Editor's Notebook: Taxes, Taxes, and More Taxes

Death and taxes, the adage goes, the only two things you can be sure of.

And taxes are making a few people in Maplewood feel like they are being driven to an early death, judging from the frequency with which the subject comes up in our coverage.

It doesn't take an investigative report to reveal that property taxes in Maplewood are onerous. Over the past few months, Patch has covered the municipality's struggle to balance the budget amidst rising costs and cuts in state aid—while not exceeding the tax cap increase rate of 3.5%. We've followed the governor's attempts to institute a new lower cap, the Township Committees' response to that proposed cap and the new 2% proposed cap that has now been approved by the State senate and assembly. We've documented accusations that our town's taxes are unbearably high because of irresponsible spending on the part of elected leadership.

The school district has likewise struggled to meet the educational needs of students in the midst of cuts in state aid. The district has eliminated many positions and outsourced others to do so this year. There were protests over how the district leadership decided to make cuts—largely through special education programming and staffing. Early in the budget process, Vice Mayor Kathy Leventhal spoke with the Board of Ed and asked them not to exceed their target cap of 3.5% in increase because she said, residents were at a breaking point. (South Orange Trustee Michael Goldberg made a similar plea on behalf of South Orange Village.)

Similarly, the County managed also to balance its budget without seriously cutting services but again has raised the tax rate—albeit modestly.

But the fact remains that most people don't know some basic facts about their tax bill. For example, did you know that the Township budget represents only about 28-30% of your tax bill? The school district claims 58-60%? And the County about 12%? It's a complex system that makes it difficult to blame any one person or entity. For example, the Township Committee does not control the school district budget directly; however, three members of the committee serve on the Board of School Estimate which approves the tax levy for the budget. The other half of the voting members of the Board of School Estimate is made up of three South Orange Trustees.

So, just why are our taxes so high? Many blame Newark. Others blame the schools. Anecdotally, we know that our town is reliant heavily on residential tax ratables. Unlike a neighboring town like Millburn which has a high percentage of highly valued commercial ratables like the Short Hills Mall, Maplewood tax collections come from more than 90% residential properties and less than 10% commercial properties.

In 2009, Ernest C. Reock, Jr. of The Center for Government Services, Division of Continuing Studies at Rutgers University, distributed a survey that aimed to quantify the phenomenon of Maplewood and other towns' high taxes. The study, "Determinants of Relative Property Tax Burden in New Jersey," listed Maplewood as 26th out of the 30 most tax burdened towns in New Jersey (South Orange was 30th). [It should be noted that the data cited in the study are from 2004; Reock says this is due to the fact that it takes several years before income data are available. He is currently awaiting 2008 data in order to update the survey. Reock also points out that the 2004 data do not reflect the substantial change in State aid for schools that was implemented for 2008-09.]

As Reock stated, "New Jersey is recognized as having one of the highest property tax levels in the country. In 2004-05 the state ranked first in property taxes per capita and fourth in property taxes as a percentage of personal income. Within the state the tax is administered through 566 separate municipal taxing jurisdictions, and its burden varies widely from place to place. Some communities are heavily burdened by their property taxes; others may be only lightly impacted."

Reock looked at "determinants" of high taxes in four different broad categories: local financial resources, expenditures, demographics and state aid. We are working to convert the files of the report to pdfs, but, in the meantime, readers can email the editor for the full report and attachments.

Basically Reock finds that Maplewood—no surprise—has a high level of residential property. We also have just average revenue, while some towns have very high fee collections. In addition, we live in one of the most highly taxed counties (Essex is in the top three behind Camden and Passaic, according to Reock's numbers). We have a fairly high level or school enrollment and per student spending and a low level of state aid. And, yes, our municipal expenditures are above average for the state.

Of the residential proportion of ratables, Reock writes, "Of the 30 places with the highest Property Tax Burden Indexes, 26 have above-average proportions of residential property, with the exceptions being Woodbury, Hillside, Salem City, and Berlin Township. This determinant begins to explain why some communities with substantial property tax bases and high personal incomes, such as Maplewood, Glen Ridge, and South Orange still show high property tax burden indices."

Regarding expenditures, Reock reports, "Twelve of the 30 most burdened municipalities have per capita municipal budgets above the state average. In several cases, they are the more urban places–East Orange, Orange, Irvington, and Plainfield, but some of the older suburbs also are included, such as Roselle, Hillside, West Orange, Maplewood, Glen Ridge, and South Orange. South Bound Brook and Berlin Township, have similarly high municipal budgets, although less urban."

Reock does not delve into a comparison of cost drivers across towns: Does Maplewood have more debt? Higher insurance costs? Those topics have been debated during town budget meetings and candidate debates and we will continue to research these issues.

Maplewood also has a high level of cost in per pupil spending, according to Reock: "Twelve municipalities out of the 30 most burdened have school costs per pupil above the state average  . . . .  Several of these places –East Orange, Orange, Irvington, Salem City, and Plainfield–are Abbott school districts, where a high school budget per pupil was mandated in 2004-05, with compensating State aid to reduce the property tax. Non-Abbott municipalities in the top 30 tax-burden places with above average per-pupil school costs include Roselle, Lindenwold, Woodbury, Runnemede, West Orange, Berlin Township, and Maplewood."

And Reock's data seem to support the Newark and/or County-as-a-drain-on-taxes theory: "The average county tax levy in 2004 was $375 per capita. Only eight of the 30 most burdened places appear to have above-average county taxes.  These include municipalities that are reasonably well-to-do in counties with many poorer communities–West Orange, Maplewood, Glen Ridge, and South Orange--where places of this sort must carry a substantial share of the county tax load, and several smaller places in Camden County–Barrington, Merchantville, Haddon Heights, and Berlin Township.

Maplewood, however, has several outlier factors. For instance, about the property tax base, Reock writes, "Probably the most obvious financial resource determinant of property tax burden is a low level of taxable property. For any given tax levy, the smaller the amount of taxable property, the higher the tax rate.  The level of the tax base has been measured by the equalized valuation per capita. .  . . Low tax bases are prevalent among the most burdened communities. Twenty-six of the 30 have property tax bases below the state average, in many cases well below. Only four—West Orange, Maplewood, Glen Ridge and South Orange—have equalized valuations per capita above the state average."

Maplewood also, unlike many other highly tax burdened towns, has a high income level. Writes Reock, "The amount of personal income has an immediate impact on the second component of the Property Tax Distress Index–the percentage that property taxes take of personal income. The personal income used here is the total personal income reported by New Jersey income taxpayers. This amount has been divided by the number of taxpayers and their dependents, with the state average being $32,460 per capita. . . . Among the 30 most distressed municipalities, 25 have levels of personal income per taxpayer below the state average. West Orange, Medford Lakes, Maplewood, Glen Ridge and South Orange are the only high-burden places having personal income levels above the state average."

Patch thanks Veronica Peralta of the Maplewood Citizens Budget Advisory Committee for making us aware of this survey and apologizes for any delay in the presentation of Reock's findings.