Two approaches to assessing property in 2024 (Jersey City & Monmouth County focus)

Consumers in 2024 are accustomed to modern technology automation (e.g., Netflix streaming, Chat GPT4, etc) but locals governments are slow to catch up. I share that contrast to frame the idea of property reassessments, which is the process of keeping assessed values (the value on your tax bill) updated, or in synch with, market values (the value your home may fetch if you were to put it on the market for resale next week). Maintaining property assessments is within the purview of local municipal government, and oftentimes the process around this task can be surprisingly antiquated, which has implications for taxpayers.

Property reassessment is important to understand if you want to have a grounding in property tax fairness. Here's why: without proactive assessment maintenance, the amount needed in property tax to fund the three local governments may not be apportioned fairly throughout the community.

Below, I will highlight two examples of how communities can assess property, using two examples: (1) updating assessments once every two or three decades (the Jersey City example) or (2) updating assessments annually (the Monmouth County example).

The basic frame: assessed vs. market value

If your home is subject to property tax, then you should know it has two values associated with it:

1. the market value (the value a realtor might estimate you could sell it for)
2. the assessed value (the value on record in the city tax office). You can find your assessed value on your tax postcard (mailed to you each January by your local city hall) or online (e.g. Hudson County's tax records are online here)

New Jersey's local property tax system is based on the premise that you should be taxed on the "true" market value of your home. We can see this mathematically represented in the property tax expense formula:

[Assessed Value] x [Tax Rate %] = [Your Tax Expense $]
where "Assessed Value" (the first factor) is supposed to be on par with market value

So if I own a $550,000 home, then my assessed value should be around $550,000, such that I will pay more property tax than a person with a home worth $200,000, but not as much property tax as someone with a home worth $1.3 million.

This all makes enough sense if assessed values are actually on par with market values; however, these two values can and do grow disconnected when municipal governments fail to keep an eye on the assessments and if they are growing too disconnected from market values. Jersey City is an extreme example that we'll briefly touch on next.

Case in point of the assessed-market value disconnect: Jersey City from 1988 to 2018

According to to this Jersey Journal article from April 2017, Jersey City has revalued its property only three times in the last 50 years, in:

• 1971
• 1988 - when the tax base was updated from $800 million to $5.6 billion (the ratio of assessed value to market value was 14%)
• 2018 - when the tax base was updated from $6.2 billion to $34 billion (the ratio of assessed value to market value was 18%)

New Jersey's handbook for assessors notes that a ratio of "85% or less may denote noncompliance" which gives context to how disruptive the 1988 and 2018 paradigms were in Jersey City, given the ratios in those years were 14% and 18%, respectively.

Letting assessed values "grow stale" over time can have negative consequences for homeowners which becomes clear when we zero down to a property-specific view. I wrote a post on Civic Parent in 2017 about tax inequity in Jersey City and showed a two-home comparison to illustrate the point, using two actual homes (with addresses redacted) to illustrate the inequity.

Jersey City's assessed values were old and completely disconnected from market values by 2017; it was as if the tax assessed values were frozen in time as if it was still 1988, prior to decades-long efforts to develop the Waterfront.  When, in 2018, the city finally revalued, the assessed values were finally updated, and we can see the sharp correction:

• The Downtown home's assessed value increased from $91K to $1.1 million
• The Greenville home's assessed value increased from $136K to $471K

I should note: municipal authorities have objective ways to determine when to revalue.  I shared a post in 2019 about using the equalization ratio as one such tool. I also laid some of this out in an open letter to City Council from 2020.

We can also visual the paradigm of 'assessed vs market' using 25 years of tax base data to illustrate the concept.  We can use the two tax base values (market value and assessed value) published by the NJ Department of Community Affairs here; the data spans from 1998 t0 2022.  I've visualized the market value as green and the assessed value as brown.

We can see in Jersey City that from 1998 (the earliest year of data on the NJ DCA site) to 2009, market values increased, then decreased after the 2008-09 financial crisis, then increased again from 2012-13 onward.  That is visible with the portion of the chart shaded in green. But then notice the brown shaded area, which represents the assessed values; it was stagnant, at about $6 billion from 1998 to 2018.

In 2018, the city finally conducted a citywide revaluation. It was the subject of much news and debate at the time. We can see the impact of the revaluation in the tax data; in 2018 the assessed value (the brown shaded area) increased and was updated to be about the same as total market value (the green value).

But notice that the only time assessed equals market (brown and green are about the same) is in that year of revaluation; otherwise, market value grows apart from assessed values, and that is where tax inequity can creep into the system. The large gaps of green above brown are where market appreciation may not be fairly apportioned into the tax bills via updated assessed values.

There are very real implications with this delaying of reassessment; some homeowners are overtaxed and others are undertaxed. Those who live in homes that are appreciating more rapidly (e.g. the Downtown home) end up subsidizing those who live in homes that are not experiencing such steep appreciation (e.g. the Greenville home). Until a correction occurs, which can be shocking when it finally happens.

I created a small analysis to show this per-home impact using the 2017 vs 2018 assessed values and the 2017 vs 2018 tax rates*:

We can see that harm resulted for both taxpayers in that:

• the Greenville taxpayer had been overtaxed for years but may not have realized it.
• the Downtown taxpayer saw a huge correction in 2018 and may not have seen it coming.

I have seen city officials write in response to this issue that 'taxpayers can appeal to have the assessed value lower" which is true, but this is putting the onus on individuals to achieve tax fairness.

Now let's look at an alternative approach being used in Monmouth County.

Now let's pivot to Monmouth County, where a new paradigm of assessment maintenance has been unfolding for a few years. The new paradigm is framed in a document called "The Assessment Demonstration Program Executive Summary" from 2019 which describes that towns in Monmouth County are updating assessments on an annual basis using updated technology and processes:

"Public Law 2013, Chapter 15, known as the Assessment Demonstration Program (ADP) is a collaborative system of property assessment between the County Board of Taxation and the locally deployed municipal assessors. The traditional revaluation model is now a relic of the past, replaced by annual reassessments to market value. By leveraging technology, increasing education standards; and utilizing advanced appraisal techniques, we are pleased to report a more cost-effective, accurate and transparent process of real property assessment. This document outlines the ADP’s use of technology and details the procedural and administrative reforms that have led to our success." (bold added by me for emphasis) - Monmouth County Tax Board of Taxation

To be clear: this document is asserting that what Jersey City (and many other towns and cities) is currently antiquated. I will defer to the document and the included data if you want to read more (it's an interesting read and chock full of data). But it's important to note the contrast being made.

There are 53 municipalities in Monmouth County but I chose three towns as examples:

1. Middletown: it has the biggest tax base in the county, valued at $13.7 billion in 2022
2. Colts Neck: its tax base is of average size within the county, valued at $3.5 billion in 2022
3. Shrewsbury Township: it has the smallest tax base in the county, valued at $66 million in 2022

We can see that for each of these towns, the assessed values (the brown shaded area) is tracking more closely to the market values (the green shaded area) in more recent years. This tracks with Monmouth County's ADP website which states that

"In 2013 the Assessment Demonstration Program, (P.L. 2013, c. 15) was signed into law for New Jersey. Monmouth County began implementation of this new program in 2014. The Assessors of 45 Monmouth County municipalities are participating in performing “annual reassessments” with the intent of increasing the accuracy of each individual assessment thereby making the system more transparent and reducing the costs associated with the appeal of inaccurate assessments."

Monmouth County's 2019 paper lays out many benefits to the annual approach to assessment including "tax distribution is on average 36% more accurate (see page 31-32)" and "Moody’s Investors Service featured the ADP in both 2014 & 2017 for appeal reductions and reassessment frequency and noted, “Fairness has surprising impact on credit quality” (see page 41)".

I would add one additional benefit to Monmouth County's more proactive approach to assessment maintenance: taxpayers are proactively updated with new assessments each year, creating a "trigger" effect to force some awareness around the assessment. This is in contrast to the other approach, used by Jersey City and other municipalities, that lets years go by between updates to the tax records. Taxpayers can be lulled into a sense of complacency when, in fact, they may be sliding into overtaxation without realizing it.

A final important note is that all of this requires resources and investment. A typical citywide revaluation like the one conducted by Jersey City may cost in the millions of dollars. The ADP program in Monmouth County would need to be implemented in a city that does not currently use it, which presumably would require setup costs; the 2019 ADP Executive Summary does note the cost savings once the system is up and running.

Local elected can and should help drive awareness and this time of year is an appropriate time to do that, given that tax appeals are coming due. For example, in Hudson County, the due date is typically April 1st (see page 6 of this document for details).

This is a complicated topic but it is important to unpack a bit of the nuance as a starting point, and then research further to learn more. I am sharing below some resources that I have used to help inform this post, in case it's helpful for further reading.

Notes

* For my 2-home analysis above, I want to note:

• For my 2017 post, I used two homes (one in Greenville and one in Downtown Jersey City) that met the criteria for over- and under-assessment, respectively. In that 2017 post, I redacted the address information but otherwise relied on public data for assessments and 2017 tax rates.
• For the table above, I revisited these same homes and pulled the 2017 and 2018 assessments from the public data. I also used the public tax rates.
• The tax expense formula is computed as assessed value times tax rate.

Sources:

1. Assessment Records Search. “NJ Assessment Records Search.” Government Website. Accessed March 19, 2024. https://tax1.co.monmouth.nj.us/cgi-bin/prc6.cgi?district=0901&ms_user=ctb09.
2. Clark, Matthew, Aguiar, Erick, and Worth, Alex J. “The Assessment Demonstration Program Executive Summary:” Monmouth County Board of Taxation, 2019. https://www.co.monmouth.nj.us/documents/18/2019_ADP1.pdf.
3. D’Souza, Brigid. “NJ Property Tax Dataset, Visualized for 1998 through 2022 (CivicParent Work Paper).” Civic Parent, February 23, 2024. https://civicparent.org/2024/02/23/nj-property-tax-dataset-visualized-for-1998-through-2022-civicparent-workpaper/.
4. D’Souza, Brigid. “Updated: Jersey City Abatements from 2016 User Friendly Budget. Mapped by Project Type & Ward.” Civic Parent, March 16, 2018. https://civicparent.org/2018/03/16/updated-jersey-city-abatements-from-2016-user-friendly-budget-mapped-by-project-type-ward/.
5. D’Souza, Brigid. “Why Property Revaluation Is a Social Justice Imperative in Jersey City.” Civic Parent, December 1, 2017. https://civicparent.org/2017/12/01/why-property-revaluation-was-a-social-justice-imperative-in-jersey-city/.
6. D’Souza, Brigid. “Why Property Revaluation Is a Social Justice Imperative in Jersey City.” Civic Parent, December 1, 2017. https://civicparent.org/2017/12/01/why-property-revaluation-was-a-social-justice-imperative-in-jersey-city/.
7. “Hudson County Board of Taxation Tax Appeal Filing Packet.” Hudson County Board of Taxation, n.d. https://secure.njappealonline.com/prodappeals/help/Hudson_InstructionsHandbook.pdf.
8. “Monmouth County Tax Board Tax Board Home.” Accessed March 19, 2024. https://www.visitmonmouth.com/page.aspx?ID=134.
9. “New Jersey Department of Community Affairs (DCA) | Property Tax Information.” Accessed February 18, 2024. https://www.nj.gov/dca/dlgs/Property_Tax_info.shtml
10. “NJ Division of Taxation - General Property Tax Information.” Accessed March 19, 2024. https://www.nj.gov/treasury/taxation/lpt/genlpt.shtml
11. “Property Revaluations in New Jersey -- What Is Really Going On?” November 11, 2016. https://www.nj.com/stark_stark/2016/11/property_revaluations_in_new_j.html.
12. “Tax Board Assessment Demonstration Program.” Accessed March 19, 2024. https://www.visitmonmouth.com/Page.aspx?Id=4246.