New Jersey Real Estate Report

From the Record:

Municipal tax offices slow to respond to a tepid real estate recovery, especially in modest neighborhoods

Homeowners at the lower end of North Jersey’s housing market — still suffering disproportionately from the real-estate slump — are now taking another hit in the form of inflated property tax bills that may be costing them hundreds of dollars extra per year.

An analysis by The Record shows that municipal tax offices across the region have been slow to respond to a prevailing trend of the recent tepid recovery — property values in most towns rising more slowly in modest neighborhoods — saddling those homeowners with an increasingly larger share of the property tax burden.

Specifically, property assessments used to calculate taxes have not been updated in many municipalities to accurately reflect the weaker markets for lower-priced homes, resulting in those owners being overassessed and, by extension, overtaxed. At the same time, higher-end homes that have increased in value faster are now underassessed and undertaxed.

The much-reviled property tax system in New Jersey, where homeowners pay more than their counterparts across the nation, is based on a requirement that all property owners be assessed at roughly the same percentage of market value, so that the tax burden is fairly distributed.

The Record’s analysis — focusing on residential sales data for 2015 — shows the disparities are hurting the lower end of the housing market, experts and officials said.

“Homeowners there are paying more then they should,” said Rick DelGuercio, president of a real-estate appraisal company based in Glen Rock. “Not only are the lower-end properties not benefiting from the market recovery, but based on the formula for determining property taxes town by town, they are now shouldering more of the property-tax burden. They’re suffering from both ends.”

Art Carlson, the assessor in Hackensack, Saddle Brook, Ridgefield Park and Edgewater, which had some of the region’s largest disparities in 2015, said: “Facts are facts. The higher-end property owners aren’t paying the same percentage as the lower end. The burden is on the lesser homes and people with lesser incomes.”

Disparities vary widely from town to town, with some places seeing only minimal differences well within the norms allowed under law. But in the worst cases, owners of lower-end homes would have saved upward of $1,000 if assessments were updated to reflect conditions last year.

Local municipalities with the biggest gaps in Bergen County in 2015 included Bergenfield, Cresskill, Edgewater, Garfield, Hackensack and Ridgefield Park. Some of the widest in Passaic were in Hawthorne, Paterson and Pompton Lakes.

The inequities were largest in the northeastern part of the state, also afflicting Hudson, Essex and Union counties. Bayonne, East Orange, Jersey City and Newark were among the most severely affected municipalities.

From Slate:

Princeton Pays Up

When Princeton University announced it had settled litigation with area homeowners who had argued it is a profit-making institution in order to challenge its exemption from property taxes, it appeared to be paying millions of dollars to clear long-lingering uncertainty.

But the agreement, announced Oct. 14, leaves key legal issues unresolved in New Jersey. Although the university did not admit its currently exempt property should be taxed, a court did not affirm its tax exemptions, either.

That could foreshadow additional challenges to research universities in the state—challenges many think could be copied elsewhere in the country as taxpayers or revenue-strapped municipalities search for sources of cash. And the lawyer who filed the Princeton case says the homeowners he represented could bring another lawsuit in six years.

Within New Jersey, a key development in the case took leverage from Princeton University. A judge ruled that the burden of proof for tax-exempt status was on Princeton University, meaning it would have been required to prove itself qualified for property tax exemptions it was already receiving. That’s a major difference from the homeowners bringing the suit having to prove that Princeton did not deserve tax breaks. It’s also a potentially slow and expensive process for the university.

On a larger scale, it’s not yet clear whether challenges to college and university tax exemptions will become common outside of New Jersey, although politicians have eyed the possibility in several states. But the Princeton settlement plainly fits into an era in which college and university finances, tax exemptions, and operations are challenged from all sides.

The settlement comes more than five years after several residents sued Princeton over its tax-exempt status. Like other nonprofit institutions, Princeton is exempt from paying property taxes on much of its property. It does, however, pay taxes on some commercial properties that don’t qualify for exemption—like a movie theater it owns—and on others it voluntarily keeps on the tax rolls, like graduate student housing. It also makes voluntary contributions to the local municipal government.

Princeton University says it is the largest property taxpayer in the Borough of Princeton municipality, with an $11.1 million property tax bill. Residents, however, argued that they have had to pay more in taxes to compensate for money the university should be paying on exempt property. The lawyer representing them has said that Princeton’s tax bill would be in the $30 million to 40 million range if it paid taxes on all of its property.