Jersey City is a community on the rise.
In the past ten years, dozens of new buildings have risen towards the sky along the waterfront, more residents are moving in, and public school enrollment is on the upswing. But as buildings, residents, and school enrollments have risen, so too have property taxes; for the average Jersey City resident, property taxes rose 62% between 2005 and 2013.
This rise in property taxes demands that we ask certain questions, including:
- How much of the rise in property taxes is due to structural, or long-term, factors, versus shorter-term factors?
- How can historic tax rate trends inform current and future tax rate trends in Jersey City?
- How, if at all, are changes in property tax rates impacting the public school system in Jersey City?
- What is the state of Jersey City’s overall fiscal health when viewed through the lens of property taxes?
These questions are at the heart of my new series, Tax Bites. For many of us, property taxes are complicated, opaque, and confusing. Tax Bites is my attempt to cut through some of the complexity.
Where Do We Start?
The logical place to start with any discussion about property taxes is the Tax Rate. The “General Tax Rate” is actually a combination of several factors, each of which I’ll cover in detail in future posts (one bite at a time). For now, though, let’s just think about the General Tax Rate as an indicator.
Indicators are useful because we can draw general conclusions from them. For example, consider your body temperature, which is one indicator of your health. A high temperature – usually above 100 degrees – means you have a fever; your body is fighting an infection. However, an indicator’s usefulness is limited in that it doesn’t give you much more than the general condition being measured; our body temperature alone cannot tell us if we have the flu, a stomach bug, or a common cold. The temperature reading doesn’t tell you why you’re sick, only that you are, indeed, sick in some way.
Like temperature readings, tax rates are useful indicators. Tax rates tell us about the fiscal health of our government. Generally speaking, a tax rate as a standalone number in a single year has limited value (I’ll cover this point in greater detail in a later article). But here’s what does have a lot of value: trending tax rates over time. Steady, stable tax rates over time are like a steady, normal temperature of 98.6 degrees over time. But fluctuating or rising tax rates over time are like a rising temperature; they are an indicator that we should ask questions, that something abnormal may be occurring. But, just as a temperature reading does not give the root cause about why you’re sick, rising tax rates do not in and of themselves point to the exact fiscal issues that are causing tax bills to go up. To get to the root causes, you have to be like a financial nurse; you have to probe for answers, analyze data, and gather context surrounding the City’s finances.
Why Exactly Are Rising Tax Rates Bad?
If assessment values remain steady, then rising tax rates indicate that the City is getting more expensive for the average homeowner who pays property taxes. Also, quality of life may be decreasing. This is because when property taxes go up, homeowners have less money to spend on disposable purchases like restaurants or impulse buys, which in turn may harm local businesses. Rising property taxes compete with college and retirement funds. They may even compete with healthcare costs, because property taxes are a 100% mandatory expense; if you don’t pay them, you will lose your home to the government. So property taxes are an extremely important expense to consider when looking at the fiscal health of a City.
Jersey City’s Tax Rates from 1998-2013
Let’s get back to Jersey City’s rising tax rates. The NJ Department of the Treasury’s Division of Local Government Services publishes historical tax data, which shows that from 1998 through 2005, Jersey City’s General Tax Rate remained relatively stable, hovering between 4.25% and 4.61%. But from 2006 through 2013, the rate increased markedly, from 4.6% to 7.47% (an increase of 62% overall). This means that tax-paying homeowners in 2013 were spending 62% more on their tax bills than they were in 2005. This harms all taxpayers, but some families feel more pain than others, like: (a) the elderly who are drawing from pensions or fixed-interest bonds, (b) families on lower incomes who may not receive wage hikes that equal or exceed the tax increases, or (c) any workers experiencing wage freezes.
The rising tax rates between 2005 and 2013 illustrate a basic concept that I’ll revisit throughout this series: conventional taxpayer risk. Conventional taxpayers act as “funders of last resort” for any municipality; in other words, taxpayers are the safety net for the municipal budget when all other revenues – state aid, abatement PILOT fees, license and permit fees, special revenues – are spent. I will dive deep into the City budget in future posts, but this concept – taxpayers as funders of last resort – is a key point to hold onto.
In the next post, I’ll take a closer look at the tax rate formula. It will serve a building block for some of the more complex topics to follow.
I look forward to learning more about Jersey City’s property taxes as this series progresses. I hope you’ll join me in the dialog. Please stay tuned, ask questions, and challenge my logic if you feel it’s flawed or if I’m missing relevant nuance (please note: all published comments must adhere to my civic rules).
Data for this post will be available shortly on the Code for Jersey City (formerly known as Open JC) open data portal. Please stay tuned to Civic Parent on Facebook and/or Twitter for updates, or just message me directly (see email below).
- Census Data: 1990.
- US Census Data: 2013 (includes 2010 measures).
- Jersey City Public Schools Demographic Study, Volume I.
- Jersey City Press Release: Jan 15, 2015 (includes citations on new and approved construction in 2014).