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Re: Explanation of abatements
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Home away from home
 
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Wishful, just ignore bodi as what he writes is inaccurate. There are not two different tax rates, or percentages as he asserts. The revaluation affects the assessed (equalized)value of the property. The tax rate is a constant value for all.
The fallacy is that he was implying that downtowners pay a lower rate (%) and that Bergen Lafayette was carrying water for them, much like I am carrying water for Warren Buffet who pay s amuch lowerincome tax rate than I.
Posted on: 2015/11/20 0:10
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Re: Explanation of abatements
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Home away from home
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Joshua, I realize you are benefiting from an abatement. But stop with the nonsense. After the 1988 reval the city went from $800 million to around $6.5 billion in ratables. The tax rate dropped for $212 per thousand to around $30 per thousand. We are below the $6.5 billion figure because the new development is tax abated. It is not added to the county's formula when the county strikes the budget. It is still one dollar for every $5 million needed to raise taxes. It is the reason our taxes increased to around $75 per thousand. Yes, spending has increased especially under Fulop, just check the city's website on budgets. But our ratable base on paper is less than 1988 which is totally ridiculous.
Posted on: 2015/11/19 21:40
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Home away from home
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If the city is getting more money from the PILOTS then they don't make taxes higher for everyone else. Yvonne keeps repeating the mantra "They are not ratables" but that doesn't answer the question. Again, the city gets more, the county gets less, and the schools get none. The state aid makes up most if not all of the revenue from the PILOT for the schools.
There is value to having property as part of the ratable base because a) if there is a tax increase, it is spread out more thinly (although it also means that cuts are spread out more thinly) and b) to the extent these new developments are driving an increase in property values, their value would be reflected in the eventual revaluation. If they are abated they keep their current rate while surrounding properties pay more. To that extent they actually help taxpayers outside of downtown at the expense of the downtown taxpayers.
Posted on: 2015/11/19 21:14
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Re: Explanation of abatements
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Home away from home
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The last reval was 1988, not 1986 Ralph, I went through it personally, I know the year. Yes, pilots or tax abatements are wrong they artificially makes taxes higher for the rest of JC taxpayers because they are not ratables, wishful_thinking.
Posted on: 2015/11/19 20:31
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Re: Explanation of abatements
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Home away from home
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Hey, Wishful_Thinking, what do you mean or refer to with "the city's general tax rate of 7.434%"?? As for tax rate, it is quite simple to figure out. Normally, in just about every city in the US, your property taxes are determined by multiplying the estimated market value of your property by a given property tax rate. So, for example, if the property tax rate for County Sunshine is 2.2%, and your home is determined to be worth $200,000, your property tax levy would be $4,400. In JC, there is a complicated system of equalization rates and assessed values that obsfucate the matter. In the end, if you want to know if you are over/under paying, you can do some simple math: look at your property tax paid for a given year (say, 2014) and divide that number by the market value of your property. That would tell you the relative property tax rate you are paying. In the case of some/many/most brownstones in DTJC, you will find that they are often paying something close to 1% (i.e., a 1 MM brownstone is paying 10K in taxes) when in reality, they should be paying 21K (this is based on the understanding that the effective property tax rate is about 2.1%). What will happen immediately after a revaluation is that every home (excluding those in other arrangements, such as PILOTs and other tax abatement schemes) will be reset to pay the same effective tax rate. So, a home in Greenville or Lafayette currently 5K, but worth only $200,000, will see a reduction in their tax bill and will now pay 4.1K.
Posted on: 2015/11/19 20:13
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Re: Explanation of abatements
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Home away from home
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I've been following this topic on JCList for 7 years now, and still don't fully understand it.
With all due respect to CivicParent and Yvonne, I don't see why PILOTs are bad - yes, all of the money is put into the city coffers vs. a % for the schools, but doesn't that mean they are an excellent revenue source for all the other improvements that contribute to an emerging, livable small city? I need some clarification from Ralph_Abutts and Bodhipoo apropos of your current argument - when you say 1% vs. 3% taxpayer what do you mean? How does this relate to the city's general tax rate of 7.434% I am concerned about "fixing" the funding of the schools (I don't have children, but their well-being is our collective responsibilty) but I have to concur, as a homeowner myself, that the $50M "missing" from the school budget due to properties being abated seems to be a drop in the bucket of the hundreds of millions of $$$ the schools seem to need. Can I ask if the school budget is increasing in-line with inflation and city tax revenues, or is it out of control? I ask because I have crunched the numbers for my humble condo, which I bought in 2008 - if it was assessed based on on-line estimates, and the current equalization rate, my tax rate could go up 25% to 45%. A pain, but it won't put me on the street - so maybe it needs to happen to fully fund the schools if that is indeed warranted. I assume those opposing the re-val are looking at 200 - 300% increases.
Posted on: 2015/11/19 19:33
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Re: Explanation of abatements
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See, this is PRECISELY why you are wrong. Total tax paid is IRRELEVANT. The only valid metric is TAX RATE. Property taxes are measured and assessed everywhere based on a tax rate percentage of property value. Everything else you mention (less government used, children less likely to be enrolled in pubic school, etc.) is irrelevant. Based on your statements, I am going to assume you are downtown owner; if i am right, you better start saving for when the revaluation finally happens.
Posted on: 2015/11/19 17:47
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Re: Explanation of abatements
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Home away from home
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Actually what you wrote literally, was not obvious and incorrect and there was no mention of a revaluation in this thread until you brought it up.
The last revaluation was in 1986. There are many properties through-out the city, which their assessed values have changed over such a long period of time. Other parts of the city will pay a larger tax burden post reval, too. As for carrying water, your assertion does not really hold water as comparing rates does not really tell the whole story. The DTJC property paying 1% versus 3% may be paying 10x the $ amount of taxes as the 1% rate payer in Greenville or Lafayette, while consuming much less government services, including being less likely to have children enrolled in the JCPS district (back on topic).
Posted on: 2015/11/19 15:58
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Re: Explanation of abatements
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Well, I am obviously excluding abated properties. Those will not be impacted by a tax revaluation, as already stated earlier in this thread. But, PILOTS are usually attached to new construction. There are some exceptions to that, which are properties that were extensively renovated and which were able to secure an abatement based on that. I still think that majority of NON ABATED properties in DTJC will see an increase in taxes. Look at neighborhoods like Greenville and Lafayette, and the only objective conclusion is that vast areas of JC have been carrying water for DTJC in terms of tax levies. It is simply unfair that those areas are paying effective tax rates of 3 and 4 percent, when so many properties in DTJC are paying rates closer to 1 percent. Those disparities, and the related under assessments, have been fueling the DTJC real estate market to the detriment of other areas. Once property tax bills start going up in DTJC, property values will see a correction.
Posted on: 2015/11/19 15:33
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Home away from home
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I agree with Yvonne about the troublesome practice of flipping abated properties. City officials from any administration have always said that they cannot make the terms of an abatement or a zoning use contingent on the identity of the owner. That may be true but it is problematic.
With respect to the future of Abbott designation and school funding, that is a concern but it's not so easy to change it. The Court's Abbott decision is based in New Jersey's constitution, so state legislators cannot hereinafter declare that the parties to the case are stripped of the remedies ordered by the Court. The Court did allow the School Funding Reform Act to at least partially do away with the Abbott/Non-Abbott distinction, but the formula more or less held the Abbott districts harmless. Things can change, courts can update their decisions. But it's not so simple. Having said that I think Jersey City should get away from the practice of relying on so much state aid and expand its base so that property tax covers more of the budget. Even if the district loses an equal amount of corresponding state aid in the short run, it does help spread out further tax increases. SFRA is not fully funded and with the state's budget crisis we can't expect it to be. So Jersey City should plan for that contingency even if raising money through the ratable base (or simply contributions from PILOTS) takes away from the city budget. For me the most compelling issue is a moral one. The Abbott decision is truly groundbreaking in several regards, with a Court demanding remedial measures for urban areas because of the unique challenges that it faces. To use the mandate of Abbott and what is arguably a loophole in the law allowing PILOTS is a pretty cynical manipulation of the system. Having said that, my sympathy for the outside (and inside) critics of Jersey City receiving its aid is limited. Under the formula, they claim that Jersey City should lose money to districts like East Newark. East Newark has very little justification to exist as a town, let alone an independent school district. It is a little over 1/10 of a square mile and does not even have its own high school. Their students may need a certain amount of aid, but the needs to run such a district are nothing compared to that of larger cities. One of the reasons property taxes are so high is that tiny boroughs and towns create redundancy. The loudest complainers about the school funding formula are suburbs. People move there and in some cases they were incorporated for the very reason of separating themselves from the "other people" As I've said before, I will consider their complaints more grounded when I see a "Oranges Combined School District" that integrates the student populations of East Orange, Orange, South Orange, and West Orange. And while they are at it, live up to their Mt. Laurel affordable housing obligations in a way other than buying out of it to stick more low income housing in the poor towns.
Posted on: 2015/11/19 15:22
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Re: Explanation of abatements
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No, I am not delusional. Most "properties in DTJC" as in the majority, "*will* see an increase in their tax bill". Yes to brownstones, however unless you have the data to prove such, I am not sure that is a correct assertion for the majority as in most. For instance, to keep this on topic, there is a lot of housing stock in DTJC (maybe even a majority?) that are PILOTS and PILOTS are not subject to tax revaluation.
Posted on: 2015/11/19 15:21
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Home away from home
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Yes, the total amount of taxes will remain the same, but it is undeniable that DTJC is currently underpaying, and most properties in DTJC *will* see an increase in their tax bill, particularly brownstones. If you don't think a brownstone currently paying 7K is not going to see a bill close to double or triple that, you are deluding yourself.
Posted on: 2015/11/19 14:58
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Home away from home
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A revaluation does not increase taxes, it just shuffles the deck. That is some pay respectively more, less or the same (including DTJC), but the total amount of taxes collected remains the same after a revaluation.
Posted on: 2015/11/19 14:55
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Home away from home
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One more thing being ignored or left out is the future of Abbott designation. Currently, JC is paying but a figment of the total school budget, at about 16% of total budget. If JC loses its Abbott designation, or if the state could force the city into paying more of its own local school budget, local residents could be on the hook for a substantial tax increase.
So, if we go by the idea that 25% of current tax bills go to paying for the public school budget, and we were suddenly expected to pay 33% of our school budget, the average property owner would likely be faced with a 25% increase in their overall tax bill (a doubling of the school portion). I wonder how many people would be able to afford a 25% increase in property taxes. Couple that with the inevitable tax increase that will hit DTJC when the revaluation finally happens in a few years, and I think it is safe to say that DTJC property owners have much to fear.
Posted on: 2015/11/19 14:40
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Re: Explanation of abatements
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There is another thing the developers do, that I find troublesome. They build in to the tax abated contracts, the right to transfer the abated property at sale. There are different formulas on abatements but some are based on construction cost. Those figures are low balled, after an abatement is grant anywhere from six months to several years, the property is sold at a substantial higher figure and the tax abatement is transferred. Councilman Fulop would protest under Healy but this practice continues under Mayor Fulop. Fortunately, this has happened a few times under Fulop but it was more common under Schundler.
Posted on: 2015/11/19 14:22
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Home away from home
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+1 JPhurst's comments. Ditto that.
If the Mayor had the power of a dictator and made all PILOTS pay traditional/conventional property taxes, that would only add $80 million more to the city coffers. Of course, the fallacy in this logic is the tax roll would not be this high without the tax abatement incentive. That is without the incentive, their would be at least some properties that would never be developed and in turn no revenue generated for the city (or for that matter low income housing). As a matter of semantics, NJ Statute defines PILOTS as not contributing to schools and likewise are Payments In Lieu of Taxes. That could not be further from the truth. You would be a fool to think PILOTS are not a tax. Try to not pay your PILOT, and watch how quickly the *Tax* Collector places a *Tax* lien on your property. You do the math. If you do not think the $119 million in PILOT property tax revenue does not contribute to the school district's budget, or for that matter the fiscal health of the city, just as much as "conventional" property taxes, then it is just ignorance (enumeracy) or being foolhardy or perhaps you are just an Irwin Schiff prophet.  The City currently pays the school district $112 million a year. There is no state imposed formula of how much revenue and of what type of revenue the city must transfer to the school district. It is completely at the discretion of the City Council and the money is paid out of the City's $530 million operating budget. The school district budget is *significantly* larger, at $665 million, btw.
Posted on: 2015/11/19 14:01
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Home away from home
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I have long advocated that state law should be changed to require PILOTs to be allocated between city, county and school district in the same proportion as regular taxes.
The reason Mayor Fulop didn't do what Councilman Fulop said (require payments from developers to the schools) was because Mayor Fulop realized that if those payments were made to the school district then corresponding state aid would be lost. So why give the money away? Just use it for the city budget. So it's not really accurate to say that the PILOTS rob the district, because if the city gave that money to the district it would lose state aid. There is backlash from some people saying that Jersey City shouldn't be able to get away with this scheme. It's usually part of a larger move to completely get rid of funding for poorer districts. There are people who use this to say that Jersey City should be out of Abbott altogether. The fact that Fulop is running for Governor makes things worse, because now both local opposition, bitter former supporters, and Republicans from around the state want to knock him down. Note that even under generous estimates, the amount of PILOT funding that should go to the school district is $50 million. That assumes that all of these developments would have been built and built to the same scale without the abatements. But even if true, Jersey City's aid is around $400 million (loose estimate here, it's actually a little more). So while $50 million is quite a lot of money, it doesn't address what the opponents of Abbott funding and Fulop the politician are getting at.
Posted on: 2015/11/19 4:09
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Re: Explanation of abatements
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Ralph, you can give any explanation you want. But in the last 10 years, properties without abatements contributed $40 million more the the local school system since 2005. Those 20 and 30 year tax abated properties with children are not being impacted.
Posted on: 2015/11/19 2:02
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Home away from home
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When the blogger asserts that PILOT revenue pays no school tax, that is true, per se, as defined in NJ Statute (NJSA40A:20-12). However, it is a bit misleading. It is like saying the Dad does not contribute to his kids allowance, because the Mom hands the kid money despite the parents sharing in all of the family's expenses.
As a property owner, you pay your property tax or PILOT payment to the Jersey City Tax Collector. All of this money goes into a general operating fund. Likewise the same is true for parking tickets, building permits, dog licenses and other sources of revenue. The City Council approves the municipal budget. In this budget, they decide how much money the municipality will write a check to the public school district. Again, you write the check to the city and the city writes a check to the school district. That check does not differentiate or enumerate what the source of city revenue is. You can debate whether the municipality contributes enough to the school district. However, when you do, you cannot uncouple from that debate, how fiscally able is the city to contribute more money, if need be. In my opinion, it is putting the cart before the horse to assert the City is not paying anywhere near its fair share to the school district. Where there are Abbott districts there are PILOTs and for good reason. This is not something unique or limited to Jersey City. The PILOT issue is being raised now because State funding for the Jersey City school district has been flat. The State is broke and is trying to push more of the fiscal burden back on the municipalities. The irony here is that the State imposes tax, borrowing, and spending caps on municipalities. There is a strong emphasis placed on property tax relief and the need to reduce high taxes. However, the State does not impose such caps on itself, nor directly towards public school districts. Likewise, you do not hear discussion about cutting school spending (public or private). It is taboo. I think the better debate is to question how "through and efficient" of an education is the Jersey City public school district providing? With emphasis on efficient, as in fiscally efficient. The school district is near the top of the state's 600 public school districts spending per student head. With an already high tax burden for JC and NJ, there's not much money left to shake off from the $ tree.
Posted on: 2015/11/19 1:26
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Posted on: 2015/11/19 1:05
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Re: Explanation of abatements
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The present County Executive Tom DeGise, was Council-President under Schundler, he never said no to tax abatements. For him to protest now, would be hypocritical. DeGise is the one that coin the phrase - Tax abated building on the waterfront do not bring in children, so the board of ed is not being short changed. Mind you he was then working as a teacher for the board of ed. We now know that to be a wrong. I still remember LeFrak stating they needed a school in their area to service their children in their buildings.
Posted on: 2015/11/19 1:01
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Home away from home
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Ok, trying to understand all this better. My first question is why isn't the County not screaming bloody hell about JC taking a substantial amount of revenue away from their tax revenue?
Posted on: 2015/11/18 21:13
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Re: Explanation of abatements
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Home away from home
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Since tax abatements are not ratables, this $57 million increase is probably expired tax abatements granted under the Schundler Administration. Everything Fulop is doing is not adding to the ratable base which would lower or stabalize taxes. Sadly, JC was worth more on paper after the 1988 reval, when the ratable base was more than $6 billion.
Posted on: 2015/11/18 17:06
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Home away from home
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Thank you for an excellent analyses and write up. Plain and simple (and with pictures.)
Posted on: 2015/11/18 16:23
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Re: Explanation of abatements
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Home away from home
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That is an extremely good explanation of what tax abatements are and their true effect on Jersey City's finances. It also explains why no matter how much a politician will rail against abatements, when push comes to shove, they will embrace them. Our city is drunk on abatements.
Posted on: 2015/11/18 15:54
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Explanation of abatements
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Newbie
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This is a really thorough breakdown of a complicated issue- the issuance of tax abatements in Jersey City. The most interesting part of this write up to me was that
1. Everything is backed up with other sources 2. It compares Mayor Fulop to Councilman Fulop's positions 3. It shows how the City moves funding around to serve its own purposes. It's called 'Jersey City pilots Rob Funding from the School System', which is a direct reference to what Councilman Fulop used to say when he was campaigning for Mayor. https://civicparent.org/2015/11/jersey ... hool-system/#comment-7370
Posted on: 2015/11/18 15:03
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