Sunday, October 29, 2017

Atlantic City Should be an Abbott

In 1990, when the Abbott list crystalized, Atlantic City met the Supreme Court's two criteria for Abbottization, ie, status in DFG A or B and classification by the Department of Community Affairs as an "urban municipality."

Though Atlantic City was demographically poorer and more "urban" than
many districts who were Abbottized, Atlantic City was excluded from the Abbott list by Chief Justice Robert Wilentz himself due to its extremely strong casino-based tax base.

Exclusion from the Abbott list was something that Atlantic City could manage given how enormous its tax base was until the 2010s.

Throughout the 1990s and again in 2008 when its Equalized Valuation peaked at $22.2 billion, Atlantic City had the largest Equalized Valuation in New Jersey.   At its peak in 2008, Atlantic City's school tax rate was only 0.44 and yet it was able to sustain $17,600 per student in spending, a much higher amount than the South Jersey Abbotts like Vineland, Bridgeton, Millville, and Pleasantville.

Atlantic City remained a high-tax base district until the 2010s.

Then, unfortunately, other Mid-Atlantic states got the idea to open casinos, Atlantic City tourist numbers dropped, and Atlantic City's tax base started to implode.

In 2013 alone, the Borgata challenged its $2.3 billion assessment and got it down to $870 million.  Then, in 2015, the Borgota appealed again and got another lower assessment.

Then other casinos started to close altogether like the Sands, the Revel, Showboat, the Trump Plaza, and the Atlantic Club.  Atlantic City mayor Don Guardian predicted Atlantic City's valuation would stabilize around $7 billion.

As Atlantic City's casinos closed and the tax base collapsed, Atlantic City did not cut its tax levy proportionally and the tax rate soared and fell more heavily on residential homeowners.   By 2014-15 the school tax rate had risen from 0.44 to 1.1691. 

In 2015 Senate President Steve Sweeney said that Atlantic City should become an Abbott.
After hearing complaints from residents facing a huge hike in their property taxes, state Senate President Stephen Sweeney (D-Gloucester) today said that the state should consider sending more aid to Atlantic City schools. 
Sweeney, on a South Jersey radio call-in show, suggested making Atlantic City an “Abbott district,” which is named for a series of court cases in which the state Supreme Court said residents of New Jersey's poorest cities have a right to well-funded schools. 
“One of the other things that has to be looked at now is, with all these tax decisions does Atlantic City now qualify or deserve to be an Abbott district?” Sweeney said on the show, Pinky’s Corner. “When the casino revenues were high, no they didn’t qualify. But now the numbers have to look at, the picture has to be reevaluated. That would help the tax base in Atlantic City.”
In 2015 Atlantic City still had an above-average tax base (its Equalized Valuation was $11.3 billion, the seventh largest in NJ), so I disagreed with Sweeney at the time, but by now Atlantic City has fallen farther than even pessimists predicted and Abbott status is merited.

In 2014-15 Atlantic City's school tax rate had been 1.1691, but by 2017-18 it was 1.1911.  For 2018-19, if new state aid does not arrive and the tax levy stays constant at $82 million, the tax rate would be 1.86!  (1.86 = $82 million / $4.4 billion)

Demographics

The first reason Abbott status is warranted is that Atlantic City's demographics are among the most challenging in New Jersey.

Atlantic City's FRL-eligibility rate is in the bottom ten for New Jersey.

1.  Camden City, 95%
2.  Union City, 95%
3.  Seaside Heights, 94%
4.  Woodlynne, 93%
5.  Asbury Park, 93%
6.  Bridgeton,  93%
7.  Passaic, 91%
8.  Paterson, 90%
9.  Trenton, 89%
10.  Atlantic City, 89%

Tax Base

Atlantic City's tax base is well below the state's average, although it is not at the same ranking as its FRL-eligibility.

For 2017-18 Atlantic City's tax base is $8300 per student compared to the state median of $13,300 per student.   (AC = ($55.86 million in Local Fair Share for 6700 students).

That $8300 per student is low, but is only in the state's bottom quarter.

However, the 2017-18 Local Fair Share is based on Atlantic City's $6.4 billion in Equalized Valuation for tax year 2017.

Since then, the tax year 2018 Equalized Valuations have come out and Atlantic City's Equalized Valuation fell from $6.4 billion to $4.4 billion.  That $2 billion drop in Equalized Valuation should diminish Atlantic City's Local Fair Share by at least $14 million, or a 25% fall.

Since the 2017-18 Local Fair Shares are already out of date, I will calculate Equalized Valuation per student for the Abbotts.

This is the Equalized Valuation per student of all the Abbotts, plus Atlantic City.  Although Atlantic City's Equalized Valuation per student is still above the Abbott average, there are several Abbotts whose tax bases are superior and yet do not even have equivalent student poverty.

DistrictEqualized Valuation Per Student (based on tax year 2018 EV)
HOBOKEN$6,194,298
NEPTUNE TWP$1,111,837
LONG BRANCH CITY$950,114
JERSEY CITY$924,101
ASBURY PARK$703,676
ATLANTIC CITY$653,744
HARRISON$596,929
GARFIELD$559,809
BURLINGTON CITY$465,910
VINELAND$407,270
KEANSBURG$371,185
WEST NEW YORK$358,421
NEW BRUNSWICK$346,825
PEMBERTON$345,188
MILLVILLE$329,073
NEWARK$312,648
EAST ORANGE$309,757
UNION CITY$308,499
PERTH AMBOY CITY$301,569
CITY OF ORANGE TWP$298,012
ELIZABETH$289,422
PHILLIPSBURG$279,214
PLAINFIELD$277,555
GLOUCESTER CITY$272,747
IRVINGTON$262,452
PASSAIC$248,136
PATERSON$231,049
PLEASANTVILLE$205,939
TRENTON$165,947
SALEM CITY$135,244
CAMDEN$114,639
BRIDGETON$85,150

Implications of Abbottization?

It's hard to say what becoming an Abbott would mean for Atlantic City.  

SFRA created a unitary funding formula for K-12 aid, but preserved the Abbotts' rights to100% state funding for construction and 100% funding for PreK for all 3s and 4s in the Abbotts.

Due to SFRA's unitary formula for K-12 aid, Atlantic City's problem for K-12 aid isn't that it lacks Abbott status, it is that it is severely underaided anyway.  For 2017-18 SFRA already says that Atlantic City should get $79.3 million, but the state only gives it $56 million (which is $24 million in regular DOE money and another $32 million in "Commercial Valuation Stabilization Aid" which comes from other state agencies.)

Atlantic City already gets $3.3 million in PreK aid, which I can infer is much less than it would get if it were an Abbott.   

I do not know the size of Atlantic City's age 3 and age 4 cohort, but based on proportionality with the Abbotts, Atlantic City is not getting nearly enough PreK money for every child there.

For instance, Pleasantville, which has 3,000 fewer students than Atlantic City, gets $6.9 million in PreK money.  Millville, which has 1800 fewer students than Atlantic City, gets $8.5 million in PreK money.  Long Branch, which has 1600 fewer students than Atlantic City gets $9.8 million.  (source, DOE State Aid Summaries)

Keansburg has only 1400 students total and it gets $2.8 million for PreK.


Although Abbottizing Atlantic City doesn't seem to be on the table anymore, I hope it does come up because a conversation around Abbottizing Atlantic City might also inspire conversation about other updates to the Abbott list, including the deAbbottization of definitely Hoboken and perhaps Jersey City, Long Branch and Pemberton.  

Thursday, October 19, 2017

Overaided Districts Regain $4.8 million and $6 million in Loans


There hasn't been much reporting on this, but the Christie Department of Education has just restored $4.8 million in Adjustment Aid to 23 overaided districts and made $6 million in ten-year loans (or "loans") to another three districts.

So far the only reporting I've seen on this was from Amanda Oglesby of the Asbury Park Press, who wrote an article about the restoration of state aid to five districts in the Asbury Park Press's coverage zone, (Marlboro, Toms River, Brick, Middletown, and Keansburg) on October 17th.

Five Jersey Shore school districts that faced hundreds of thousands of dollars in state aid cuts have learned that the money will be restored, according to the New Jersey Department of Education. 
The announcement came from the department this week that schools in Brick, Keansburg, Marlboro, Middletown and Toms River will receive thousands of dollars more in state support than had been promised last summer. 
Early last spring, each district balanced its budget on a state aid promise that would later prove ephemeral. State Democrats struck a deal over the summer that moved a portion of the districts' promised money to schools that were not receiving their fair share under the State Funding Reform Act.

After a query to Ms. Oglesby and the Department of Education I learned that there were other districts who either got all of their Adjustment Aid back or received a loan to be repaid over ten years out of future state aid. 

These are the districts who are having their Adjustment Aid restored.  


DistrictRestoration
Andover$47,195
Brick$720,507
Burlington City$149,493
Easthampton$56,982
Englewood$160,731
Frelinghuysen$12,367
Hopatcong Boro$227,978
Keansburg$517,808
Kittatinny Regional$121,727
Marlboro$233,031
Middletown$356,772
North Warren Regional$66,201
Stanhope$30,324
Stillwater$36,145
Toms River$1,366,845
Ventnor$42,081
Vernon Township$300,000
Wallkill Valley$94,904
Washington Township$52,765
Weymouth Township$47,472
White Twp$34,902
Wildwood City$104,221
TOTAL$4,780,451

Several of these districts are massively overaided.  Hopatcong's excess was going to be $5,888 per student even before the restoration.  Weymouth was going to be overaided by $9,463 per student.  Brick by $2,703 per student.  

The Department of Education letters do not go into any detail as to what the justifications were for the restorations.  The letters begin like this.  


Pursuant  to  the  provisions  of  P.L.  2017,  c.  99,  the  New  Jersey  Department  of  Education (Department) has performed a review of your district’s application for additional general fund state aid for fiscal year 2018.  Our review has been conducted in the form of a needs assessment; the purpose of which is to evaluate the merits of the district’s request for additional general fund state aid.  Your district’s 2017-18  general  fund  state  aid  was  originally  $2,373,620  and  had  been  reduced  by  $47,472  to $2,326,148. Your application requested $47,472 in additional general fund state aid.  Based upon our review and the recommendation of the Executive County Superintendent, your district’s application is approved for additional state assistance in the amount of $47,472.

Another three districts are getting loans, East Orange (+$3,130,330), Millville (+$811,983), and Vineland ($2,059,792). 

May 2018 Update: The loans were converted to grants in Phil Murphy's FY2019 budget.

I do not know why these districts got loans and not grants.  

Great Meadows's application was denied.  

Although the total new aid ($4.7 million) is a tiny percentage of NJ's deficit against Uncapped Aid ($2 billion without redistribution, $1.328 billion with redistribution), these restorations to the overaided strike me as deeply unfair.

Although it was difficult for overaided districts to make cuts in the summer of 2017, if NJ has new money to give out, it should still have gone into TPAF or, if it had to be spent on opex aid, to the most severely underaided districts such as Bound Brook, with its $9500 per student deficit, Manchester Regional, with its taxes in excess of 200% of Local Fair Share, and Atlantic City, whose tax base has just lost another $2 billion since state aid was calculated.

---

See Also: 
Update:

Since this post appeared, there's been some more reporting on the state aid restorations.




Monday, October 16, 2017

Combined Reporting Won't Increase NJ's Revenues by $290 Million

For the last few years the New Jersey Policy Perspective have been leading a campaign for NJ to change its corporate tax laws to require something called "Combined Reporting."

Combined Reporting is an accounting rule that nullifies a corporation's attempt to avoid taxation by shifting profits from high-tax states to low-tax states via phony subsidiaries.  Under Combined Reporting, all of a corporation's subsidiaries are treated as a unitary, combined unit and then a state taxes a percentage of the entire entity's profits.  Under Combined Reporting, any transfers of money between subsidiaries are disregarded and the whole corporation's bottom line is what gets taxed.

For years, the New Jersey Policy Perspective trumpeted Combined Reporting as a taxation game changer that would increase corporate tax receipts by 10-20%, or $235 million to $470 million a year.   The NJPP's proposal has been adopted by several major progressive groups and politicians in New Jersey, such as the CWA and Senators Ray Lesniak, Linda Greenstein, and Paul Sarlo and most significantly Phil Murphy.

As a matter of tax fairness, Combined Reporting is a sound idea because it levels the playing field between small businesses and multistate businesses, but the revenue estimates that the New Jersey Policy Perspective disseminates (and have been picked up by Phil Murphy) are highly inflated.

The reason why NJ would not see such a big uptick in revenue from Combined Reporting is that in 2002 we already reformed our tax code to make it harder for corporations to set up phony subsidiaries to evade state taxation (eg rental corporations, utilize intellectual property holding companies, transfer pricing, captive real estate investment trusts, captive insurance subsidiaries etc).

NJ already requires Combined Reporting for some businesses, such as casinos.  NJ's "Throwback Rule" requires companies to pay taxes on "Nowhere Income" if the sale originated in NJ.

Owing to the anti-tax avoidance laws already on NJ's books, when the Office of Legislative Services came out with its own estimate in October 2016 for what Combined Reporting would bring in, it was for $110-$290 million, which was a 5-10% increase on NJ's historical Corporate Business Tax receipts. The OLS said NJ's revenue increase would be low because of the reforms already made, especially the Throwback Rule.

That OLS report actually didn't base the 5-10% report on other states' experiences after implementing combined reporting. It estimated that based on their pre-reform projections and then used the 5-10% numbers for NJ.

A 2014 report by the Rhode Island Department of Revenue estimated an approximate 20 percent revenue gain, when isolating combined reporting from other tax law changes involving three-factor and single sales factor apportionment systems. Connecticut’s consensus revenue forecast for FY 2016 estimates a revenue gain of approximately 5 percent from implementing mandatory combined reporting as one part of a major corporate tax reform in that state. In 2008, New York State’s Division of the Budget estimated an increase of 8 percent for combined reporting. However, a report commissioned for the National Conference of State Legislatures in 2010 found little impact in the initial years of combined reporting reforms in New York and Vermont. The Massachusetts Department of Revenue originally estimated 26 percent revenue growth in FY2009 from combined reporting, although total corporate revenues grew by closer to 17 percent that first year and Massachusetts did not isolate how much was due to the tax change compared to economic conditions. Massachusetts also reduced the corporate tax rate during that period. 
Given that the prior New Jersey corporation business tax reforms of 2002 were also intended to limit the use of some corporate tax shelters, it is reasonable to anticipate that the potential revenue impact of mandatory combined reporting may be closer to the low end of the wide range estimated in other states. Accordingly, the OLS believes a potential corporation tax revenue increase ranging between 5 percent and 10 percent annually is possible, but also highly uncertain. 
Since NJ's Corporate Business Tax has historically brought in $2.2 billion to $2.9 billion, the OLS made the $290 million ceiling estimate by taking 10% of $2.9 billion, a double best case scenario. The $2.9 billion amount, however, hasn't come in since 2008.

Source, Page 10.
http://www.nj.gov/treasury/omb/publications/17citizensguide/citguide.pdf

Also, the OLS does not consider that businesses might develop counter-tax planning strategies or even avoid New Jersey altogether.

Note, even the state studies that the NJ OLS used were on the high side.  Maryland's legislative research office predicted no boost.  In 1994 Iowa's legislative research office also predicted "minimal impact."  In an extremely thorough report, Indiana's Legislative Services Agency said that Combined Reporting would only increase revenue temporarily:

We used econometric techniques to examine how state tax policies, including combined reporting, influence state corporate income tax revenue. This method controls for variation in the tax base related to the economic cycle and other tax policies, and separates the impact from combined reporting. The econometric results suggest that combined reporting may have an initial positive impact on corporate income tax revenue but that this impact is not lasting. We estimate that the initial positive impact could potentially be economically significant. However, we also estimate that this impact will only be short term and will decline to zero in the long run.
Indiana also warned that while Combined Reporting more often increases a tax liability, Combined Reporting can reduce a company's tax liability too "In cases where one or more affiliates has a loss, combined reporting could reduce the entire unitary group’s taxable income."

The NJ Office of Legislative Services also used the historic high of NJ's Corporate Business Tax of $2.9 billion, when the most recent FY2017 Corporate Business Tax haul was only $2.4 billion.  Using the 5%-10% parameters on $2.4 billion gives a range of $110-$240 million.

To its credit, the New Jersey Policy Perspective trimmed estimate it used in its publicity from $470 million to to $290 million, but has refused to acknowledge the tentativeness of the OLS's estimate or that the OLS was giving a wide $110 million to $290 million range, not a $290 million target.

Despite obviously being aware of the uncertainties expressed in the OLS's report and even deeper uncertainty expressed in other states' reports, the New Jersey Policy Perspective uses the $290 million confidently, with a only a momentary, unexplained qualifier of "up to."

Here is Sheila Reynertsen caught in half-truth February 2017:
One of the most responsible ways to create a path to financial sustainability is to ensure that corporations and the wealthy are paying their fair share in New Jersey. Closing tax loopholes is one way to do this. Expanding combined reporting in New Jersey would close corporate loopholes and help prevent multi-state corporations from artificially shifting profits out of state. This tax policy could raise up to $290 million in much-needed revenue each year to shore up underfunded investments like higher education and public transit.

Here is Jon Whiten giving the same "up to" half-truth in October 2017:

Other states – 25, to be exact – have combated [corporate tax evasion] by adopting a practice called “combined reporting.” And New Jersey should join them. Limiting the ability of profitable multistate corporations to use accounting tricks to dodge state taxes would help level the playing field for the state’s small and local businesses – and raise up to an additional $290 million a year to help the state pay its bills and make key investments.
For the NJPP to be honest and say Combined Reporting "could bring in $110-$290 million" would actually hardly be more verbose, but "up to $290 million" makes Combined Reporting sound so much more lucrative than estimates say it would be.

Perhaps I have been too critical of the NJPP because they do use that "up to" qualifier, but Phil Murphy does not use the qualifier and the $290 million upper limit has become the actual expectation and the media is clueless. 

* Murphy would raise $290 million in his first year in office by closing a tax loophole that allows corporations to shift profit made in New Jersey to lower-taxed states, an idea based on bill introduced by state Sen. Raymond Lesniak (D-Union) that cleared the Senate budget committee last October, but was never put up for a vote.

 Tom Moran, in complete naiveté and ignorance, rounds that up to $300 million.

Due to the Murphy campaign, that $290 million estimate for Combined Reporting has been repeated everywhere, as if it were just money laying on the table.  (Example 1, Example 2, Example 3)

Tom Moran, in an otherwise good column on how Phil Murphy would not be able to pay for the agenda he laid out, took it as truthful that Murphy's tax increase package would bring in $1.3 billion.

No, the wiggle room in Murphy's plan is on the spending side. He has three top priorities that represent his red lines: He wants to increase aid to local schools, boost pension payments, and begin repairs of our decrepit transit system. His $1.3 billion in new tax revenue will be devoted to those three initiatives, he says.   [my emphasis]

The first journalism I saw explaining that $290 million was the ceiling of a revenue range didn't come out until October 7th, when Samantha Marcus of NJ Advance Media explained

How much money would be generated by [Combined Reporting]? The non-partisan Office of Legislative Services has called the impact of combined reporting "uncertain and variable." It predicted the state could see $110 million to $290 million in new revenue annually.

Murphy's campaign builds its plan on the higher estimate.

The NJPP's near-certainty and Phil Murphy's complete verbal certainty over the revenue increase created by Combined Reporting is reason why we all have to be very skeptical of anything we read about how "closing corporate loopholes" will produce massive amounts of easy money.

The fact that the $290 million estimate became canon in New Jersey media so quickly and easily is another example of how New Jersey is harmed by the lack of a center-right or free-market think tank.  Although a center-right think tank would misrepresent issues too, at least they could be a quick corrective for out-of-context papers from the left.

It's worth noting that the NJPP authors of these op-eds for Combined Reporting are not tax experts. Neither Reynertsen nor Whiten has ever worked in a state's budget agency or Treasury.  Neither is an economist.  Jon Whiten's background is as a journalist. Sheila Reynertsen was a birth coach and hospital anti-merger activist.  Andrew Sidamon-Eristoff, who is a bona fide budget expert since he was NJ's Treasurer, says that Combined Reporting won't even bring in anywhere near $200 million.

(note, I'm not a tax expert either. I just read stuff online, like Whiten and Reynertsen.)

The New Jersey Policy Perspective does some good research, but they are an ideological group, staffed by people who are not experts in their fields, and NJEA-funded.  Their pronouncements should not be taken as factual until further verification is performed.  The NJPP's silence on/opposition to redistributing Adjustment Aid and indifference to spending the state's existing money more efficiently, should be taken as how they are influenced by the big public sector unions who fund them.

Also, given that $290 million is a ceiling estimate, we have to be very skeptical about Phil Murphy's plan to increase revenues by $1.3 billion, of which Combined Reporting is a part.  Between the uncertainty of the Combined Reporting revenue increase and the uncertainty over NJ's ability to tax Carried Interest without Massachusetts, Connecticut, and New York cooperating, Murphy's tax hikes will not bring in $1.3 billion unless there is some simultaneous strengthening of New Jersey's economy.

Combined Reporting is a good idea in terms of tax fairness because it would even the playing field between multistate companies and local companies and because New Jersey needs all the new money it can get, but it will not bring in $290 million per year.

Given that New Jersey's budget crisis will continue under the next governor New Jersey is going to need to redistribute Adjustment Aid more than ever.

Thursday, October 5, 2017

2017 Changes in Equalized Valuation: the Urban Core Grows

The Department of Treasury has just released the Equalized Valuation of every town in New Jersey and thus given us an insight into NJ economic and demographic trends.

Equalized Valuation is the market value of all the (taxable) property in a town.  It updated every year by the county tax assessor and is used to apportion county taxes and, theoretically, school aid.  The way county taxes are apportioned is that if a town has 10% of a county's total Equalized Valuation, it pays 10% of county taxes.  Equalized Valuation also determines tax apportionment in (most) regional school districts.

Equalized Valuation is not the same thing as the aggregate assessed value, which is the sum of all the individual assessments on properties and may not reflect market value at all if the reval was not done recently.  Assessed values are only used for a town's internal tax apportionment.

(see note at bottom for how Equalized Valuation is calculated)

Equalized Valuation is supposed to be used, along with Aggregate Income, to determine a town's state aid, but SFRA is a non-operating law and this use of Equalized Valuation is dormant. Even if SFRA were operating, Adjustment Aid disallows changes to the state aid of a third of New Jersey's school districts.

Nevertheless, after this review of changes in Equalized Valuation we'll look at how these changes affect districts's (theoretical) Uncapped Aid state aid.

The Broad View 

The State's total Equalized Valuation grew from $1,208,823,762,826 to $1,242,801,663,665, a one year net increase of $33.6 billion, or 2.78%.  The median town, however, only gained 1.6%.

Although Equalized Valutaion increases due to new construction, the change is mostly due to the increase or decrease in the existing physical stock and so Equalized Valuation is a rough way to gauge changes in real estate in a town.  Since inflation was 1.9%, we can see that the state (overall), beat inflation, although we must not assume that the average home increased by more than inflation, due to the concentration of the increase in only a few places and the increase in EV that comes from new construction. 

Looking longer term, this is an increase of 6.9% from 2013, when the state's total Equalized Valuation was $1.16 trillion.  The five year inflation rate was 4.98%.

The towns with Equalized Valuations above $10 billion are, with their change in ranking from last year:

1. Jersey City, $28.4 billion (unchanged)
2.  Hoboken, $16.427 billion (+2)
3.  Edison, $16.414 billion (-1)
4.  Newark, $16.1 billion (+1)
5.  Toms River, $15.4 billion (-1)
6. Jersey City's PILOTed property, estimate at $12-$13 billion.
7.  Ocean City, $12.2 billion (unchanged)
8.  Middletown, $10.849 billion (unchanged)
9. Woodbridge, $10.839 billion,  (unchanged)
10. Brick, $10.7 billion  (unchanged)
11. Millburn, $10.3 billion (+1)
12.  Franklin Township, $10.105 billion (+2)
13. Lakewood, $10.097 billion (+3)


The Urban Core Grows, Triumph of the Train Line Suburbs

As always, the average masks diversity and New Jersey's gain in real estate value was uneven.  Half of New Jersey's growth in Equalized Valuation took place in three counties, Essex, Bergen, and Hudson.

Of New Jersey's 21 counties, only seven gained more than the state average of 2.78% and only another two beat inflation.  Thus most towns in New Jersey are not doing well and homes are a poor investment for their owners.


Hudson County was, again, the biggest gainer, reaching $77.7 billion, which is growth of 8.86%, or $6.3 billion.  Hudson County's gain was 19% of New Jersey's total net gain, of $33.6 billion. For last year, Hudson County's gain was 25% of the state's total gain ($11 billion out of $43 billion).

Jersey City gained $2.7 billion, growing from $25.7 billion to $28.4 billion).

Jersey City's Equalized Valuation is now more than Gloucester County
Jersey City's $28.4 billion Equalized Valuation is equal
to 2.35% of the state's total.
($26.3 billion).  I estimate, based on the $128 million increase in Jersey City's official, assessed valuation, that about $634 million of Jersey City's growth came from new construction and the expiration of PILOTs, with the other $2 billion of the increase coming from appreciation.

As new buildings are built in Jersey City, like 99 Hudson (shown at right), Jersey City's Equalized Valuation will continue to soar.

Hoboken gained $1.3 billion to reach $16.4 billion, putting it ahead of Edison and Newark to become the second most valuable town in New Jersey.  Hoboken's Equalized Valuation is almost as much as Sussex County ($16.9 billion.).

Weehawken gained $359 million (12.6%), to $3.2 billion.

Jersey City's all-in tax rate will probably become about 1.9.  Hoboken's will probably become 1.1.

Hudson County's other riverside towns also did very well, an indication that the "Gold Coast" is spreading.  Bayonne gained 7.9% ($428 million), North Bergen gained $618 million (11.2%). Union City gained $290 million (8.2%).  West New York gained $121 million (4.5%).    Tiny Guttenberg gained $94 million (9.9%).  Edgewater gained $245 million (7.1%).

These school districts are underaided, so the consequence of this growth is that their (hypothetical) Uncapped Aid will decrease.

Essex County had the second biggest gain in percentage terms, at 5.9%, or $5 billion.

Newark (!) Led Essex County
 with a $2.3 billion/17% increase

in Equalized Valuation.
That growth is disproportionately from Newark, which grew from $13.8 billion to $16.1 billion, a remarkable 17% increase.

The other Essex towns on the train lines did well, including urban Essex.  East Orange grew from $2.7 billion to $3 billion.  Orange grew by 8.8%.

The train-line suburbs also thrived. South Orange ($228 million, +8.5%), Maplewood ($250 million, +6.6%), Millburn ($637 million, +6.6%). Montclair, Glen Ridge, and Bloomfield did almost as well.

Only three other counties gained more than 3.0%.  Bergen County gained 3.36%, Union County gained 3.01%, and Monmouth County gained 3.4%.  Monmouth County's gain included an 11% increase from Asbury Park, already one of NJ's most overaided school districts.

Ocean County gained 2.94% ($2.8 billion), disproportionately driven by Lakewood's $1.1 billion (12%) gain.

Morris, Gloucester, Passaic, Salem, Burlington, Warren, Mercer, Camden, Cumberland, Sussex, and Hunterdon all grew, but lagged inflation.  Morristown might be the best performing traditional suburb, with a blistering 12.6% growth.

Atlantic County was the only county county to actually lose Equalized Valuation, dropping from $34.9 billion to $32.7 billion (-6.4%).  That loss was almost all from Atlantic City, which lost another $2 billion ($6.4 to $4.4 billion).  This is remarkable because Atlantic City was once NJ's #1 town in Equalized Valuation, at $22.2 billion in 2008.

New Jersey's other cities held their own or grew.  Elizabeth gained 6.5%. Camden gained 5.5%. New Brunswick had a 5.2% gain. Paterson gained 3.9%. Trenton was the laggard, with a 2.3% gain, which is still respectable considering Trenton's history.

Source, http://www.state.nj.us/treasury/taxation/lpt/lptvalue.shtml

Finally, New Jersey's big suburbs had a mixed year.  Franklin Township had a very good year, with 7.8% growth.  Edison grew at 3.7%, Woodbridge at 3%, but Clifton, Cherry Hill, Toms River, and Hamilton lagged inflation.  Brick and Wayne were nearly unchanged, so that's a significant decline in the real value of real estate there.    Bridgewater actually lost valuation.

Implications for State Aid

Changes in Equalized Valuation have implications for state aid because Equalized Valuation is one component of Local Fair Share and Local Fair Share is a component of the formula for Equalization Aid.

Local Fair Share is the amount of school taxes SFRA indicates a town is capable of paying.

The state calculates Equalization Aid with this simple formula

Equalization Aid = Adequacy Budget - Local Fair Share

The formula for Local Fair Share for 2017-18 is itself slightly more complex:

(0.014009 x Equalized Valuation + 0.047823 x Aggregate Income)/2.

The .014009 number is called the Equalized Valuation Multiplier. The 0.047823 number is called the Income Multiplier. The multipliers are supposed to be tweaked year to year.

Although the formula looks complex, it basically means that the state expects a school district to pay property taxes equal to 0.7% of its Equalized Valuation plus 2.3% of its Aggregate Income.

So, if a district gains $100 million in Equalized Valuation, that alone would increase its Local Fair Share by $700,000.  If a district gains $500 million in Equalized Valuation, that alone would increase its Local Fair Share by $3.5 million.  (assuming no change in Aggregate Income or the multipliers.)

So, for Jersey City to gain $2.7 billion would cause its Local Fair Share to increase by $20 million, Since Jersey City is overaided by $152 million for 2017-18, that means its excess aid for 2018-19 will be at least $172 million.  (not counting the growth in Aggregate Income)

For underaided districts, the increase in Equalized Valuation is hypothetical.  Bayonne's $428 million in new Equalized Valuation would theoretically reduce Bayonne's Uncapped Aid from $105 million to ~$102 million.  Since Bayonne's actual state aid is only $57 million anyway, there is no actual change for Bayonne's aid growth.

Lakewood's $1.1 billion in growth might actually be enough to erase its state aid deficit (which was only $3.2 million in 2017-18).  On one hand, this justifies Lakewood increasing its own tax levy, but it means that SFRA is even less applicable to Lakewood than before.

Atlantic City was already severely underaided and lost another $2 billion this year.  That loss should translate to $14 million in additional state aid, raising Atlantic City's Uncapped Aid from $79 million to $94 million.  Since Atlantic City only gets $46 million now, the change is hypothetical since an already out-of-reach target has now become more out-of-reach.

Since Hoboken's Local Fair Share is already 4.7x larger than its Adequacy Budget, Hoboken does not receive Equalization Aid.  Thus, the growth in Hoboken's Equalized Valuation and Local Fair Share has no implications for state aid.

Changes in Tax Base Indicate the Need to Redistribute State Aid and Amend the Tax Cap law to allow aid-losing districts to tap their tax bases more easily.

The fact that the tax base wealth of New Jersey towns is constantly changing underscores the need to redistribute state aid.  Given the increases in Equalized Valuation in several districts who are already overaided, such Jersey City, East Orange, and Asbury Park, it is likely that the excess aid surplus will increase for 2018-19 again.

Since these towns, however, can't even tap their own tax bases due to the tax cap, we also need to amend the tax cap for districts losing state aid and/or badly under Adequacy.


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See Also

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How is Equalized Valuation determined?
Equalized Valuation is determined by calculating the ratio of sales prices to a town's official assessment for its own local taxes.  If sale prices are, on average, 110% of properties's official assessments, then Equalized Valuation would equal 110% of a town's total official assessment.  If sale prices are 93% of official assessment, then Equalized Valuation would equal 93% of a town's total official assessment.

Because Equalized Valuation based on a ratio of sale prices to official assessment, a town's refusal to do a reval does not affect Equalized Valuation.  

Contrary to assertions from Sen. Mike Doherty and the Toms River Board of Education, Jersey City's decades-long refusal to do a reval did not distort its state aid since JC's Equalized Valuation constantly grew along with its real estate market.  Jersey City's state aid was distorted by Adjustment Aid and PILOTing, not the lack of a reval.  

If a town's Local Fair Share exceeds its Adequacy Budget, a change in Equalized Valuation has no theoretical impact on state aid at all, since it doesn't matter if a Local Fair Share exceeds Adequacy Budget by 5% or 150%.  Equalization Aid is $0 in either case.

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