Last Thursday, we posted a letter from an Englewood homeowner whose property taxes more than doubled in this year's tax revaluation. We received a number of responses from readers that ranged from sympathy (“I know another person whose increased tax bill ruined her deal to sell her house.”) to antipathy (“Why it is always the people in wards 1 and 2 who are crying for mercy?”).

However, as we learned from Sunday's Record, modest properties, not luxury homes, are being hit the hardest by Englewood's tax revaluation. The Record reports:

Owners of half of the most modest homes will see their taxes jump by at least 25 percent, while more than half of owners of the most luxurious residences will get tax cuts.

Indeed, middle-class families are getting hit the hardest. According to an article in New Jersey Monthly, nearly 75,000 more people left the state than moved in this past year. And the ones moving in are wealthier than the ones leaving. Patrick Murray, director of the Monmouth University Polling Institute, explains:

The state is losing two-income middle-class families, the backbone of New Jersey’s economy, because they decide they can’t make it here.

We could see this very trend in Englewood. The Record interviewed one resident whose modest home on Third Street rose in taxable value by 211%. According to this resident, "I'm going to sell it and move. It's too much." Meanwhile, a retired supermarket cashier is concerned she won't be able to sell her home on Van Nostrand Avenue at its higher tax rate, wondering, "How are they going to want to buy a house with those kind of taxes?"

But, what is driving these tax increases? According to the appraiser who performed Englewood's revaluation, it's the growing demand for inexpensive homes. The Bergen Record explains:

Englewood's housing market has one of the largest supply of lower-end housing in Bergen County -- most within a mile from sprawling estates.

Indeed, the problems caused by the reassessment to individual taxpayers shouldn't be confused with the problems of municipal expenses.  The City Council has no control over the relative values of properties.  That is the job of the tax appraiser.

It takes no special financial expertise to see which way the wind is blowing. Those in modest homes with modest cashflows need a financial “Plan B” for the possibility that things won’t get better any time soon, either locally or nationally.

Most disturbingly, for some, Plan B may mean moving out.

A major continuing concern of most citizens is the level of their property taxes. It is a subject too often addressed with more heat than light. We hear often that New Jersey has the highest property taxes in the country. While true, it's impossible to address unless we are willing to 1) pay higher income/other state taxes in exchange for higher state aid to our communities, or 2) reform our highly fragmented system of local control over education and municipal services. State officials are currently grappling with these issues, but the political and practical obstacles to real change are formidable.

What Can Be Done?

At the local level, your City Council members can positively affect the municipal portion of your tax bill in at least five ways: 1) by insuring effective management of staff to provide municipal services at minimal cost, 2) by hard bargaining with employee groups and officials over salaries and benefits, 3) by making effective use of federal and state assistance programs, 4) by striving to prevent taxable property from being sold to tax-exempt institutions and, conversely, to place tax-exempt property back on the tax roll, and 5) by carefully managing expansion of tax ratables to spread costs over a larger base. #1, #2 and #3 also apply to the members of the Board of Education, who determine the school portion of your taxes.

Resistance to Change

Candidates for local office routinely express their concern for the tax burden borne by their homeowner constituents. However, once in office, these politicians must face the political realities of cutting costs and bargaining with employee groups. For example, members of the high-cost Police Department routinely complain about inadequate manpower, and can generate political support for their complaints. Privatization of services, as when the Board of Education hired an outside maintenance firm in 1993 at an annual savings of $1,000,000, aroused considerable community antagonism. Hard bargaining by the Board of Education can result in labor unrest, including threatened or actual strikes.

Stable Bureaucracy

Council members and Board of Education trustees come and go, whereas the bureaucracies they depend on are more permanent. Therefore, it is easy to go along with the way things have always been done and not rock the boat. Both municipal and school officials are subject to a plethora of State regulations and guidelines. This is particularly true in personnel matters, where the influence in Trenton of teacher, police and other State-level labor groups is considerable. The net effect is that local officials find that the bulk of their budgets, consisting of salaries and benefits, is essentially fixed, and often they are happy to hold annual increases close to the rate of inflation.

Revaluations

Every few years Englewood, in common with all New Jersey towns, is required to conduct a property revaluation. This has no effect on the total amount of taxes to be raised in any given year, but is merely a reallocation of the tax burden based on "fair market value," as determined by ostensibly qualified professionals. Our quarterly tax payment due August 1, 2007, will be the first one to reflect the recently completed revaluation.

Development

City officials determined some years ago that the best way to fund necessarily rising costs while minimizing the impact on residential taxpayers was to encourage more intensive development of Englewood’s industrial area. So the City created a zone for low-rise light industry for just that reason. However, as time went on, property values elsewhere rose much more rapidly. Consequently, the industrial area's tax contribution to the total became minimal. City officials argued for more intensive development, which translated into the construction of medium to high-rise buildings. This wave of more intensive development began in the 80s with the construction of the hotel and neighboring office building on South Van Brunt Street. Nearly complete are the Windsor Park project facing the County golf course and the Englewood South project just north of Rt. 4. Just getting under way is the controversial Flatrock Square project south of Rt. 4.

Controlling Development

Developments of this magnitude can over time have a major impact on Englewood financially, socially and politically. For this reason, City officials should proceed with care before signing off on major projects. Decisions which will have long-term consequences should not be made on the basis of short-term market factors or political motives. After all, new construction means new tax ratables, but it also means new costs.

The rule of thumb is that new construction which doesn't increase school costs is beneficial on balance. However, there are many other variables to be considered. The assumption that the construction of hundreds of new residential units won't place undue strain on municipal systems could, in retrospect, seem naive. Therefore, the larger a development project is, the more important it is to be aware of all its possible consequences.

Tax Rate Perspective

Englewood’s tax rate was formerly among the highest in Bergen County. By 2006, however, there were eighteen other Bergen County towns with higher rates, many of which do not have our full range of services. The following are the rates of selected neighboring towns in 2006, shown on an equalized basis to make them comparable:

Bergenfield 2.453

Bogota 2.112

Cresskill 1.631

Englewood 2.011

Fort Lee 1.687

Hackensack 2.267

Leonia 1.940

Ridgefield Park 2.376

Teaneck 2.419

Tenafly 1.910