NJ School Funding Basics: The Tax Base

This is part of series about school funding, property tax, and community in Jersey City. I'm learning about Jersey City's tax base, tax levies, and property tax profile so that I can better understand our school funding paradigm. I'm sharing with the community, through this platform, as I learn. To read see the full series, click here

Property taxes are the primary means of funding our local schools. Therefore, to able to understand, dialog, debate, and advocate for fair local funding of our public schools, we must have a clear, fact-based, and data-driven understanding of our property taxes. That includes two key pieces of information: a) the "tax base" and b) the "tax levy".  The subject of this "201" post will be the tax base.  The subject of the "202" post in this series will be the tax levy. And in post "203" of this series, I'll bring these two concepts together around the concept of tax "rates".

In this series, I'll be diving specifically into Jersey City's school funding, but I'll be providing data for the entire state, so that readers can compare and contrast different towns and cities. Understanding our city in context with the rest of the state is critically important because our schools are so heavily dependent on state aid, which is a bucket of funding that is distributed to school districts throughout NJ.

So, for example, for state aid purposes...what happens in Freehold Boro, Bridgewater, Cherry Hill, or Newark does actually impact what happens in Jersey City, and vice versa.

Taxable property is "the Tax Base"

Jersey City's 2018 Tax Base was valued at $34 billion.

The Tax Base is...Most of Us.

Let's start off with what most of us are familiar with: our own property. It's worth a certain amount of money, which is known as market value, which we can typically find out from a realtor. Market value is supposed to equal assessed value, meaning you should see your market value on your tax bill (if you don't see market value on your tax bill, then you may be over- or under-assessed).

When we add up all of our taxable properties, i.e. all our homes, all the business property, and so on, it all sums up to the value of our city's "tax base".

 

The Tax Base is revalued each year.

In 2017, Jersey City's tax base was valued at $28 billion; this was an estimate, based on home sales in that year.  In 2018, Jersey City conducted its first citywide revaluation in 30 years, and the tax base was valued, more precisely than the previous year, at $34.6 billion, which represented a $6 billion increase over 2017  (you can find the tax base values in the city's User Friendly Budgets here).

Each year, the tax base is revalued for tax purposes. Generally, this revaluation is estimated using an in-depth process based on home sales.  But periodically, a citywide revaluation is conducted and the revaluation is based on an actual assessment of all the real estate in the city (as is the case for Jersey City in 2018).

 

The Tax Base is open, public data

Tax Base details are published on city & state websites

There are two primary locations to learn about the tax base, and this applies for any municipality in NJ, including Jersey City.

Source 1: The User Friendly Budget. This is a variation of the typical budget document that municipalities are required to submit to the state each year as part of the budgeting and reporting process. The budget is called "user friendly" because it contains more detail and specificity than the long-form budget that is also available on the city website.  Tax base data is accounted for in the "UFB-5 Tax Assessments" tab of the User Friendly Budget.  The User Friendly Budget was put into place in 2015 as part of a GASB (Government Accounting Standards Board) update that I wrote about here.  You can access Jersey City's User Friendly Budget via MS Excel download at this link, which is located on the "Financial Reports" page of the city website.

Click on image to view in new tab.

 

Source 2. The NJ Division of Local Government Services "Property Tax Information" page. NJ provides property tax data in annual spreadsheet (e.g. .CSV, MS Excel files) for years as far back as 1998. The site is updated annually with new files that are added to the existing list of files. You can access that link here.

The Tax Base is *not* the entire city.

Taxable properties are the Tax Base. Tax-Exempt properties are excluded.

The User Friendly Budget shows us what property types make up the Tax Base

Recall the "Monopoly Board City" example above, and how we had three different types of property: your home on Pacific Ave, the Boardwalk where you go to have fun, and the public Jail. Recall that only your home and the Boardwalk pay property tax; the Jail, however, is tax-exempt property.

The User Friendly Budget shows this break-out, but in a real-world, annualized view. Refer to the picture above (it's from the 2018 UFB which is available on the city's website). We can see that in 2018 in Jersey City, there were:

1) 52,390 taxable properties worth $34 billion
2) 9,807 tax-exempt properties worth $20 billion.

We can further break out these taxable and tax-exempt properties, by using the categories provided in the User Friendly Budget. For instance:

(1) Taxable Properties (The Tax Base)

We can see from the User Friendly Budget's "Taxable Property" summary that:

1) Nearly 50% of the tax base is comprised of residential property. There are 37,021 "parcels" of residential land valued at $16 billion (a "parcel" is a combined "Block" & "Lot" identifier, which every tax record contains).
2) Over 25% of the tax base is comprised of commercial property. This property is valued at $9 billion.
3) And 11% of the tax base is comprised of apartments. This property is valued at $3.8 billion.

Each of these property types are defined and tracked by the government. You can learn about this process using the NJ Assessor's Handbook, a technical guide published each year by the state. The Handbook is intended for assessors but it's impressively readable for taxpayers, i.e. much of it is written in plain English.

(2) Tax-Exempt Properties (NOT the Tax Base)

We can see from the User Friendly Budget's "Exempt Property" summary that:

1) Nearly 60% of tax-exempt property is classified as "Other Exempt...these are mostly abatements. This real estate is valued at nearly $12 billion in 2018. An important note: while abatements are tax-exempt, they do pay payments in lieu of taxes (PILOTs), which are fees that go directly to the city, but are not shared with the Schools (more on that later in this series).
2) About 27% of tax-exempt property is public buildings, which is City Hall, the Court House, and so on. These are government buildings used for the public good and are valued at $5.4 billion.
3) And about 6% of tax-exempt property are public schools. These are valued at nearly $1.3 billion.

What's a "Parcel"? How do we learn more about these property types?

The terms "parcel" and "block" and "lot" are key terms used by the tax assessor to define and value our real estate.  An excellent resource to understand these terms, and how they are used, and the assessing process in general, is The NJ Assessor's Handbook located here.

Jersey City has the largest tax base in NJ

Jersey City's tax base was revalued in 2018 at $34 billion.

Jersey City is the largest tax base in the state...by far.

In 2018, Jersey City underwent the first citywide revaluation in 30 years. The 2018 value, as I noted above, was $34 billion. This is the biggest tax base in the state. But how does Jersey City compare, dollar-for-dollar, with other municipalities in NJ? To compare Jersey City's tax base with other municipalities, we must (for now) look back at 2017 data (because 2018 statewide data is not yet available).

In 2017, the five largest tax bases in NJ were:

1-Jersey City ($28 billion)*
2-Hoboken ($16 billion)
3-Edison ($16 billion)
4-Newark ($16 billion)
5-Toms River ($15 billion)

To see all the 2017 tax base values in the entire state, you can refer to the "#OpenData" section below, which contains a chart I created based on state tax data from the Division of Local Government Services (source #2 noted above).

*Jersey City's tax base grew from $28 billion in 2017 to $34 billion in 2018.

#OpenData: Dig in!

The table below can be sorted & filtered - take it for a drive.

To see all the 2017 tax base values in the entire state, you can refer to the chart below, which I created based on state tax data from the Division of Local Government Services (source #2 noted above). I uploaded it into Tableau to give readers the ability to sort by tax base value, or drill into a County or Municipality of interest to you.  [Note: the data is not inflation-adjusted; it's a direct report-out from what the state publishes here.]

 

Tax Base & School Funding - the Critical Connection

The Tax Base is the primary source of local school funding.

The Tax Base & School Funding are connected by...the school tax levy.

The tax base is what funds the local school tax levy. Because the tax base funds the local school tax levy, the importance of the tax base to this discussion of school funding cannot be overstated.

I'll write more about the tax levy, and then the tax rate, in my upcoming posts (links will be available once they are published):

"School Funding & Property Tax 202: The School Tax Levy"
"School Funding & Property Tax 203: The School Tax Rate"

For now, hopefully this provides a baseline understanding of the tax base; what it is, where we can learn more about it using public data, and how Jersey City compares with the rest of the state.

If you have questions or comments, please leave them below (all comments are moderated and will be published once approved).

Additional Reading:

Posted in Advocate, JCPS Funding Crisis, Property Taxes, Public Data FAQ, Schools.

One Comment

  1. Pingback: School Funding & Property Tax 201: The School Tax Levy – Civic Parent

Leave a Reply

Your email address will not be published. Required fields are marked *