Legislative fiscal estimate assembly committee substitute for

ASSEMBLY COMMITTEE SUBSTITUTE FOR

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  The Office of Legislative Services (OLS) concludes that the enactment of the Assembly Committee Substitute for Assembly Bill No. 2495 would result in an indeterminate increase in State expenditures, an indeterminate increase in costs incurred by the additional pilot county (Atlantic County), and indeterminate savings to municipal governments in the pilot county.
  
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  The pilot county will bear the cost of conducting a property revaluation in any municipality that did not do so within 24 months prior to the effective date of the committee substitute. The State will incur additional costs associated with reimbursements paid to the pilot county for costs associated with the property revaluations required by the committee substitute.
  
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  Although the Consolidation Fund and Sharing Available Resources Efficiently (SHARE) program have been eliminated and defunded, respectively, Atlantic County may be eligible to received State assistance through the Consolidation Implementation program.
  
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  While municipal governments would not see cost savings in the near term, they will achieve cost savings in Year 4 and beyond because the county government will assume the costs of office space, staff, and supplies for the office of county tax assessor.
  

The transfer of the assessment function from Atlantic County’s municipalities to the county itself will require the revaluation of all municipalities within the county to create uniformity of assessment throughout the county. The committee substitute authorizes the county assessor to assist in the orderly revaluation of all municipalities within the county, including the authority to grant a municipality a waiver from the revaluation requirement if the municipality has implemented a revaluation within the preceding 24 months and the county assessor believes that the revaluation produced accurate valuations that are still relevant.

The county assessor would be aided by deputy county assessors, appointed by the county board of chosen freeholders at any time after the appointment of the first county assessor. The committee substitute provides that all payments in lieu of taxes and tax abatement programs shall be unaffected by the appointment of a county assessor. If the county assessor wishes to settle a property tax appeal, the assessor must inform the municipality in which the property is located of his intention to settle the appeal.

The committee substitute requires the county to pay any costs associated with the municipal revaluations. The State must reimburse the county for the cost of the revaluations at the end of the three-year period during which the municipalities must be revalued, with monies appropriated to either the Consolidation Fund or the SHARE program.

The pilot county will bear the cost of conducting a property revaluation in any municipality that did not do so within 24 months prior to the effective date of the bill. Information compiled by the Division of Local Government Services indicates that there are 136,423 line-items of taxable property in Atlantic County. The Atlantic County Tables of Equalization for 2012 and 2013 note that four municipalities, Brigantine City, Egg Harbor Township, Galloway Township, and Linwood City, implemented property revaluations in 2012 and 2013. There are a total of 49,103 line-items of taxable property in those four municipalities. If these municipalities are exempted for the revaluation required by the committee substitute, 81,171 line-items would have to be examined during the revaluation process. In 2009, the Division of Taxation in the Department of the Treasury indicated that the average cost of a revaluation was $79.45 per line-item. If that amount has increased with inflation, the average cost of a revaluation would now be $88.23 per line-item. The estimated total cost of conducting revaluations in the remaining municipalities would be $7,691,097.33 ($88.23 x 87,171). The OLS notes that the current law permits revaluations required pursuant to P.L.2009, c.118 to be conducted over a period of three years following the appointment of the county assessor.

Information regarding the Gloucester County property assessment program implemented following the enactment of P.L.2009, c.118 indicates that the consolidation of tax assessment functions has resulted in expenditure reductions totaling $2.3 million. Gloucester County noted that municipalities previously paid $5.2 million for personnel, office, engineering, and legal expenses related to tax assessment and that under the countywide program, these expenditures have declined to $2.9 million. These costs do not include reassessments or revaluations that might have occurred under the municipal assessment system, but Gloucester County noted that these costs could total $1 million per year, based upon the implementation of a revaluation every 10 years. Gloucester County also noted that the establishment of a countywide system has enabled greater utilization of in-house legal services.

The State will incur additional costs associated with reimbursements paid to counties for costs associated with the property revaluations required by the committee substitute. P.L.2009, c.118 requires these payments to be made from State appropriations to either the Consolidation Fund or the SHARE program. The SHARE program provided funding for municipal consolidation and shared services studies. The Consolidation Fund was intended to augment the SHARE program through the development of new incentives for local governments to conduct their work more efficiently and by further encouraging consolidation and shared services through technical assistance. State support for the Consolidation Fund was eliminated at the end of Fiscal Year 2010, while appropriations for the SHARE program were last authorized in Fiscal Year 2011. No reimbursements were provided through those programs to the original pilot county established by P.L.2009, c.118 (Gloucester County).

The Fiscal Year 2015 budget appropriated $8.5 million from the Property Tax Relief Fund for “Consolidation Implementation.” Budget language permits these funds to “...be allocated to provide reimbursement to local government units that consolidate pursuant to any law, including but not limited to...P.L.2009, c.118 (C.54:1-86 et seq.)...”. Information available through the New Jersey Comprehensive Financial System indicates that $3.7 million has been paid to Gloucester County. Budget language confines funding to non-recurring costs that the Director of the Division of Local Government Services determines are necessary to implement a consolidation or municipal annexation. The amount appropriated for Consolidation Implementation has varied from year-to-year and there is no guarantee that any State financial assistance will be provided to Atlantic County. The bill requires any reimbursement to be paid over a three-year period following the completion of the three-year revaluation period. If the revaluations are completed in calendar years 2015, 2016, and 2017, the State would not incur any additional costs until Fiscal Year 2018 at the earliest.

The OLS notes that the budget for the office of the county tax assessor will be set by the Atlantic County Executive and the Atlantic County Board of Chosen Freeholders. While municipal governments would not see cost savings in the near term, they will achieve cost savings in Year 4 and beyond because the county government will assume the costs of office space, staff, and supplies for the office of the county tax assessor. Information obtained from the adopted budgets for Atlantic County indicates that for the three most recently completed fiscal years (2011, 2012, 2013) total expenditures for salaries & wages and other expenses for tax assessment administration averaged $2.563 million. Although data on total municipal expenditures for that time period are not readily available, the Atlantic County abstracts of ratables do contain data on anticipated municipal revenues for each year. Because State law requires municipalities to adopt a balanced budget, anticipated revenues can be a reliable estimate of municipal expenditures. The average amount of revenues anticipated by all Atlantic County municipalities for 2011, 2012, and 2013 was $519.6 million. The average total amount expended for tax assessment administration accounts for 0.49 percent of the total average amount of anticipated revenues. Please note that the total amount expended does not include amounts spent for municipal reassessments or revaluations, the latter of which may be financed through the issuance of short-term debt that is retired over a five-year period.

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).