Revaluation Costs

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Author Message   Spitz Supporter Username: Doublea Post Number: 1434 Registered: 3-2003 Posted on Wednesday, February 22, 2006 - 11:04 am:        There is an article in today's Star-Ledger about Montclair's choice of an appraisal firm to conduct a townwide revaluation. The story says that Montclair is going to finance the revaluation over five years via a special statute. I had previously mentioned that I read last year that Eatontown was financing its revaluation over five years. It is my understanding that South Orange intends to finance the costs of the revaluation over two years. Is it possible to finance it over five years?   Spitz Supporter Username: Doublea Post Number: 1436 Registered: 3-2003 Posted on Wednesday, February 22, 2006 - 1:19 pm:        I realize it's way too soon to expect an answer, but I know that Allan Rosen, chair of the finance committee reads this board. Allan, I had mentioned the five year period being used by Eatontown last year. John Gross also reads the board. If we can use five years, why shouldn't we? The revaluation costs have been used as an excuse for why we can't do other things. There may be some reason we can't go the five year route. Has it been investigated?   wnb Citizen Username: Wnb Post Number: 325 Registered: 8-2001 Posted on Wednesday, February 22, 2006 - 1:43 pm:        Wouldn't financing over 5 yrs vs 2 end up costing more money? Or is the financing somehow interest free?   Spitz Supporter Username: Doublea Post Number: 1437 Registered: 3-2003 Posted on Wednesday, February 22, 2006 - 2:53 pm:        wnb - It seems this should be the case. But why would Montclair be using 5 years? Maybe Allan can explain.   Spitz Supporter Username: Doublea Post Number: 1438 Registered: 3-2003 Posted on Wednesday, February 22, 2006 - 3:37 pm:        I just spoke to the finance officer in Montclair. Municipalities are allowed to finance "emergency" expenitures under Chap. 40A of the NJStatutes. "Emergency costs" specifically include revaluation costs. I then asked whether using the five year period resulted in additional finance costs. She said it depended on whether it would be paid from regular cash flow or whether you had to go out and use notes. But in any event, there was a tax advantage to the taxpayers. She said they weren't sure whether Montclair would use the regular cash flow or get notes, but the tax advantage was the determining factor.   Howard Levison Citizen Username: Levisonh Post Number: 449 Registered: 1-2004 Posted on Wednesday, February 22, 2006 - 3:39 pm:        Spitz: The CBAC discussed this question at length and agree with your position. We will post the answer once we have reviewed our meeting notes.   Spitz Supporter Username: Doublea Post Number: 1439 Registered: 3-2003 Posted on Wednesday, February 22, 2006 - 3:49 pm:        Thanks Howard.   Rastro Citizen Username: Rastro Post Number: 2372 Registered: 5-2004 Posted on Wednesday, February 22, 2006 - 4:37 pm:        wnb, a fifteen year mortgage typically costs less money than a 30 year one. But most people get 30 year mortgages because of cash flow issues. Similarly, while spreading out the payments over five years might increase the "carrying costs", if it were shorter term, the village would have to come up with more more in the near term. While this could be done with a special assessment, can you see our BOT passing up the opportunity to raise taxes and increase the budget after the re-valuation is paid off?   wnb Citizen Username: Wnb Post Number: 326 Registered: 8-2001 Posted on Wednesday, February 22, 2006 - 4:43 pm:        Then we should be rightly trying to first see if we can do it 2 years and only if there is a cash flow issue, do it 5 years. Stating 5 years as default is "better" and implying it is irresponsible to go with 2 years isn't exactly prudent. Even if paid with cash flow rather than notes, you take 5 years to pay off something -- someone has financed it, they expect interest on the money. Using notes to pay for it is just another way to manage that. But either way, interest has to be involved in one way or another. Either way, you're borrowing money -- the only difference is from whom.   Rastro Citizen Username: Rastro Post Number: 2373 Registered: 5-2004 Posted on Wednesday, February 22, 2006 - 4:54 pm:        I don't think anyone is saying do it in 5 years. I think Spitz wants to understand why one town is doing it one way, and another town is doing it another way. While it might cost the village more moeny to finance it over 5 years, it might cost the residents less. My thinking is this: Let's say the reval costs $5,000/month if financed over 2 years, and $3,000/month if done over 5 years. In the first scenario, unless a special assessment is done, taxes will go up by $60,000 for year. I cannot imagine taxes going down in year three (after the reval is paid off). In the second scenario, taxes would go up by $36,000 in year one, and of course would not go down in year six. So while the town would be paying $120,000 over two years, or $180,000 over five years, the cost to tax payers would be less in the five year plan. Now, granted, I've completely made up these numbers, and they are not accurate at all. But the point I'm making is that taxes are going to go up to cover the cost of the reval, and will not go down. So, to me at least, it looks like a five year plan would be better for the rest of us. How's that for cooking the numbers?   Spitz Supporter Username: Doublea Post Number: 1440 Registered: 3-2003 Posted on Wednesday, February 22, 2006 - 5:37 pm:        Let's see what the CBAC says. As Howard says, they've spent a lot of time considering the issue.   Pizzaz Supporter Username: Pizzaz Post Number: 3187 Registered: 11-2001 Posted on Wednesday, February 22, 2006 - 5:49 pm:        I think I've heard from Howard that there are considerable increases in debt service beginning next year along with additional projected support payments for SOPAC. I think it's unfeasible for the town to pay out from surplus for the reval. It's simply not there.   MHD Citizen Username: Mayhewdrive Post Number: 3389 Registered: 5-2001 Posted on Thursday, February 23, 2006 - 8:49 am:        I thought I heard at the BOT Meeting last night they said it would be paid for over 3 years. P.S. Can someone please tell Calabrese this is a revaluation, not a re-evaluation.