East Brunswick slammed by $1.6M in tax appeals

EAST BRUNSWICK — Township officials are looking to pass a bond ordinance that would minimize the impact of this year’s influx of tax appeals.

Despite allotting $690,000 in reserves in this year’s budget for the refund of successful appeals, Mayor David Stahl said the total number of tax appeals has doubled from last year, costing the township more than $1.6 million.

In order to mitigate the financial repercussions of the hundreds of residential and commercial appeals, officials are considering a bond ordinance for $1.31 million that will go before the Township Council for adoption on Nov. 8.

“This is reflective of the economy nationwide. Many other communities in New Jersey have had a record number of appeals this year, and East Brunswick is no different,” Stahl said. Monroe, for example, is paying out $5 million. “Property values have gone down, just like many other towns, and it’s something we need to deal with. But we need to tackle this carefully,” he said.

East Brunswick has seen about 300 residential and 100 commercial appeals in 2010, as compared with 97 residential and 104 commercial appeals in 2009, and just five residential appeals in 2008.

Stahl said the influx of appeals is economically driven. Because housing prices are declining, more and more residents have been appealing to the tax assessor in order to re-evaluate the valuation of their properties.

The higher number of appeals could have been devastating for East Brunswick taxpayers, Stahl said, and residents could have seen an immediate tax rate increase of 12 cents per $100 of assessed valuation if officials had not opted to bond for the money.

“The numbers came in beyond anything we could expect,” Stahl said. “But we wanted to spread the total amount over a few years so it wouldn’t hit the township so hard.”

The bond, which was bought at a .55 percent interest rate and will also cover appeals that are still pending, will be paid back over the course of three years, with an estimated tax rate hike of 4 cents per year. That means that the owner of a home with an assessed valuation of $100,000 will pay $40 more each year in taxes from 2011 to 2013 to pay back the bond.

Stahl said residents who successfully appealed will see a reduction in their municipal taxes in October; however, they will still be subject to the same increase as other residents come January.

The mayor noted that bonding for tax appeals is a common practice throughout the state, and East Brunswick has taken such actions before to pay for the tax appeal refunds on two office buildings off Route 18 and the New Jersey Turnpike.

“This is the most prudent plan to ensure that municipal services are not disrupted and our budget doesn’t suffer,” Stahl said.

A $750,000 budgetary shortfall is already projected for 2011, in part due to new state legislation that will require towns and school boards to keep tax hikes below 2 percent per year. While explaining the effects of the appeals on the township and taxpayers, Stahl emphasized that municipal taxes represent only 18 percent of a resident’s overall property tax bill, but the municipality has to pay for 100 percent of the refund on a tax appeal.

“It’s a severe inequity,” Stahl said. “The municipality is basically a tax collector, but because of state law, we are also solely responsible for tax appeals. We’re paying five times as much as we’re actually taking in.”

At an Aug. 23 meeting, the Township Council authorized emergency appropriations related to the bond ordinance. However, the ordinance must be approved by the state Local Finance Board at an Oct. 13 hearing before it can come back to the council for a public hearing and adoption.