The beginning of summer in Hoboken is a time for venerable traditions, like the Arts and Music Festival, that first trip down the shore, and town officials complaining about the county property tax increase.
Last year, the average Hoboken residential property owner paid $7,397 in total to the city, county, and public schools, and if the 2015 fiscal year budget for Hudson County is approved, an owner of a $518,000 home will pay $352 more this year. While that might not be a lot for a one-time increase, property taxes have been on the rise consistently for at least the last five years.
The vast majority of the tax increase on Hoboken property owners for 2015 is projected to come from the county. Hoboken’s public school district also increased the amount of money it raises through taxes, or its tax levy, by 4 percent this year. The city tax rate will remain flat this year.
In the new $525 million Hudson County budget introduced last month, the portion of the county’s total tax levy drawn from Hoboken will increase by 11.6 percent compared to 2014. If passed without amendment, Hoboken’s share of county taxes will have increased by a whopping 48 percent since 2010.
Mayor Dawn Zimmer issued a press release last week criticizing the county for failing to provide tax relief to Hoboken residents. With Hoboken having just passed its own 2015 budget with no tax rate increase, and Zimmer argued that the county hasn’t done enough to hold its own costs down.
“Lessening the levy on Hoboken would just mean that you’re increasing it more in towns like Union City.” – Thomas DeGise
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But why has Hoboken’s county tax burden ballooned in the past half-decade? Two reasons: The county’s budget has increased, and so has the value and amount of Hoboken’s property. Some may not realize that Hoboken has to pay a disproportionate share compared to its neighbors because the amount is partly determined based on the value of property transactions in the town.
Two factors
Hudson County’s proposed 2015 budget represents an increase of 13 percent in the past five years. In order to fund this growth, every municipality in the county will pay more in absolute numbers to the county than it did in 2010.
But Hoboken will see more of an increase. The assessed value of Hoboken’s tax base increased by 268 percent in that time period, while the assessed value of every other county municipality put together increased by only 2 percent. It’s not really the assessed value that determines the rate that Hoboken residents pay, but the fact that Hoboken’s land value is increasing at such a high rate does play into the tax rise.
Hudson County taxes are actually allocated based on each town’s “equalized value,” as calculated using a state-mandated formula related to land sales.
“The equalized value is determined by the [property] sales that take place in the town,” explained Hudson County Tax Administrator Don Kenny. “Every year, the sales that take place in any given town are analyzed by both the assessor and the Division of Taxation, and every Oct. 1, the state publishes the ratio for each town.”
To a certain extent, the equalization ratio keeps the situation fair in a county in which many towns have avoided having their property value reassessed to modern standards in a revaluation. Thus, the ratio generates a more accurate picture of the towns’ tax bases.
Hoboken did a revaluation in 2013, but no other Hudson County town besides Guttenberg has done one in decades. Jersey City was about to do one in 2013, but incoming Mayor Steven Fulop halted it.
Hoboken’s property sale prices continue to skyrocket, so its equalized value has grown rapidly in comparison to nearby towns, just like its assessed value. Kenny said Hoboken sale prices were already 20 percent higher just one year after its revaluation.
Between 2010 and 2015, Hoboken’s equalized value increased by 12.3 percent, while the equalized value of every other county municipality put together actually fell by 11.7 percent.
The relative value of Hoboken and the rest of Hudson County is crucial because the total county tax burden is split between municipalities progressively, meaning more valuable towns pay a higher share than less valuable towns.
Like a rich businessmen who hits a new tax bracket when his or her salary jumps, Hoboken is a “victim of [its] own success,” in the words of Kenny.
In fact, even if Hudson County kept its total tax levy completely flat for 2015, Hoboken’s county tax burden would still have increased by approximately 6 percent due to its increased tax base.
With apologies to Benny Tudino’s, it might be best to think of the Hudson County tax levy as a jumbo-sized pizza. Everyone has to pay for it. An increase in the amount of taxes the county needs means the pizza is getting bigger, and an increase in Hoboken’s “equalized value” means the city is richer and is expected to pay for more slices, regardless of how much it actually ends up eating in terms of the county services it receives. It’s no wonder Hoboken taxpayers get sick to their stomachs.
Balancing budgets
What does the city receive for that money? The county’s paid administrators (county executive and staff) and elected officials (Board of Chosen Freeholders) oversee county roads, parks, the county jail, Court House, and other offices.
The question of what Hoboken gets has been asked by mayors and city councils for more than 20 years, often only around the time taxes go up, and then the rumbling quiets down.
This year, Mayor Dawn Zimmer said the county can do better moneywise.
“Obviously we need to provide essential services,” she said Wednesday, “but we need to do it as cost-effectively as possible…and I don’t think that [the county] has done that so far.”
Hudson County’s total tax levy has increased by 20 percent over the past five years, and Zimmer suggested that a lack of concern on the part of the county executive and county freeholders was at least partially to blame.
“They are comfortable doing a 4 to 5 percent increase [every year],” she said. “They think that’s OK and what I’m saying is, ‘that’s not OK.’ ”
Zimmer noted that Hoboken’s municipal tax levy has fallen 9 percent since 2010.
“We reorganized the Police Department,” she said, “with the Fire Department, we held the line and when there were retirements we didn’t do more hires, we did an overall evaluation and made changes within City Hall.”
Hudson County Executive Thomas DeGise defended his proposed 2015 budget, saying that the increase in Hudson County’s total tax levy for this year would probably fall in the range of 3 to 4 percent after budget amendments, a mark he characterized as “modest.”
“Anything lower than that would mean a curtailing of services,” said DeGise, “and in particular in the parks and on roads, because things like the running of the jail, the psych hospital, the welfare system, providing security, the court houses…are things that we are mandated to do, and in many cases, these are the things that the cities, including Hoboken, don’t want to do.”
DeGise said a flat county tax levy would not be possible due to the large fixed costs he faces, primarily in the sector of salaries, benefits, and pensions for Hudson County’s two law enforcement agencies.
“If you could talk the unions into not taking any raises, that would be a good start,” he said. “If you could talk the state government into covering their pension obligations, and their health benefits, that would help too. Other than that, the only way to [keep the levy flat] would be to cut services.”
Still, DeGise said he understood why Zimmer was criticizing the budget, given its disproportionate impact on Hoboken.
“If I was the mayor of Hoboken, I would be saying the same thing,” he said.
Balancing tax burdens
Zimmer believes that the way Hudson County splits its tax levy among its municipalities is unfair and needs to be changed, though she declined to specify what a better system would look like.
Zimmer noted that Hoboken has 7.9 percent of Hudson County’s population but bears 20.6 percent of its county tax burden.
“We pay 260 percent more than we would if taxes were based on population,” she said.
However, she stopped short of arguing that county tax burdens should be based purely on population.
DeGise emphasized that the equalization formula came from state, but he said he was unsure if he supports seeking to change it.
“Lessening the levy on Hoboken would just mean that you’re increasing it more in towns like Union City or Harrison or Jersey City,” he noted, “towns that aren’t growing” as fast as Hoboken.
Carlo Davis may be reached at cdavis@hudsonreporter.com.