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Will Rising Property Taxes Encourage Mergers Among NJ's 565 Municipalities?

Friday, May 27, 2016   (0 Comments)
Share | 05/27/16

As property-tax bills continue to rise across New Jersey, lawmakers are taking a new look at ways to encourage municipal officials to find savings by merging with a neighboring town. The effort comes nearly a decade after a similar legislative endeavor, but there’s only been one successful municipal consolidation since that attempt, the 2013 joining together of Princeton Borough and Princeton Township. So now, after 2015 set a new record for New Jersey property-tax bills -- with the average amount rising to $8,353 -- lawmakers are trying again by advancing legislation that would change rules applying to property tax assessments, debt, employment, and other areas that can trip up potential mergers. But the new legislation also has its critics, including the New Jersey League of Municipalities, which says the bill as written could actually end up discouraging mergers by making them costlier to implement.

One area where there seems to be no debate, however, is the mounting frustration with New Jersey’s high property-tax bills. A cap on property tax increases went into effect in 2011. The cap has helped to slow the rate of growth in recent years, but property tax bills nonetheless remain on the rise. Last year, the average New Jersey property tax bill rose by nearly $200 to $8,353. At the same time, state property-tax relief provided through the popular Homestead program has remained flat. Adding to the frustration for local officials has been the state’s failure during Christie’s tenure to replenish funds for municipal aid programs that totaled over $1.7 billion before the Great Recession. The current state budget provides municipal aid programs with $1.5 billion. More than $300 million in revenue from utility taxes has also been diverted from municipalities and into the state budget in recent years, adding to the strain.

The bill seeking to encourage more mergers by updating the Uniform Shared Services and Consolidation Act of 2007 is sponsored by Sen. Robert Gordon and Assemblyman Timothy Eustace (both D-Bergen).  The legislation would require that a municipal consolidation report and Municipal Consolidation Study Commission fully flesh out the projected impact on property tax bills that any proposed merger would have. It would also allow for a loosening up of rules used for tax assessments and equalization, which is a process followed in New Jersey to ensure the tax burden is evenly divided across a municipality, to facilitate a merger. The bill would also allow for the drawing up of special zones or “taxing districts” so that debt can be apportioned fairly among property owners as two new municipalities come together. Severance pay could be offered to employees to encourage them to stay on the job until a consolidation is completed.

The organization is worried about sections of the bill that apply specifically to employees of the merging communities, said Michael Cerra, the group’s assistant executive director. Flagged as a concern are proposed rules granting tenure, continued employment, and terminal-leave rights to public-safety employees in the merging communities that the league fears could end up adding on additional costs for each town’s public workers even as the merger itself is attempting to save money. Without amendments, Cerra and other league officials are concerned the bill could end up preventing future mergers more than encouraging them. “The bill will actually limit local flexibility, increase consolidation costs and, thereby, discourage future consolidations,” he said.

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