simply isn’t enough money to sustain our current state budget, let alone any additional spending proposals.’’

From the Daily Record:

Getting together in the Chesters?

A bit of New Jersey history has a chance to be made in Chester Borough and Chester Township. If all goes according to plan, residents in both towns will vote next November on becoming one. Both tonws would have to approve for a merger to take place. Meetings of a consolidation committee began earlier this year and the next one is set for Nov. 24 at Chester Borough Hall.

New Jersey has 566 municipalities, all with their own set of professionals and employees. The thinking is that one way to reduce property taxes is to reduce government. Incoming governor Chris Christie correctly has spoken of the need for towns to share services and to explore consolidation. But he stops short of threatening to mandate consolidations, which is something Trenton has had little appetite to do.
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Some may wonder why merging two small towns would be considered historical, as opposed to a no-brainer. The answer is that this is New Jersey, a place where so-called home rule is prized. Some voters have an emotional attachment to their town that is hard to dislodge.

Recent proof of that comes from Sussex County. Voters in Wantage and Sussex Borough were asked in this month’s election if the towns should become one. Sussex voters said yes, but Wantage residents were overwhelmingly opposed.

From the APP:

Forum to give status on potential consolidation of six school districts

Possible scenarios of what might happen if the neighboring school districts of Green Brook, Long Hill, North Plainfield, Warren, Watchung and Watchung Hills Regional High School consolidated will be the focus of a public meeting here Thursday.

The forum will be hosted by the township and presided over by Trudy Doyle, who as executive county superintendent established an advisory committee to study the issue as part of a state directive for municipalities to look at cutting school costs.

Gwen Thornton, a field representative from the New Jersey School Boards Association, will provide an overview of the cost-cutting initiative and an update.

From the Star Ledger:

Sussex Borough and Wantage: A tough sell on N.J. town mergers

In a leafy corner of the state, far from the epicenter of a nasty gubernatorial election, voters from the Sussex County towns of Sussex Borough and Wantage quietly mulled a merger of the two municipalities. And on Tuesday, by nearly a 3-to-1 margin, they said, “No thanks.”

The consolidation seemed to make sense: The towns already share three regional schools, a construction department and a court system and, served by the State Police, wouldn’t have to quibble over police. Plus, the towns had assets (land and utilities) to share. In an unsettling economy, when cutting property taxes is the driving political issue, this one seemed like a rural no-brainer.

“If it wasn’t going to happen here, I wonder if it’s going to happen anywhere,” said Sal Lagattuta, one of the proponents.

According to the Consolidation Study Commission report, the towns — if they merged — could have saved $585,000 in the first year. Future savings could have been greater with even more cost-cutting. That’s a nice chunk of change, but it wasn’t enough to persuade residents to erase a border — especially those in Sussex Borough, population 2,000.
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The average municipal tax bill in Wantage — home to 11,000 — would have shrunk only $57, business administrator James Doherty said. The average savings in Sussex Borough would have been approximately $400. Still not enough, it seems.