Less than a year after it completed its first property revaluation in 25 years, Hoboken is about to embark on a “rolling reassessment” program. Every year, 25 percent of properties will be inspected, and at least 50 percent of the properties in town must statutorily have their values revised based on values and trends.
The city received approval for the new operation from the Hudson County Board of Taxation and the state Division of Taxation in September, and has already begun sending out letters seeking information from property owners. The city will hold a community-wide meeting this Wednesday.
In a reassessment or “reval,” cities use data from property inspections, real estate sales, and information on the income and expenses of commercial properties to determine the total market value of all real estate within their borders. Hoboken has hired Appraisal Systems, the same company that managed its 2013 revaluation, to lead the new reassessment.
The city says it is seeking reassessment because the true value of Hoboken’s total real estate as of Oct. 1 is already 12 percent higher on average than the total value calculated in last year’s revaluation, according to calculations made by the New Jersey Division of Taxation.
“By doing a rolling reassessment, it will make sure that the unfairness doesn’t start building up.” – Dawn Zimmer
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Such rapid growth, says Hoboken Business Administrator Quentin Wiest, opens the door to unjust overassessement and underassessment of properties, not mention a rise in costly tax appeals for the city.
Revaluations have long been a touchy political topic in Hoboken, with property owners concerned that their taxes will rise as a result. It is not yet known whether this year’s reassessment will cause individual tax increases, but city officials suspect that it will decrease Hoboken’s overall county tax burden. This means that residents’ county taxes may fall, although their municipal taxes may rise. Residents pay a total amount that is made up of county, city, and school taxes.
Why reassess now?
In an interview on Wednesday, Wiest and Mayor Dawn Zimmer said moving so quickly to a rolling reassessment was an attempt to maintain the integrity of last year’s revaluation in the face of skyrocketing residential prices.
“By doing a rolling reassessment, it will make sure that the unfairness doesn’t start building up,” said Zimmer.
They also said that annual reassessments would produce more gradual changes in assessed values. Some property owners saw the assessed value of their property more than quadruple as a result of the 2013 revaluation.
On a base level, Wiest said government bodies are constitutionally mandated to ensure that taxes are fairly proportioned, and rolling reassessment was Hoboken’s way of fulfilling its obligation.
In Hudson County, that makes Hoboken a near anomaly. Guttenberg is the only other county municipality that has had a recent revaluation, and Jersey City Mayor Steven Fulop is currently in court defending his decision to pull the plug on a revaluation in his town.
Appraisal Systems President Rick Del Guercio said in a presentation before the City Council on Wednesday that rolling reassessments are becoming more common around New Jersey. Nearby Hackensack has installed the system, along with several south Jersey counties including Monmouth, Burlington, and Gloucester.
The Zimmer administration also says rolling reassessments will save the city money in the long run, particularly when it comes to tax appeals. The closer a city’s ratio of true value is to 100 percent, said Wiest, the fewer tax appeals it will face and the less it will have to pay out to claimants.
“If the county says [your city’s] ratio is down to 90 percent,” he explained, “even if my property is valued just right, I’m still entitled to come in and get the value reduced because the ratio for the town is 90 percent.” Hoboken’s current ratio of true value is at 88 percent.
Based on an agreement approved by the City Council in September, Hoboken will pay Appraisal Systems $125,000 per year to run its rolling reassessment program. However, the four-year cost of the program will still be smaller than the full cost of Hoboken’s 2013 revaluation, which was $680,000.
Will taxes go up?
Making assessments fair could mean higher taxes for some and lower taxes for others.
“The purpose for any revaluation or any reassessment is to fairly apportion the tax burden of a town,” said Wiest. “If somebody is paying less somewhere because their property is undervalued, that means somebody else is paying more than they should.”
According to Wiest, the only situation in which individual property taxes would be guaranteed not to go up is if all property values in Hoboken were increasing at the same rate.
But Wiest himself noted that all of the property values in a city typically do not move in perfect tandem. In fact, unequal rates of change are part of the reason why reassessments are necessary in the first place.
Speaking generally about the 25 years before Hoboken’s 2013 revaluation, Wiest said, “Properties have appreciated at different rates in different parts of the city. Different pieces of property go up or go down more quickly than others. Apartment buildings do this, retail properties do that, condos do this, single-family homes do that. There are many markets, there isn’t just one marketplace…and what happens is, over time, those markets move differently.”
Though individual property owners may see tax increases, the city of Hoboken as a whole could pay less in county taxes. Wiest emphasized that the total property value in Hoboken determined by last year’s revaluation was smaller than the valuation Hudson County would have given Hoboken based in its “equalization ratio.” Thus, Hoboken actually saved in county taxes last year by doing a revaluation.
City officials think the same will be true of this year’s reassessment. Already, Hudson County has valued Hoboken’s total real estate as of October 2014 at $1.4 billion higher than the amount assessed in last year’s revaluation using its equalization ratio. Because that ratio is being driven primarily by skyrocketing condo prices, Zimmer and Wiest suspect that it is overestimating the value of non-residential properties that aren’t rising as fast. If that’s the case, a reassessment of Hoboken’s properties would result in a lower total property value and a smaller share of the county tax burden.
Community meeting on Wednesday
According to Del Guercio, the new inspections under the rolling reassessment will begin with those properties Appraisal Systems were unable to gain access to even after three attempts last year. Properties that have recently been sold or are on the market will also be a focus of this round of inspections.
Hoboken will hold a community meeting on Wednesday, Nov. 12 to provide information on the rolling reassessment process from 6 to 8 p.m. at the Hoboken Elks Lodge, located at 1005 Washington St.
Carlo Davis may be reached at cdavis@hudsonreporter.com.