TAX NEWS - 2010

Central Jersey Tax: Locals wary of tax cap plan

Some local officials are wary of a plan proposed by Gov. Chris Christie that could come before voters in November to pass a constitutional amendment to cap property tax increases to no more than 2.5 percent a year.

Those who oppose the plan said it would lead to large cuts in services and could also mean layoffs for municipal and school employees.

Supporters of the plan said it would allow New Jersey residents to control escalating property taxes in the state.

"Such a cap will establish fiscal discipline on every level of government in New Jersey," said Community Affairs Commissioner Lori Grifa in an op-ed distributed to New Jersey newspapers. "With Cap 2.5, if a municipality, county or school district wanted to raise property taxes higher than 2.5 percent, they would have to put it on the ballot and let voters decide."

Ms. Grifa said the plan would encourage local governments to find waste, abuse and inefficiencies in operations. The cap would permit adjustments in the event a municipality adds new tax ratables. Local governing bodies that do not spend the full amount allowed under the levy cap would be allowed to bank the extra levy and use it in subsequent years.

South Brunswick Mayor Frank Gambatese said the plan would further exacerbate the existing budgetary problems facing towns throughout New Jersey.

"It boggles my mind how the governor can constantly place blame on the towns for problems the state created in the first place," Mayor Gambatese said. "We have to struggle to put together a budget with the $1.5 million in state aid that he took from us. To reduce our budget by $1.5 million means cutting 15 to 20 employees so we can't keep up with the services we're providing. People aren't going to go out and vote to give themselves a tax increase, so this is an easy solution from the governor's chair but it's not easy for the towns."

South Brunswick Board of Education President Matthew Speesler said he wouldn't have a problem with the cap if school budgets weren't voted on and the cap was just set at 2.5 percent. He said if voters were to reject a plan that comes in under the 2.5 percent cap then it puts the district in a difficult position to provide what the state considers a thorough education.

"This would put a constraint on districts because the money has to come from someplace and we keep looking to taxpayers," Dr. Speesler said. "Our fixed costs keep going up as we look for ways to limit what we cut. New Jersey needs to change the way we fund education where we look to property owners for the funding."

Monroe Mayor Richard Pucci said there has yet to be concrete analysis of what kind of impact Cap 2.5 would have in the future and he said he believes it would make the problem worse.

"I've seen no analysis released about how this is going to impact the average homeowner," Mayor Pucci said. "If that 2.5 percent cap is put into place and you look at the declining ratable base situation, which is going nowhere, and project this over 10 years then I believe property taxes will go up 25 to 35 percent over the next decade. And all those people who were told they would get homestead rebates ended up getting nothing so if anyone can explain to me on paper how that's reducing property taxes then I'd like to see it."

Jamesburg Mayor Anthony LaMantia said the cap would eventually begin to cut the services municipalities are able to provide residents.

"In theory the cap is a good idea if the governor can turn around and stop every other cost from going up more than 2.5 percent," Mayor LaMantia said. "When you look at insurance costs, which can go up 10 to 20 percent in a year, if those costs go up eventually you're going to go broke. The cap is going to stop municipalities from giving adequate services to residents."

Cranbury Committeeman Win Cody said the cap wouldn't have much effect in his town because Cranbury receives little in state aid already.

"I think the cap would be a good way to help maintain taxes and growth overall and it shouldn't really impact us or our services," he said. "What I like about it is that it means voters have a choice to increase the taxes more if it's needed. But where it could impact us is if inflation goes crazy then the cap would hurt things, but I believe there would be some relief in the toolkit the governor is proposing."

As part of the reform package Gov. Christie is proposing, arbitrators in collective bargaining disputes would be prohibited from awarding benefit and salary increases to public workers of more than 2.5 percent a year. The proposal would also allow local governments to opt out of civil service so mayors can run towns more like a business, according to Ms. Grifa.

Local governments would also have the ability to negotiate with the private sector to offer benefit options that could lower government costs and give workers the chance to pick a health plan that best suits them, Ms. Grifa said. Public workers would also be required to contribute 1.5 percent of their salary to their health benefits.

State Assemblywoman Linda Greenstein, a Democrat who represents Cranbury, Jamesburg, Monroe and South Brunswick, said examples from other states that instituted a hard cap leave her wary of the proposal.

"When California instituted a hard cap social services and school systems there went downhill rapidly which is obviously nothing we want to emulate," she said. "People keep talking about the hard cap that was put into place in Massachusetts and there has been a large amount of misinformation as to how successful that has been because there is all kinds of data that the cap caused problems there. When we think about doing something like this we need to look long and hard at the places that used it and make sure it's not going to cause more problems."

State Sen. Tom Goodwin, a Republican who represents the same district, said there must be a lot of questions asked by both sides when considering the cap. He said municipalities are struggling to deal with declining revenues and increased expenses and he wants to see how the cap would effect those existing problems.

"I want to see how the cap works in practice because unfunded mandates keep adding costs to municipalities and school boards and they need relief on those," he said. "We need to try and rein in costs while aggressively attacking these unfunded mandates because everybody is faced with declining revenues and increased expenses and we can't keep having the taxpayer make up the difference. There will be discussion on this proposal and I'm looking forward to hearing what both sides have to say, from the local level up to the governor."