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Gerardryan
| | Posted on Thursday, February 1, 2001 - 10:32 pm: |     |
At this morning's Township Committee meeting I reported on my analysis of the Revaluation Relief Act and how it might apply to Maplewood. Vic asked me to post the analysis here and to repeat it at next Tuesday's meeting.
The quick summary is that it looks like the Revaluation Relief Act won't work here and can't be applied. I'll give my analysis as to why I think that's the case. If you can see any flaws in the analysis or have any suggestions then please post 'em. The TC is pursuing other avenues with our state legislators, and will report when we have any news on that front.
For the rest of the mail I'll use "the act" as a shorthand for "the revaluation relief act of 1993".
The act allows towns to provide tax abatements for three years for anyone whose property value increased by more than the average increase of assessed value in the town. In our case that's anyone whose property increased by more than a factor of 3.71.
The law calculates a number that turns out to be the difference between
(new assessment * 2.75%)
and
(old assessment * 10.22%)
or the "change" column in my spreadsheets. (The law states the formula differently but if you do the math, the number's the same).
The act then gives a 60% abatement in the first year after a reval is in effect, with smaller numbers for the two years after that.
I calculate that the act would apply to 3295 homes in Maplewood, and would provide a total of about $3.551 million in abatements.
But where does that abatement money come from?
I thought that we could somehow reduce the tax decrease for some to fund the abatement for others. Whatever your opinion of that option, it's not a legal one. There's no such thing as what would amount to a "reverse abatement" for some property owners... there's no way in the law that we could force some folks to pay more tax than their assessment would indicate.
The only option to fund the abatements would be to add the abatements to the total amount to be collected by taxes. Using the 2000 taxes as a basis for comparison, that would make the new rate 2.93%.
In the table below I show different scenarios: every elegible property, only those with $2400 or more in annual increase, only those with $3600 or more, and only those with $4800 or more. In each case I show the total cost of the abatement, the number of properties receiving that abatement, and how the tax rate would change from the 2.75% base.
| | | Cost | Properties | New rate | | All | $ 3,550,733.10 | 3295 | 2.93% | | $2400 change | $ 1,931,002.20 | 825 | 2.85% | | $3600 change | $ 1,118,875.66 | 369 | 2.81% | | $4800 change | $ 493,107.48 | 115 | 2.78% | |
As you might realize this creates a couple of problems:
1. everyone's tax burden increases, including those receiving the abatement (the net effect of the abatement is thus not as large for the property).
2. a situation is created where some number of folks receiving the abatement end up paying less taxes net than some folks not entitled to the abatement
A personal example with one scenario will make this clear, though the situation that the example illustrates applies for any possible application of the act.
Assume we provide revaluation relief only for those whose taxes are increasing by more than $4800. That applies to my house. My taxes at the 2.75% rate are $14916.70. The "change" of $6066.18 means I'd get an abatement of $3639.71 in the first year that the act is applied. To pay for the abatement, apply the rate of 2.78%. My taxes are then $15046.66 minus the $3639.71 abatement, or $11406.95. Committeeman Liebman, whose "change" is $2902, isn't entitled to the abatement in this scenario, so his taxes are $11484.22... or $77.27 more than mine.
This kind of situation plays itself out no matter what scenario you construct for use of the act. Wherever you draw the line, there will be people "above the line" whose net taxes are lower than those "below the line".
This MIGHT be legal, but it certainly doesn't sound fair to me.
I conclude that the act is useless to us, and that other avenues must be explored.
Jerry Ryan |
Jln
| | Posted on Friday, February 2, 2001 - 1:04 am: | |
Jerry,
One detail and then a larger point:
The detail: my reading of the Act allows for an 80% abatement in the year of the reval, then phasing down over three ensuing years to 60, 40, 20 and then 0 relief in the 5th year. I'm not sure from your posting whether your reading of the Act is the same.
The larger point: Though I haven't checked your math,intuitively I think your analysis is correct. Another way to structure relief would simply be to phase in the new valuations for everybody over some period of time. That of course would raise a similar problem of delaying the tax decreases for some individuals to offset the delay of increases for others. It certainly could be argued that there is an element of unfairness in that. As I stated publicly at the town meeting the notion of fairness is very elusive. Thus for some individuals, particularly senior citizens who face shocking, abrupt increases in taxes, this may be a crushing blow, and there is an element of unfairness in that situation as well. In my prior comments to the TC, I admitted that the Act, as written, presents real difficulties, but it is clear to me that the state intended to provide relief in exactly this situation. Thus I hope the Township Committee is working with the State to explore other possible solutions. For example, for senior citizens with a lot of equity in their homes, but little cash flow flexibility, some sort of state subsidized low interest reverse mortgage program might be considered. The goal here is to allow individuals sufficient time to make necessary adjustments in their lives without having to take precipitous action. Such precipitous action will throw many houses onto the market in a short period and will totally destabilize the market, which won't be good for anybody. |
Aruba18
| | Posted on Friday, February 2, 2001 - 4:39 am: | |
Jerry-do you realize what you posted on 01/24/01? You posted info about Certified and how they were supposed to carry out their work, specifically, look back at #7 which reads,"Notify all property owners, sharing the details used to assess their properties"- - Somehow, looking at all that has transpired and having heard from the TC and many other property owners, I know that it is time for the TC to finally admit that Certified ABYSSMALLY failed to carry out their mission as it was laid out by the TC, and that the residents of Maplewood are NOT RESPONSIBLE for their failures, nor should we have to live with their mistakes and flawed processes. If you are truly concerned about restoring the credibility of the TC, NOW IS YOUR CHANCE!! PROVE TO THE RESIDENTS THAT THE TC IS TRULY CONCERNED ABOUT THE POPULACE OF OUR TOWN, AND JUST MAYBE, THE PRESENT TC WON'T BE VOTED OUT OF OFFICE IN THE VERY NEAR FUTURE. |
Gerardryan
| | Posted on Friday, February 2, 2001 - 7:49 am: | |
Aruba18: STOP SHOUTING I CAN HEAR YOU JUST FINE.
I suppose that the only way this can be "proven" to you is "reject and redo"?
Tell me how to prove it. |
Gerardryan
| | Posted on Friday, February 2, 2001 - 7:52 am: | |
Jim: The law was amended down to three years according to what I have from Westlaw.
Right now the act is the only existing mechanism to "phase in a reval". We're working with the legislative delegation to find some alternate solution. |
Waynecaviness
| | Posted on Friday, February 2, 2001 - 9:16 am: | |
Jerry,
On another thread, it has been reported that Millburn has completed a reval but has decided to hold off putting it on the books until 2002.
How does that reconcile with our efforts to utilize the "Relief Act", consult with the state, etc. In other words, how can Millburn, assuming the reported accounts are factual, unilaterally decide to hold off implementing their revaluation and Maplewood can't? (Note that I don't think we should; if at all possible, it should proceed.) The difference between Millburn's actions and Maplewoods actions seem strikingly different even though apparently in the same general circumstances.
Not trying to be argumentative, but really, how does this square? Inquiring mindlets want to know! |
Gerardryan
| | Posted on Friday, February 2, 2001 - 9:35 am: | |
Wayne: Assuming that the reported actions are factual, I cannot explain Millburn's actions, either from a legal or a moral standpoint.
I understand that they hired their own full time assessor's firm to do the work; I don't know what questions they had about their results.
I understand that they have not told residents anything about the numbers, which seems wrong to me, somehow.
If you lived in Millburn and were over taxed or under taxed, wouldn't you want to know? Wouldn't you want to see the numbers? Wouldn't fairness dictate that you should? Wouldn't it be wrong to withhold such information?
If I were a Millburn homeowner, I would want to know :-). |
Waynecaviness
| | Posted on Friday, February 2, 2001 - 9:58 am: | |
Jerry,
Thanks for prompt response!
Absolutely! If I lived in Millburn, I absolutely would want to know! |
Mtierney
| | Posted on Friday, February 2, 2001 - 11:59 am: | |
My friend in Millburn told me about Millburn's actions (I purchased The Item and quoted the assessor in another thread). She said the town was not releasing its reval which its fulltime tax assessor completed in November because the numbers are not final. Millburn concluded that the real estate bubble in 2000 was not to be counted on. Millburn sees clearly a softening of the real estate market and has chosen to give the market time to readjust. Nothing was said about finding fault with methods - the crazy market was the main problem. Of course, Maplewood choses to run rough shod over that issue. Oh, Mr. Ryan, you are undoubtedly a wizard with numbers, but are you a lawyer too? I think we need some big legal brains to interpret that Act. |
Gerardryan
| | Posted on Friday, February 2, 2001 - 12:03 pm: | |
Mtierney: no I'm not a lawyer, but the Township Attorney is, and he's done his own analysis as well. It matches mine, thanks very much.
Are you a lawyer? or a wiz with numbers? Do you have any comments on either part of the analysis of this issue?
And can you comment on my note to Wayne, above? If you were in Millburn, would you be happy about having numbers kept from you by your government? |
Mtierney
| | Posted on Friday, February 2, 2001 - 12:17 pm: | |
Absolutely! If I believed my township people were working for me by exhibiting caution and had my best interests at heart. (see my comments on the Millburn thread). Truly, I have trouble balancing my wallet, so in answer to your question, no,I am neither a math wiz or a lawyer. I do know the value of a second opinion, however. I think a system in which a lot of people have to be hurt in order for relief to be felt by another group of people will do more to destroy this town than anything else. How can that be right? There has to be a more equitable way to go. |
Lisat
| | Posted on Friday, February 2, 2001 - 12:22 pm: | |
Jerry,
I wouldn't want to see the numbers, if the numbers were wrong. And I wouldn't want erroneous numbers to be spread throughout the town. Whether purposely or because of incompetence, Certified did a lousy job. And we'll never know whether some people's homes were undervalued because they won't come forward if they were.
I think Millburn has handled their revaluation decision morally and responsibly. Economists are in the midst of arguing publically whether we are in a recession now, or whether it is around the corner. The 'boom' market is wimpering quite a bit. For Millburn to have put off the reval for one year to see what happens with the market is the right thing to do.
People are acting as though there is only one way to apportion taxes, and that there is only one way to look at the value of property, i.e., fixed/real market. There are different ways of doing it based on one's beliefs about fairness. Millburn's decision is evidence that there is more than one way to do this.
I believe there has to be a reval. I believe we all should pay our fair share of taxes. I am not sure, myself, what 'fair' means in this case. My understanding is that it meant something different in 1981 (partially based on the idea that everyone in the town used the same services and should pay similarly for those services). Am I wrong about this? I'm not saying that is the fair way of doing it, but we might want to keep an element of that. Perhaps everyone starts off with taxes of $1500 because of the services available to all. There is more elbow room and bias in the numbers than has been talked about openly.
I've already had an elderly gentleman offer to sell his home to me for $250,000 less than the assessed value because he wants to get out of here before the axe drops and all the other giant homes go on the market. Another elderly gentleman up the street has found a home and is planning his move. Wait 'til Spring. Not only are you forcing these Senior Citizens out of their homes (which I assure you will shorten some of their lives), but you are doing so in a way that will also reduce the value of their homes just as they are trying to make their escape.
I don't question the morality of Millburn's decision. Not only is it moral, it's compassionate and smart. |
Lisat
| | Posted on Friday, February 2, 2001 - 12:31 pm: | |
Oh, by the way, when he offered me his home for 250K less, I said, "I can't pay 16K in taxes." He said, take the sale price to the county and they'll lower the taxes. If this is true, and if this winds up being the scenario that's repeated throughout the town, I question the morality of the TC. |
Lseltzer
| | Posted on Friday, February 2, 2001 - 12:55 pm: | |
It's worth pointing out that witholding the numbers in our case would be to cover up the fact that large numbers of homeowners have been overpaying by thousands of dollars for many years. I think "criminal" would be a good word to describe that. |
Ffof
| | Posted on Friday, February 2, 2001 - 1:23 pm: | |
And, LSeltzer, just wondering, were those homeowners you mention banding together (in I guess it would have to be 1998-99) threatening a lawsuit if the town didn't start a reval process? And, if in a few years (maybe even a few months) when the market has tanked in the areas where the bubbleconomics hit the highest, will you be coming to their rescue too yelling "Criminal" "Criminal"? |
Damellon
| | Posted on Friday, February 2, 2001 - 1:34 pm: | |
Let's all face it, the reason why we are in this mess is that the "TC" did a sloppy job with the reval. Apparently, it was nobody's job to oversee the process. This is unacceptable representation. And the way that the assessments went out after election day was like a page right out of our sleeze-ball President Clinton's handbook. How the members of the TC can go around all puffed up and full of themselves the way that they do is beyond me. I want them - out of my house, out of the pool, out of the library, out of the school district (especially!!!) - and out of town hall!!! I urge everyone to please consider taking a closer look at the other candidates that may represent us more appropriately during the next election! Based on the discussion above it looks like Millburn was able to secure a logical thinking group of township people. I'm sure we can too.
-------------------------------------------------------------------------------- |
Lisat
| | Posted on Friday, February 2, 2001 - 1:36 pm: | |
After hearing people speak about paying 8K in taxes on a home that's valued at 130K, I believe that there are numbers of people who have paid more than their share in taxes. (Perhaps this dates back to the last reval, which took into consideration the fact that everyone had the same fire department, school system, etc. no matter where in Maplewood they lived or how valuable their house was.) But I'm curious about the 'for years' aspect. The boom in the market, which seems to have created the big inequities happened fairly recently. So, I would actually be interested in knowing whether someone has done any analysis about how many overpaid for how long. |
Gerardryan
| | Posted on Friday, February 2, 2001 - 2:28 pm: | |
Lisat and Mtierney: I do not think it would be acceptable for any Township Committee to say "we just went through a revaluation, analyzed every home, and then decided to wait a year" without offering some fact-based justification as to why.
Lisat said she "wouldn't want to see the numbers if the numbers were wrong". As sure as I am sitting here typing, I KNOW that in Maplewood there would be an outcry for a public sharing of all of the numbers so that people could draw their own conclusions.
I think it is wrong and unfair to not share all the information that is available as soon as it becomes available. And I cannot believe the people advocating for government that would keep information from its citizens.
It is absolutely amazing to me that there is not at least one person in Millburn demanding to see the facts about the assessment done in that town, as a justification for their action! |
6yearrez
| | Posted on Friday, February 2, 2001 - 2:31 pm: | |
Can we reign this discussion back in and stick to the topic? I started reading this thread because I'd like to see some discussion of what we could possibly do using "the Act" of 1993. We need to keep and preserve the well-being of our seniors- and of course others who are being very hard-hit by these taxes.
So, back to the topic, please?
Jerry,
It looks like adjusting for the abatement by hitting the town afterwards with adjustments using different tax rates is inside-out and backwards. Can we raise the money outside the property tax realm? If I read your posts correctly, the TC is consulting with the state to look at solutions to offset the abatement. I think this is proper. I've only seen a little discussion (above), such as a reverse mortgage, or some other form of loan. At what cutoff must someone be to be considered having a hardship in their tax increase, to be eligible? Can you describe some of the solutions that might be discussed with the state?
I'd also like to see some real discussion about how to mobilize our efforts toward Trenton to generate a real change in the system, so we are not paying to fund the school system through property taxes. It is apparent that many in this town still have a lot of fight and frustration left in them, let's use some of that energy and direct it at the source. |
Gerardryan
| | Posted on Friday, February 2, 2001 - 2:58 pm: | |
6yearrez:
I am open to suggestions on alternatives to the act, which I agree looks "inside out and backwards".
Someone told me about an idea that they had (you know who you are, so if I am not saying it right, chime in!): allow people to opt into a program where in exchange for a lein on the house they get some payment (equivalent to the abatement) on their property tax. The leins are securitized and sold, and must be satisfied when the house is sold. This basically allows anyone but particularly a senior citizen or other person on a fixed income to stay in their house by pre-selling some or all of their property tax obligation.
I don't know that you can really pick a "fair" cutoff that applies to everyone: one person's ability to pay $2400 more could be another person's backbreaking financial hardship. You have to allow folks to decide for themselves, it seems to me.
Lobbying has some near term and some long term dimensions. In the near term we need to concoct a remedy that we can ask everyone to get behind. In the long term... the entire legislature and governor are up for election this fall. And there is the proposal on the Senate floor for a special constitutional convention solely for the purpose of changing away from using property tax to fund schools that may have some merit. |
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