Yesterday, Jersey City taxpayers received initial news that the 2021 municipal budget would “cut taxes for Jersey City residents by an average reduction of $967 a year for every household.” The city’s press release is here, currently the only primary information we have (the actual budget file – typically 50+ pages and loaded onto the city’s finance page, is not yet available).
I generally don’t pay much attention to press releases, but this one was interesting mostly because of what it may suggest about the city levy. More to come as more details are released by the city, but for now:
1) A note on the word “average” here in tandem with a $967 tax expense reduction. The city doesn’t explicitly quantify the “home average” but it’s probably similar to what the Board of Education does, which is pull the 2020 average assessed value from public tax data (the average assessed value is about $452,000 per state data here) and the tax savings for that $452K valued home is what is cited in the press release. So, if your assessed value is above or below this $452K value, then your estimated tax savings would be higher or lower, respectively.
2) Something to dig into once the budget is released: what are the buckets of revenues being used to fund that bottom line “$620 million” number cited in the press release? I’m curious what, and how much, those buckets are. For context, our city budget is funded each year by various sources including (a) local revenues (like parking fees, pet licenses, etc), (b) PILOT revenues (Jersey City is unique in how much of PILOT revenue we rely on), (c) state aid, and (d) the city levy.
3) Federal aid is easing pressure on taxpayers — that means easing pressure on the city levy. A “levy” is just the amount of a budget funded by tax. The “levy” is also known as “funding of last resort,” meaning the city uses up all other sources (e.g. parking fees, PILOT fees, state aid), and then the levy is like a plug that is backed into to pay the remaining balance of expense. This year, the federal aid is (as intended) easing pressure on that levy “plug.” The city explicitly names this in the $69 million in expected revenue from the American Rescue Plan (federal aid).
4) Related to above, and this is what I find most interesting: the city levy may decrease this year. I say “may” because the levy wasn’t explicitly named in the press release and we don’t have the public data to confirm. And I hesitate to assume too much when the data will likely be released within the next week or two. But here’s why I say it may decrease:
- for city tax expense to decrease, then the city tax rate must be decreasing.
And the city tax rate changes based on 2 factors:
- if the city levy decreases and/or
- if the tax base increases
Reminder: the tax rate is basically numerator-denominator math (ie tax rate = tax levy / tax base). We know the tax base grew last year (state data tells us that here) but for such a large tax reduction (-$967 per average household), I am assuming the city levy (numerator) may also have decreased.
5) If (again IF) the city decreases its levy this year then that’s a big deal … particularly given this year’s increased school levy. For years, the city levy has consumed the largest share of “tax pie” … we each pay property tax, and our bills fund all three local governments: public schools, city, and county services. We can see in the NJ Department of Community Affairs data above (published in 2021) that municipal tax consumed about 45% of the “property tax pie.” I should note: I’ve shared similar visualizations on CivicParent, but this is an example from state data (you can download the Excel file here):
The levy data is listed in the chart above, upper left (under the label “Total Property Taxes”). The “Property Tax Shares” is then showing the percent of total for those numbers. If the city levy is decreasing, then we should expect to see a reapportionment of the slices of “pie” — the blue city slice, the red school slice, and the orange county slice. Just things to keep an eye out for when the city budget is in fact released.
More to come.
There is so much more to unpack here. Questions abound. For now, if you’re interested, check out my landing page for the Jersey City Municipal Budget here (I’ll be adding to this as the budget season unfolds) and these other public documents:
- Jersey City Municipal Budget – Insights & Analysis (CivicParent landing page)
- Jersey City’s 2020 Adopted Budget (regular budget file)
- Jersey City’s 2020 Adopted User Friendly Budget (contains additional insights and nuance not available in regular budget file)
- NJ Department of Community Affairs landing page with historic property tax data
- Jersey City Public Schools 2021 Schools Budget – Approved May 2021