They say timing is everything.
Given the slow economic recovery, the still sluggish housing market, and the city’s unstable tax rate – which all came on the heels of a booming housing market that saw the construction of thousands of new residential units – is this the best or worst time for the city to do a property revaluation?
When the Jersey City Council recently approved the allocation of $3.15 million for the upcoming property revaluation by a vote of 6 to 3, those who voted against the allocation explained their opposition by saying a reval now could push struggling homeowners into foreclosure and convince others to leave the city. Elderly and modest income homeowners, they argued, would be the ones most negatively affected.
Is now this the best time to hit Jersey City residents with tax a reallocation?
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Richardson joined Councilman Steve Fulop, of Ward E, and Nidia Lopez, of Ward C, in voting against the appropriation.
Some council members who voted in favor of the fund allocation, including Ward A’s Michael Sottolano, explained their support by pointing out that a reval does not mean every property owner will see a tax increase as a result of the process.
“You don’t know that your taxes will go up,” Sottolano said in response to a concerned resident at the April 13 council meeting. “Some people actually see their taxes go down in a revaluation because they’ve been over-assessed. And because the market is low now, this is actually the best time for a reval, instead of when the market is high.”
City Business Administrator Jack Kelly also said it’s best to do a revaluation in a “soft market.”
Rising market, falling market
A municipal revaluation essentially reallocates, or redistributes, the tax burden in the city based on home values.
“In reality, a reval can be done at any time, although the best time is when the [property] market is as stable as possible,” said real estate attorney Timothy P. Duggan of Stark & Stark, who is chairman of the firm’s property tax appeal group. “You actually have the same problems in a rising market that you have in a falling market. That problem being that the comparable sales that you use [to determine the fair market value of each property] fluctuate quite a lot, and fluctuate quite a lot within a short period of time.”
For example, in a market in which property values are rising quickly – which was the situation Jersey City had in the ‘90s and early 2000s – homes purchased at the beginning of the year are valued much lower than those for comparable properties bought at the end of the year.
In a falling market, such as the city has had in more recent years, Duggan explained there is the opposite problem. A home sale made in January or February is likely to sell for more money than the sale of a comparable property in November or December.
He noted, however that municipalities “can have more exposure to tax appeals” when the market is falling.
“What you want in a perfect revaluation is a stable market so that data is not changing quickly over the course of a year,” Duggan added. “Many people are terrified when a reval gets done. And they have real legitimate fears…When the economy is good, and you get hit with a higher tax bill, you have a better chance to absorb that on a monthly budget. But you have much less of a chance when the economy is bad. And some folks don’t have a shot at all…So, is this the best time to hit them with a reallocation?”
Duggan gave the example of one couple he represented who had been saving $500 a month for their children’s future college tuition. After their town went through a reval, their property was assessed at a higher rate and their taxes went up by $8,000. The money that had been socked away for college now goes to the tax collector.
“And of course, this was a couple who at least had an extra $500 a month to put aside,” Duggan added. “Many people don’t have that kind of disposable money, and a lot of people don’t have it when unemployment is up, wages are flat, and there may be few opportunities to increase your income.”
The conventional wisdom that a third of property owners will ultimately see a tax increase following a revaluation, while a third will see their taxes go down, is fairly accurate, said Duggan, adding that another third of property owners won’t see an increase or a decrease.
“The people who go down are the ones who own newer properties. And they are sometimes the ones who actually push for a reval to be done because over the last 10 or 15 years they’ve likely been overpaying,” said Duggan. “But, the people whose taxes go up, you’ll never get them to admit that they’ve probably been underpaying all these years.”
Of course, one wrinkle in Jersey City is that much of the new construction here is abated property that has already been given long-term, multi-year tax breaks. Another is that the city hasn’t done a property reval since 1988.
Although abated property in Jersey City will be reassessed as part of the upcoming revaluation, Duggan said their taxes will not go up when the tax burden is redistributed – a fact that has many owners of older homes seeing red.
There are thousands of parcels of commercial, residential, and vacant property that will be assessed during Jersey City’s revaluation, which will be conducted by the politically connected firm of Realty Appraisal Co., based in West New York.
The city will host a meeting on the revaluation process for residents on Tuesday, May 3 at City Hall at 280 Grove Street. The meeting will begin at 6 p.m.
E-mail E. Assata Wright at awright@hudsonreporter.com.