Property Tax Symposium
Co-sponsored by The Regional Planning Partnership, The Edward R. Bloustein
School of Planning and Public Policy, and Princeton University
November 15, 2002
Presentation by Dianne Brake
Thank you for coming to talk about property tax reform, a topic that many people feel is hopeless to talk about. I know why I am here. When I was on the Council on Affordable Housing in the early 1990's, Ara Hovnanian left the Council and gave the rest of us little gifts. For me, he had a button. It said, "Hopelessly clinging to utopian illusions." I told him I would wear it proudly! Today I see that I should have handed out these buttons at the door! But you must feel, as I do, that although tax reform is one of the thorniest public policy issues, doing nothing to change it is unacceptable.
But you may well ask, why is a planner introducing the complexities of New Jersey's tax structure? Just about everyone in this room knows more about it than I do. Well, don't worry, I am not going to do that. We are not going to talk about what is wrong with our current tax structure. We are going to talk about the particular ways in which our current tax structure prevent us from achieving the goals of Smart Growth.
Let me just run through what the goals of Smart Growth are. (PowerPoint, beginning to slide 14)
Washington Township, Mercer County, is also a relatively rural township that is known as the place where a State Plan-type town center is being built. The added growth pushed this small township over the threshold to needing its own high school. They have just maxed out their bonding capacity with a $60 million bond to cover the costs of building. Not surprisingly, they have also just approved a 5 million square foot warehouse facility on the Turnpike and Interstate 195. They feel that the $35 million development, bringing into the town and school district close to $1 million per year, is something they felt they had to do to cover their increased costs.
And in just about every planning board in the State, urban, suburban and rural, new housing development is met with comments like, "We cannot let one more child move into our town!" Some towns are even opposed to senior housing because the residents are likely to vote against the school budget.
These fiscally reasonable decisions are causing land use patterns that
are unsustainable. As long as we leave the property tax system as is, cities
will continue to have trouble attracting an economic base and improve their
schools; housing will be unaffordable even to the relatively wealthy; traffic
will increase as people live further and further away; and our labor force
will shrink, weakening our economy.
These fiscal decisions are also exacerbating unacceptable social and economic
segregation. Let me just run through some slides produced in a new report,
due out in December.
Metropatterns slides (Slides 15 - 37)
To fix all of this, RPP has recommended implementing the State Plan. We have an application of it in our VISION 2050.
Slides (30 - end)
Today's discussion will focus on how we can fix our tax structure, not simply to reduce the burden of taxes on those who cannot afford it, and not simply to make sure the state has cut spending in the right place - not that there is anything simple about it! - but to fix it in such a way that will allow towns to make better planning decisions.
This reformed property tax structure will
- will reduce overdependence on locally-generated revenues;
- will reduce development pressures on open land and encourage affordable family housing;
- will level the playing field among all municipalities and school districts
We want the property tax structure to eliminate the ratables chase, encourage urban revitalization and encourage housing development - affordable, family housing - close to jobs and transportation.
This reformed property tax structure will need to be combined with other tax policies, such as:
Differential taxation: By instituting lower property taxes in SDRP Centers and Planning Areas 1 and 2, and higher property taxes in Planning Areas 3, 4, and 5, development could be encouraged into those regions where the infrastructure exists to support it.
New incentives to keep farmland in farming: Increase the roll back on farmland if it is developed, and perhaps adding a preferential tax treatment for the State receiving a portion of the proceeds from the sale of the property for urban redevelopment or affordable housing.
State Plan Implementation Fund: A statewide fund for financing infrastructure needed in appropriate growth areas is needed. Pooling, through some type of tax-base sharing arrangement, of the growth in property value resulting from development not in accord with the State Plan would reduce the incentive for individual municipalities to chase ratables.
Motor Fuels Tax: Currently among the lowest in the nation, New Jersey's fuel tax could be increased to provide additional revenue and be a disincentive for development in auto-dependent areas.
Reallocation of public service costs: If those public service costs currently assumed by municipal and county governments that are more appropriately State responsibilities were assumed by the State, pressures on local property taxes would be reduced.
Regionalization: It can reduce duplication, avoid future costs, and reduce the need to attract additional ratables.
Income Tax: The income tax is the most progressive tax option, and would affect urban and suburban New Jerseyans equally.
Statewide property tax: With a statewide property tax rate (as has been ordered by a recent New Hampshire Supreme Court to fund schools), developers would no longer seek to avoid high-tax urban areas and suburban municipalities would no longer need to chase ratables.
The above list is not intended to be exhaustive, but is intended to show a package of remedies that are needed to address the problem effectively. I look forward to hearing more from the panelists about what can be done.