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IT'S TIME FOR "REAL" PROPERTY TAX RELIEF!
By Jersey City Mayor Bret Schundler
For decades, every municipality in New Jersey has received state dollars to help
pay for operations. The purpose of this "State Revenue Sharing" has been to decrease New
Jersey's highest-in-the-nation reliance upon property taxes for municipal funding.
This money has come with diverse official and colloquial names: "Consolidated
Municipal Property Tax Relief Aid," "Energy Receipts," "Discretionary Aid," "Aid to
Distressed Cities," "Takeover Relief Aid" -- but whatever its been called, its object has
been the same: to give property taxpayers a break!
The State of New Jersey is presently enjoying a record budget surplus. It would be easy for the State to increase its Revenue Sharing with municipalities to provide tax
relief to property owners. But up until this year, the State has been doing the opposite.
Over the past six years, "real" (i.e., inflation-adjusted) State Revenue Sharing has been increased for only 35 communities. The real state revenues of New Jersey's other
531 communities have been reduced: in some instances through the erosion of inflation,
and in others through outright cuts. This has put upward pressure on property taxes!
The State justifies some of its Revenue Sharing cuts by arguing that it provided
municipalities with offsetting savings through its pension initiative. Yet, while some State
initiatives have reduced local government costs, other State initiatives have increased
local government costs. So on balance, state cost reduction initiatives do not
justify reducing State Revenue Sharing.
We Mayors believe that the State deserves credit for instituting a direct property
tax rebate program. But if the State gives rebates to property owners even as it continues to provide
fewer State Revenue Sharing dollars to New Jersey's municipalities, it will be
doing nothing but giving with the one hand what it had taken with the other.
The 35 communities which have enjoyed an increase in State Revenue Sharing have
been given it, according to the Whitman Administration, because local financial problems
necessitated an increase in state assistance. That's fine. But it's not fine that the State has
effectively penalized many New Jersey communities for avoiding such crises.
Consider the perverse incentives such penalties create. A mayor who wants to lower
property taxes and undertakes the politically risky task of cutting municipal costs, risks
being penalized for the effort through a reduction in State Revenue Sharing. The result may
be that the mayor will have gored some special interest's ox without obtaining any tax relief
for his or her constituents. That mayor will learn never to cut municipal costs again!
My own experience as the Mayor of Jersey City is illustrative. When I was first
elected in 1992, the City faced a $40 million budget deficit. My Administration closed it
without increasing the City's property tax levy by controlling spending and attracting new
revenue-generating development. The State rewarded Jersey City for this achievement by
reducing its State Revenue Sharing. This put the City at risk of having either to increase property taxes massively
or massively lay-off workers. Either scenario would have reversed
Jersey City's continuing recovery. The State ultimately agreed to reverse its Revenue Sharing
cuts. But why should any city have to worry about being penalized for good fiscal
management?
Speaking on behalf of the New Jersey League of Municipalities and the New
Jersey Conference of Mayors, we believe that the State should reverse all of its Revenue
Sharing reductions of recent years. We don't want the State to cut the increased revenue
it is providing to those 35 troubled municipalities it is assisting, but we do want the State
to make New Jersey's other 5311 municipalities whole relative to the real State Revenue
Sharing they previously received. In addition, we want the State to continue keeping us whole
in the future, through indexing all State Revenue Sharing to inflation -- not just the 40% of
State Revenue Sharing that was indexed by last year's "Property Taxpayers Protection Act."
The cost to accomplish all this would not be as great as one might imagine. When the
State restores each New Jersey municipalities' real State Revenue Sharing to where it was
six years ago, it will be able to eliminate most of the money it currently appropriates
under the headings of "Discretionary Aid" and "Aid to Distressed Cities," because most of
this money is simply replacing the real state revenues that municipalities lost in recent
years.
New Jersey's property taxpayers need relief. Reversing six years of Revenue
Sharing cuts would not help the State's Budget, but it would help the family budget of
every New Jersey homeowner. Indeed, it would allow them to enjoy the direct tax rebates
that the State is sending out, instead of having to use this money to pay increased local
taxes.
With the State enjoying a record budget surplus, now is the time for it to restore
municipalities' real State Revenue Sharing. New Jersey's municipalities did their part to
help the State pay for its income tax cuts. Now it's the State's turn to help pay for municipal
property tax cuts!
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