Property Tax Rate Math: A Quick Breakdown

General Tax Rate = Total Levy / Tax Base.

February 25, 2018. I got a question recently about the tax rate as it relates to property taxes. It prompted me to write about the tax rate in a bit more detail to explain how the tax rate is changing, why it's changing, and what to expect in the coming months as the Revaluation unfolds. 

The NJ Division of Taxation explains the tax rate here and they show how the tax rate is used to compute your tax bill:

But how is the "General Tax Rate" computed? At its heart, the general tax rate (for property tax purposes) is a fairly simple formula:

General Tax Rate (%) = Total Levy / Tax Base

What's not so simple, however, is understanding what goes into the "Total Levy" and the "Tax Base".  Let's go over what these components are and how they could change - that in turn will inform how the tax rate could change in the months ahead.

The Numerator: "Total Levy" = City Levy + County Levy + School District Levy

The "Total Levy" is money raised to fund city, county, and school district services.  The total levy is not easy to find on the city, county, or school district websites. For instance - if you go to the Jersey City's website you'll find the city's total budget, within which you'll find the "amount to be raised by taxes" (this is the "city levy"), but you won't find the county or school district budgets at that site (see bottom of this post for more about how to find Jersey City's total levy). 

Fortunately, we can find compiled information about the total levy at NJ's Division of Local Government Services website, which reports that Jersey City's 2017 Total Levy to fund city, county, and school district services was $485,906,173. [Note that this amount does NOT include PILOT fees.] 

So Jersey City's 2017 tax rate numerator is: $485,906,173

The Denominator: The "Tax Base" = All Taxable Property in the Municipality

The tax base is the assessed value of all the taxable real estate in Jersey City. If you've attended my property tax/revaluation workshop or read up on what revaluation is, you know that Jersey City's assessed values are stuck in a 1988 paradigm and are, now, through revaluation, being updated to reflect 2018 market values.  

In 2017, Jersey City's Tax Base had an assessed value of $6,214,706,588. You can find this number in the NJ Division of Local Government Services report and also here, in Appraisal Systems' "Revaluation Update" that was shared with Jersey City taxpayers in December 2017. 

So Jersey City's 2017 tax rate denominator is: $6,214,706,588. But remember...this denominator is "stuck" in a 1988 paradigm...yet it was used to compute the tax rate in 2017.

Jersey City's 2017 Tax Rate (Actual)

So the tax rate in 2017 as our Numerator divided by our Denominator:

But with revaluation, this 1988 paradigm will change, which will update the general tax rate denominator, which will in turn update the tax rate as a whole.

2018 & Beyond: Property Revaluation Impact on the Tax Rate.

As the city's assessed values (stuck in 1988 paradigm) are updated to market value (a 2018 paradigm), the Tax Base assessed value will increase from $6,214,706,588 to about $29,900,576,900. It's important to note that this $29 billion assessed value is based on estimates compiled by Appraisal Systems as of December 2017.

But remember that with this new general tax rate, we are dealing with ESTIMATES, specifically: 

  • The Numerator: $485 million tax levy is based on *2017 spending*.
  • The Denominator: $29 billion valuation of the tax base is an *estimate*.  

So here's how and why the Tax Rate could change between now and July 2018 when the Revaluation process is finalized:

  • Possible Changes to the Total Levy (the Numerator). Each year we have inflationary increases to budgetary spending. For example, from 2016 to 2017, Jersey City's total levy increased 3.5%, from $469 million to $485 million. 
  • Possible Changes to the Tax Base (the Denominator). Successful appeals could drive the total assessed value of the Tax Base DOWN.   An appeal is a homeowner saying "my property isn't worth as much as the government thinks it is."  

It's also worth noting that abated property could expire from their abatement contracts which would have two notable impacts: (1) the properties would stop paying PILOT fees and start paying conventional taxes and (2) the assessed values of those properties would become part of the tax base.  How these two factors would impact the total levy (numerator) and tax base (denominator) would require a separate, detailed analysis so it's not clear if that would be positive, negative, or neutral to taxpayers. I mention it only because it's a factor to consider.

So as we move forward, just remember: the tax rate is not set in stone and will be finalized only by mid-2018 when the city, county, and school district budgets are finalized and when all appeals are finalized. The current 1.62% general tax rate is an estimate, but it's impacted by a few key components.  The more that we, as a community, understand these key components the better informed we'll be about possible tax rate change going forward. 

 

The "Total Levy" is money raised to fund city, county, and school district services.  The total levy is not easy to find on the city, county, or school district websites. For instance - if you go to the Jersey City's website you'll find the city's total budget, within which you'll find the "amount to be raised by taxes" (this is the "city levy"), but you won't find the county or school district budgets at that site. 

Where we can find this information more easily compiled is at NJ's Division of Local Government Services website. If you're familiar with Excel and/or hunting & pecking for civic-related data then this is not too arduous a process. But for anyone new to this topic, it's clunky and not very transparent or user-friendly. 

Understanding components of "the Total Levy" (click to enlarge in new browser window)

An Example: How to find the "levy" within the Jersey City's annual budget (click to enlarge in new browser window)

Leave a Comment