This post made my head spin a bit … the math and timing is wonky and confusing. I’ve done my best to break it down and welcome dialog and feedback about anything that is unclear.
This past week, Jersey City’s municipal council passed its annual 2022 budget with a $112 million increase to the city levy. This action caps a year of change in Jersey City’s property tax landscape; school tax and city tax have both increased. Residents will see these increases in their tax bills, but what can make this somewhat confusing is that the rates are not approved until the second half of the year. Thus, not only is tax expense going up, but it’s also going up in a lump-sum manner in the third and fourth quarters. I wanted to write a post to demystify (for myself and others) some of what is happening on an annual and quarterly basis with the tax bills.
Citywide view of property tax expense
On a citywide basis, we can see big shifts from 2021 to 2022. Jersey City’s total tax levy(schools, county, city) increased from $636 million in 2021 to $863 million in 2022.
This increase is driven primarily by a $112 million increase to the city levy and a $116 million increase to the school levy.
An “average” home view
Now let’s zero in and look at how this levy change impacts the tax ex an individual home. I looked up an actual home in Jersey City’s tax payment system that was assessed for $461,000 (the citywide average). The system shows several years of historic data which is helps put this year’s tax hike into perspective. I should note, for the chart below, I computed the estimated 4th quarter 2022 tax expense (which is calculated using the updated levies and tax base data).
This homeowner will see their tax expense increase from $7390 in 2021 to $9,700 in 2022*. What’s more, most of the increases will be pushed through the third and fourth quarter tax bills.
I’ve run this updated math (including the latest city levy) through my visualization here if you want to check out your own tax expense.
Local government budgeting timelines drive tax expense flux throughout the year.
To understand the quarterly tax expense flux, we have to get grounded in the budgeting timelines for our three local governments. And, to ensure we’re all on the same page, I’ll note:
- Quarter 1 is January through March,
- Quarter 2 is April through June,
- Quarter 3 is July through September, and
- Quarter 4 is October through December.
1–The schools. The new school rate was passed in May (during Q2) and so the new rate took effect in the Q3 tax bills. The schools operate on a fiscal year starting on July 1 and state law mandates that they pass their draft fiscal year in March (so the July 1, 2022 – June 30, 2023 budget was passed in March 2022). Then, the draft levy goes to the county for review. The levy returns to the school board in April and the school board passes its final levy in early May at a special budget hearing. In this sense the schools are forced to budget ahead, but they are still passing their budget nearly midway through the calendar year and thus any increase in school tax change typically doesn’t take effect until Q3 (July 1 – Sep 30).
2–The county and city. The county passed its budget in July (Q3) so the new county rate likely took effect in Q3 tax bills. The city passed its budget in October (Q4) so the new city rate will take effect in Q4 tax bills. What’s more, the county and city operate on a calendar year basis but are granted latitude by the state to pass their calendar year budgets during that calendar year.
The Tax Rates
With this timeline in mind, let’s now look at when the new rates will take effect in 2022. We can see this in the tax payment data — using some basic tax math, we can back into the rates used each quarter. The new school tax rate is about 0.87% and the new city tax rate is about 0.82% (these rates are computed by dividing the new levy for each government into the 2022 tax base value).
As the tax rates get approved by each local government, they are used to compute property tax for residents, with two notable factors:
1) A new quarterly tax is computed using the new rate
2) A retroactive adjustment is made to compute prior quarters’ tax expense based on the new rate. Whatever was not charged in the prior quarters (due to a lower rate being in effect in those quarters) is added to the current quarter as a lumps sum adjustment.
Public reaction to the tax increases in Q3 and Q4
The school tax rate was the first to get passed and residents saw that impact in their Q3 tax bills. Mayor Fulop mailed taxpayers about that increase in June in which he blamed the board of education for the school levy hike.
Then in early July (during Q2), Hudson County quietly passed its annual 2022 budget with a slight rate decrease. The county did this by keeping its own levy the same as last year; with slight tax base growth, the rate actually decreased.
And what also began during July was the city’s annual budgeting process, which included city council committee hearings on the budget. I wrote about the city budget this past summer — you can find those articles here. Fast-forward several months to October 20, 2022, and the city finally approved its calendar year 2022 budget…and here is where things went a bit off the rails.
The city budget: red flag alert
A few observations around this year’s city budget:
- The budget was passed unusually late this year (10 months into the year); this is late even by Jersey City’s abnormally late standards.
- There was a “late uncovering” of $36 million of cash deficits which “wasted” hours and hours of the council’s time due to incorrect data.
- The revenue increases were needed to avoid furloughs or layoffs, per city officials.
- The budget includes $70 million of one-time federal “ARP” (American Rescue Plan) funding — this is essentially a one-time plug. There is no clear roadmap for the city funding its recurring, structural expense into the years ahead.
I’ve written about about Jersey City’s structurally imbalanced revenues; this 2022 tax hike bears that warning out. So I’m personally not surprised by the tax hike, but I am surprised by the late passing of the budget, the cash deficits, and the lack of communication around furloughs.
These are all red flags. The city’s longer-term fiscal position, the way the budgeting process is being managed by the administration, and the way the legislative checks and balances are (or rather are not) in place on the council side are all called into question.
Council members are now running for political cover; Council President Watterman blamed the city for a late budget and Ward E Councilman James Solomon penned an op-ed explaining his issues with both the budget and the process.
All of the political hand-wringing aside, there is no reason why the mayor or councilpersons cannot host town hall type sessions where they transparently explain the budget and what it pays for. Or, where they communicate some of these issues in a live format where Q&A can be afforded. I was part of a town hall in Montclair last year where this was modeled; it is doable but it requires competency, initiative, and enough respect for taxpayers to do meaningful outreach outside of political campaigns.
Explore on your own: find data about any property in Jersey City:
If you are interested in searching the public tax payments system for a particular record, you can do so using the “Block,” “Lot,” and “Qual”. These are the tax record datapoints that point to a particular address, with ‘block’ being the geographic block on the tax map, “lot” being a parcel of land within that block, and “qual” being a unit with a building if that building is multi-unit.
1–First, we need two public datasets:
a–Assessment Records Database – here you can find any tax record in Jersey City and, importantly, your property’s “Block” and “Lot” values (the value of the home that property tax is based on).
b–Jersey City Online Tax Payment System – here you can find your historic tax bill payments. This is a useful dataset but the city removed the “Address” from the search fields. However you can easily work around this by pulling the “Block” and “Lot” values from the tax record (above) and using those values as your search terms.
2–What will happen next is you’ll see your tax payments that stretch back to the 2017 timeframe. The data shows up on a webpage which you can copy/paste into a spreadsheet.
* Notes:
(1) The school levy is in the 2022-23 school board budget here (on page 12).
(2) The county levy is in the 2022 county budget here.(1)
(3) The city levy is in the 2022 city budget here (on page 43 or “Sheet 11”).
(4) The county levy is apportioned to each of Hudson County’s 11 municipalities; this detail is not in the budget. However, the county levy was unchanged from 2021 to 2022 so I assumed this year’s levy was the same as last year.
(5) Here’s how the tax expense math works for the average homeowner:
- In 2021 the total tax rate was 1.6%. $461K x 1.6% = $7,392
- In 2022 the total rate will be about 2.11%. $461K x 2.11% = $9726
- The 2022 total tax rate of 2.11% rate is based on the new local budgets for schools/county/city
- new school rate is 0.86%,
- new city rate will be about 0.82%, and
- new county rate is 0.43%
- The new rates are derived from the 2022 levies in each local budget divided by the 2022 tax base value. I previously wrote about the expected city hike here.
- The 2022 total tax rate of 2.11% rate is based on the new local budgets for schools/county/city
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