In this post I’m using 2 public datasets:
A: Jersey City’s 2022 Municipal Budget (Introduced) with proposed 2022 revenue and expense, located on the city website here.
B: Jersey City’s 2015-2021 Municipal Budget summaries compiled in NJ’s User Friendly Budget Database (Excel file downloadable here).
On June 15th, Jersey City released introduced its 2022 budget. I’ve reviewed that budget in tandem with historic budget data contained within NJ’s User Friendly Budget Database and wanted to share some key insights around revenues.
I will point readers back to my previous post regarding structural expense, because it ties into three key insights related to revenues:
1–the city property tax levy* increased by 45% from 2021 to 2022 and is the primary source of sustainable revenue;
2–abatement PILOT fee revenue, which eventually expires at varying points in time due to dozens of individual abatement contracts, is being used to fund 15% of the budget. What’s more, abatement PILOT fee revenue decreased by $11 million this year, indicative of its character as a “revenue at risk” per Sheet 4b of Jersey City’s 2021 User Friendly Budget; and
3–federal COVID-19 aid, is also expires in 2024 and is helping fund $70 million, or 10%, of the 2022 budget.
Taken together, these three insights point towards a more holistic budgetary picture that taxpayers should understand:
1–25% of the city budget – which consists of mostly structurally recurring “people cost” expense – is being funded by “special revenues” that will eventually expire;
2–as these “special revenues” expire, the city will fall back on the “funding of last resort” which is the city tax levy; and
3–if and when the city tax levy increases at a greater pace than the tax base (which this year it appears to be doing), then we can continue to expect rising tax rates, which in turn will increase tax expense for taxpayers.
Let’s break it down.
1–The total proposed budget is $695 million; of that, $325 million will be funded by city property tax and $170 million will be funded by abatement PILOT fees and COVID-19 aid.
Revenues in 2022 total $695 million. Of this, $325 million, or about 47%, will be funded by city property tax. The balance of the city budget – $370 million – would be funded by other sources, including abatement PILOT fees ($101 million), COVID19 federal aid ($70 million), state aid ($64 million), local revenues ($41 million), and more.
2 — City property tax is up 50% in 2022, from $224 million in 2021 to $325 million in 2022
The city tax levy is increasing by $100 million, from $224 million in 2021 to $325 million in 2022. This is a 45% one-year hike, but 2021 was actually an aberration when we look back multiple years. The city levy has been steadily increasing over the past 7 years, from $233 million in 2015 to $325 million in 2022, with the only decrease happening in 2021. We can see this longer trend line through NJ’s User Friendly Budget database, using 8 years of available data:
3 –“Special revenues” are also up but … they are ‘special’ in part because they don’t last forever.
Referring to the User Friendly Budget database again, we can see that from 2015-2022, Jersey City has relied on several different line items of revenue but two categories stand out:
- The city property tax (the green line)
- “Special Revenues” (the blue line) — this contains several key items including (a) COVID-19 aid and (b) abatement PILOT fees.
Let’s take peel back the layers on these two important Special Revenues:
a) COVID-19 aid — I wrote about COVID-19 aid last year so will refer readers back to that post and just highlight here:
- Jersey City was allocated $146 million in total ARP aid in 2021
- this aid expires in 2024,
- the city used $28 million in its final-approved budget last year (we can see that in the 2021 column of this year’s budget), and
- the city is proposing to use $70 million of that aid this year.
b) Abatement PILOT fees — I also wrote about abatement PILOT fees last year and you can read that post here. Worth highlighting here is that abatement PILOT fees are actually down this year by $11 million. Also worth noting: abatement PILOT fees have been a structurally important part of the city’s revenue picture for years … however:
- abatements expire per the duration established in the abatement contract — they typically last from 10 to 30 years;
- when the abatement expires, the property converts to conventionally tax-paying property…this means that property stops paying a PILOT fee to the city and instead starts to pay property tax which his split among the school, city, and county.
These special revenues are part of the city budget paradigm that taxpayers can ask city council about in an effort to understand: what’s the plan to transition away from COVID-19 and abatement PILOT fee revenue?
For those interested in the abatement PILOT fees, I’m including my dataset with the view pre-filtered for abatement data; you can further filter by wildcard term search:
How all this factors into tax bills
Let’s close the circle here with our tax bills. The city tax levy is used in tandem with the tax base to compute the key metric we need for our tax bills which is the city tax rate. So, let’s patiently walk through the math, and I’m going to emphasize here that this is a back of the envelope calculation on my part to help illustrate how the math works. For specific questions around your tax bills, you should be contacting the local tax office or your local elected council rep.
2021 City Tax Rate = City Tax Levy / Tax Base in 2021
- The 2021 City Tax Levy was $223,674,915. This can be sourced to the 2022 introduced budget here.
- The Oct 1, 2020 Tax Base was $37,995,411,969. This can be sourced to state data here.
- The 2021 city tax rate was thus $223M/$38B = 0.59%
2022 City Tax Rate = City Tax Levy / Tax Base in 2022
- The 2022 City Tax Levy is proposed at $324,685,761. This can be sourced to the 2022 introduced budget here.
- The Oct 1, 2021 Tax Base was $39,640,675,892. This can be sourced to state data here.
- The proposed 2022 city tax rate is thus $324M/$39B = 0.82%
Per state data here, the average home in Jersey City was assessed at $461,000 in 2021. Thus, the annual estimated increase in city tax expense for a $461,000 home can be computed as:
$461,000 x (0.82% – 0.59%) = $1,060 annual increase in city tax expense
Now, an important note: this is city tax expense only. The June 2022 Jersey City tax bill will show a tax increase that is inclusive of city, school, and county tax expense. I’m going to devote a separate post to breaking that next.
Here is the full dataset with filterable views.
It’s important to note here that behind much of any talk of city tax expense is related to supporting city employees who are serving the public. The roles they play, and how we support them as city employees, is part of the community dialog that should be occurring around the annual budgeting process.
In a separate post I’ll focus on what’s changing, revenues-wise. For now, check out the other posts in this series:
- Series Kickoff: the 2022 Municipal Budget
- Jersey City’s 2022 Municipal Budget: the Big Picture
- Jersey City’s 2022 Municipal Budget: a Focus on Structural Expense
And, check out my series from prior years:
* Important details around the property tax:
1) I’m bucketing library tax in with the larger “city property tax” line item. I’m doing this to simplify the visuals…I’ll point readers back to my category mapping that I referred to at the bottom of my “Big Picture” post
2) Arts and “green space” taxes do not show up on the standard budget file, thus are not visualized separately here.