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Township Lowers Limit on Tax Appeal Settlements

South Brunswick Township Council lowers settlement threshold hoping to stem the tide of dropping ratables.

Township Lowers Limit on Tax Appeal Settlements

With declining ratables impacting both municipal and school tax rates, the township is lowering the threshold for settlements on tax appeals. Previously, any settlement on a tax appeal that was greater than $50,000 had to be brought by the South Brunswick Tax Assessor to the Township Council for approval. At last week's meeting, the council lowered the settlement limit from $50,000 to $25,000.

"In the past, the assessor had latitude to negotiate at a maximum of $50,000. Where that really comes into play is with the business community," said Public Affairs Coordinator Ron Schmalz. "Over the last few years the assessor has been doing a good job, but administration wasn't aware what was going on with the appeals and the values were dropping more than we knew. So now the assessment can't be lowered more than $25,000, otherwise the council needs to know about it. When it was $50,000, once you have 10 settlements, we're talking about a half million dollars that we didn't know about."

Last year, the township saw a reduction in ratables of approximately $100 million. Of that total, $98.5 million came from commercial and industrial tax appeals. Approximately 100 companies successfully sued the township for a tax reduction last year.

The township previously sought to settle when officials thought South Brunswick would lose more money on the appeals in court.

"Once we settle they can't sue us for a reevaluation for two years, so our tax assessor tries to make a settlement with them," said Mayor Frank Gambatese earlier this year. "Especially if he feels going to court would lose more money than the settlement that we're able to come up with." 

Gambatese said the tax appeals by businesses are usually successful in court due to the impact of declining residential values.

"You can't win those cases, because when you go into court they say residential values are down to 46 percent of their true value, while corporations are at 100 percent," he said.

Over the last seven years, the township's ratable base has decreased by $180 million. The drop in assessed value has a greater impact on the tax rate for the municipality and school than any other factor, according to township officials.

"During the last three years alone, 8 percent of our ratable base has been diminished from the net affect of tax appeals," said Chief Financial Officer Joseph Monzo, at a Township Council meeting earlier this year.

Tax appeals by both homeowners and business owners have experienced a staggering increase during the recession. In New Jersey, appeals surged by 221 percent from 2008 to 2011,  according to a report in SmartMoney Magazine.

, according to district Business Administrator Anthony Tonzini. . The budget, which increased by 1.15 percent over last year, lowered the general fund tax levy by about $630,000 to $96.2 million, but the tax rate increased by about 5-cents to $2.85 per $100 of assessed valuation due to the ratable drop. 

The Township Council is expected to vote on April 24 to approve a budget that will not increase the tax rate from the current 72 cents per $100 of assessed valuation. The council was able to offset the drop in ratables mainly through the use of money from the Affordable Housing Trust Fund on prior work by township employees, and by getting money back from the state for the cleanup of a landfill on New Road.

By placing tighter restrictions on tax appeal settlements, Schmalz said the township would be able to monitor the situation more closely in hopes to lessen the impact on future budgets.

"Since the economy turned, the real estate market has been inundated with tax appeals, so the ratable base has decreased," he said. "Hopefully the economy starts to turn and real estate values stabilize. But this ratable drop has had a huge impact on our budget."

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