Tax reassessments bring relief to some North Jersey homeownersSunday, May 8, 2011 Last updated: Sunday May 8, 2011, 12:43 PM
BY DAVE SHEINGOLD
STAFF WRITER
The Record
There's a silver lining to the real estate slide, and it's about to bestow a tax break on homeowners in 14 North Jersey communities — and perhaps others in the near future.
From Ridgefield Park to Totowa, owners of houses and condominiums will bear less of the local property-tax load this year following a wave of assessment updates that shifted local tax burdens away from residences and toward commercial properties.
In some places, the typical homeowner is likely to see a tax cut, while increases for office, retail and industrial buildings could top 20 percent when tax bills go out this summer and fall, according to an analysis by The Record.
The changes will affect 13 Bergen County communities and Totowa, places where officials updated tax assessments to better reflect a four-year slump that has dropped home values more than commercial values. The shift has left homeowners holding a smaller share of each town's overall real estate value, which means that, under state law, they must shoulder a smaller share of property taxes.
Homeowners getting a break
In 14 towns in Bergen and Passaic counties, homeowners can expect a measure of tax relief this year, while commercial properties are likely to face steep increases. The reason: Those towns last year conducted property reassessments that brought tax valuations more in line with actual market prices, as a result of the real estate slide. That process left commercial property owners with a larger share of the local tax burden. The examples below show typical results for properties in three towns. HACKENSACK Citywide percent change: -15.7% Residential Property type: Two-story frame house Lot size: 0.15 acres 2011 assessment: $233,700 2010 assessment: $326,000 Percent change: -28.3% Commercial Property type: 12-story office building Lot size: Not available 2011 assessment: $35,631,700 2010 assessment: $39,884,800 Percent change: -10.7% RIDGEFIELD PARK Village-wide percentchange: -20.8% Residential Property type: Two-story frame house Lot size: 0.13 acres 2011 assessment: $285,900 2010 assessment: $383,000 Percent change: -25.4% Commercial Property type: auto wrecking yard Lot size: 1.7 acres 2011 assessment: $959,800 2010 assessment: $1,026,400 Percent change: -6.5% NORWOOD Borough-widepercent change: -20.3% Residential Property type: Two-story ranch house Lot size: 0.34 acres 2011 assessment: $481,000 2010 assessment: $647,900 Percent change: -25.7% Commercial Property type: One-story bank building Lot size: 0.49 2011 assessment: $1,355,700 2010 assessment: $1,431,500 Percent change: -5.3% Source: Bergen County Board of Taxation Staff analysis by Dave Sheingold
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Before the changes took effect, homeowners were effectively overpaying taxes, helping to generate a wave of appeals that were costing towns millions of dollars a year in refunds. The new trends reverse those seen in the first half of the 2000s when home values — and homeowners' taxes — rose fastest.
More shifts are likely to come next year as additional municipalities consider resetting property-tax assessments.
Losing equityFor homeowners, "it's good news, bad news. The good news is you're going to get some property-tax relief. The bad news is, you're getting property-tax relief because you are losing equity in your homes," said Rick DelGuercio of Appraisal Systems, a Glen Rock company that worked on 10 of the assessment updates.
It was welcome news for Michael Fagen of Ridgefield Park, whose $6,700 annual tax bill will drop $300 to $400 if the village and its school system adhere to a 2 percent spending-increase cap imposed by the state. When his assessment was reset in 2007, his taxes went up $1,100 and continued to rise after that.
"The taxes kept going up, and my house value was going down," said Fagen, who lives in half of a two-family colonial on Route 46. "Now it's a little more fair."
But in the zero-sum game of shifting tax valuations, one person's gain is someone else's loss. For the owner of the Westside Village Tavern on nearby Paulison Avenue, the readjustment could mean $1,700 a year added to the cost of running his sports bar, which sits amid a jumble of industrial properties and railroad lines. Frank Myslivecek said a tax hike might force him to curtail renovations, alter his menu or raise prices.
"Everything is going up in price. This is just another straw to break the camel's back," said Myslivecek.
The analysis by The Record found that:
* Homeowners' assessments dropped a combined 16.4 percent in the affected municipalities, which had all last updated their values in the mid-2000s, before the market stalled. Commercial values in those towns dropped only 4.3 percent.
* If property taxes go up 2 percent this year, the overall median residential tax in the 13 Bergen towns will decrease about 4 percent, while the median commercial tax will jump roughly 12 percent. (Totowa was not included in the analysis because detailed data were not available from borough officials, but the aggregate numbers suggest that the trend held true there also.)
* Some of the biggest breaks would go to homeowners in Edgewater,
Hackensack, Ridgefield Park and Norwood. In
Hackensack, for instance, a 2 percent levy hike would result in a 12 percent tax cut for the typical homeowner and an 8 percent increase for the typical commercial owner.
* Specific properties facing the biggest increases include The Shops at Riverside in Hackensack, Becton Dickinson in Franklin Lakes and The Brownstone, an apartment and retail development off Route 4 in Englewood. All could see tax hikes of several hundred thousand dollars.
* Smaller shifts will come mostly in towns with limited commercial real estate, including Ho-Ho-Kus, Emerson and Oakland.
In each case, the municipalities undertook what are known as property reassessments, which allow for a quick fix to repair inequities resulting from rapid swings in the real estate market. In a reassessment, values are updated in clusters, by neighborhood or by property type.
The next round of such adjustments is set to include Fair Lawn, Lyndhurst and up to six other municipalities that are considering property reassessments in the near future.
They are less complicated than property revaluations, which involve address-by-address updates and are the more traditional way of revising assessments after longer periods of time. Each of the 14 communities had done formal revaluations at or near the top of the market, in essence locking in values that quickly became outdated.
Seven revaluations took effect this year in Bergen and Passaic. But in those towns, shifts in the tax burden were muted by the fact that values had last been updated well before the boom. In general, the overall values rose, and commercial values increased most. Because the prior updates were from 1988 to 2002, their shifts reflected the ups and downs of several real-estate market swings.
An additional 11 communities are set to do revaluations this year and next.
Failure to make any adjustment can be costly, expert say.
About a dozen towns still sit with values set at or right before the market peak, including Harrington Park, Ridgewood, Teaneck and Washington Township.
Towns in that situation "are extremely vulnerable to widespread appeals," DelGuercio said. "It's likely that the residents are paying too much."
Spikes in tax appealsSeveral factors had created inequities in the distribution of property taxes, leaving some homeowners overtaxed and generating huge spikes in appeals, said real estate appraisers and town officials. In addition, appeals won by some large commercial property owners added further to the inequity.
The number of appeals filed with the Bergen County Board of Taxation more than tripled, from 2,594 in 2006 to 9,004 in 2010, with additional cases going to state tax court; Passaic's number jumped during that time from 833 to 4,541.
"It really ended up being an unfair situation for residential homeowners," said Steve Lo Iacono, city manager in Hackensack, which paid $7.5 million in refunds from 2008 through 2011. "Things had gotten tremendously out of whack."
The reassessment in Hackensack dropped the city's overall value of residential property by 26 percent, while the city's commercial base went down only 6.7 percent. In Ridgefield Park, residential values dropped 26.2 percent, compared to a 10.3 percent decline for commercial values. In more upscale northern Bergen, Norwood saw the biggest shift, as residential property went down 22.9 percent and commercial figures declined 2.2 percent.
Facing impending tax hikes, business owners said in interviews that they would probably look for ways to trim expenses before raising prices.
At the Colonial Inn catering hall in Norwood, Paul Guarino Jr. said he might have to postpone buying new chairs or upgrading the hall's air-conditioning system if his $70,100 tax bill increases by around $20,000.
"I can't say that it's terribly unfair," said Guarino, whose taxes dropped by $4,100 when his assessment was last reset in 2008. But "that certainly could preclude us from making a reinvestment, which has consequences."
Homeowner Hector Ferrer of Hackensack will believe he's getting a tax cut "when I see it," he said, adding that the underlying problems of high property taxes and local government spending remained. But if it happens, he said he would use the money to replenish a tax escrow fund that was wiped out last year when he was out of work.
"It's not like I'm not welcoming it," he said. "I do, however feel like this whole situation has to be fixed."
E-mail: sheingold@northjersey.com
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The tale of the taxesPercent change in the total value of property in municipalities that did reassessments or revaluations that took effect this year. All saw shifts in the tax burden from residential to commercial property.