TRENTON -- The state Assembly is to vote today on legislation that would establish a 2 percent cap on local property tax hikes, the result of last week's compromise between Governor Christie and Democratic legislative leaders. Christie's new budget includes some funding for a credit that would be provided in 2011 for property owners. While the political sideshow in...
N.J. Gov. Chris Christie, left, Assembly Speaker Sheila Oliver (D-Essex), center, and Senate President Stephen Sweeney (D-Gloucester), right, in file photos. TRENTON -- The state Assembly is to vote today on legislation that would establish a 2 percent cap on local property tax hikes, the result of last week's compromise between Governor Christie and Democratic legislative leaders.
Christie's new budget includes some funding for a credit that would be provided in 2011 for property owners.
While the political sideshow in Trenton may be confusing, the goal of the new cap is simple: Put stronger controls on property tax bills.
What's the latest? The Senate voted overwhelmingly to approve the 2 percent cap on Thursday after Governor Christie, a Republican, and Senate President Stephen Sweeney (D-Gloucester) struck a deal over the July 4th weekend. Assembly Speaker Sheila Oliver (D-Essex_ has posted the bill for a 10 a.m. vote.
How did they come up with 2 percent? Current law caps local property tax increases at 4 percent, but it allows several exceptions and voters remain frustrated with high property tax bills. Christie originally proposed a constitutional amendment that would lower the cap to 2.5 percent cap with only one exception, modeled after a Massachusetts initiative. Democrats in the Legislature countered by passing a 2.9 percent cap that included several exceptions, but no constitutional amendment. After signing the new state budget in late June, Christie and the Democrats began negotiations on a new cap. In the end, Christie dropped the constitutional amendment and agreed to allow some more exceptions in exchange for a lower base cap of 2 percent.
Why cap property taxes? State spending is up 40 percent over the last 10 years, far outpacing the rate of inflation since 2000, but spending by local governments has increased by 70 percent during the last decade. And local governments rely heavily on property taxes, the one tax voters routinely identify as their biggest concern. At a combined $45 billion, local governments spend more money than the state does with its annual budget of about $30 billion. Not surprisingly, New Jersey has the highest property taxes in the nation.
Do caps work? The last decade began with tax bills averaging $4,429 statewide and ended with average bills of $7,281, a more than 60 percent increase. Tax bills were going up by more than 7 percent annually in the mid-2000s before a 4 percent cap was enacted by Gov. Jon Corzine in 2007. The last two years saw average statewide increases of 3.7 and 3.3 percent. Conservatives point to those type of decreases when promoting the benefit of tax caps, but labor leaders say they only tell half the story because some communities have eliminated valued services and jobs to get under the caps.
What about the exceptions? The existing 4 percent cap includes several exceptions that communities have used to get around the limit. More than 30 percent of local governments were able to hike taxes over 10 percent in 2008. The deal Christie has struck with Democratic leaders would also allow exceptions, for debt payments, rising health benefit and pension costs and if an unforeseen state of emergency occurs. School districts would also get an exception to deal with rising enrollment.
What happens to property tax rebate checks? The checks are gone for the 2010 calendar year, but Christie's new budget includes some funding for a credit that would be provided in 2011 for property owners. And while those suffering from high property taxes are sure to miss their rebate checks this year, they may accumulate similar relief if the 2 percent cap is in place for a few years and local leaders resist using the exceptions. An analysis of tax data by The Record indicates property tax bills would be nearly $2,000 smaller this year if a 2 percent cap like the one proposed had been followed since 2000. The average rebate check last year was $1,037.
How strong is a cap without the constitutional amendment? A cap established by constitutional amendment requires statewide voter approval, but a public referendum is also the only way to undo it. The statutory cap Christie and the Democrats have agreed on can be changed easily by future lawmakers and governors, just as they are changing Corzine's.
What's next? Christie rejected the Democrats' 2.9 percent cap and sent the 2 percent cap to lawmakers in the form of a conditional veto that passed the Senate and now awaits approval in the Assembly. Christie has also put forward more than 30 bills that he would like to see enacted along with the property tax cap to reduce local government costs. The Legislature is planning to review the remaining property tax legislation throughout the summer.
What are they saying? "Over the years as property taxes have continued to go up, it has become apparent that Trenton politicians of all political stripes have repeatedly failed to fix the system. Today, we can act to ensure … that 10 years from now … young families won't be struggling to own a home because they can't afford the property taxes and that our seniors aren't forced to move out of state by wild tax increases year after year." — Governor Christie
"Capping property taxes is only a means to controlling property tax growth. … We still need to give municipalities and schools the tools they need to actually lower property taxes. The Senate Budget and Appropriations Committee will still spend its summer undertaking an aggressive review of all facets of the property tax system. Unless we release the pressure state mandates and other cost drivers place on mayors and school administrators, property taxes will never actually go down." — Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-Wood-Ridge).
Related coverage:
• After months of debate, N.J. Senate passes 2 percent property tax cap in less than an hour
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• N.J. mayors tell Assembly panel 2 percent property tax cap will burden towns
• N.J. Assembly Speaker announces official support for 2 percent property tax cap
• Gov. Christie pushes Democratic lawmakers to pass bills coping with property tax cap
• N.J. lawmakers' plan for 2 percent property tax cap inches closer to reality
• Gov. Christie issues conditional veto of property tax bill in deal with N.J. Dems
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