Assemblyman David Wolfe

WOLFE ASKS FOR INFO TO ASSESS THE IMPACT OF ABATEMENTS AND EXEMPTIONS ON PROPERTY TAXES

TAX EXEMPTIONS TO DEVELOPERS ARE COSTING THE STATE & POOR NEIGHBORHOODS HUNDREDS OF MILLIONS OF DOLLARSAugust 8, 2006
Assemblyman David Wolfe/732-840-9028
Assembly Republican Office/609-292-5339

WOLFE ASKS FOR INFO TO ASSESS THE IMPACT OF ABATEMENTS AND EXEMPTIONS ON PROPERTY TAXES

TAX EXEMPTIONS TO DEVELOPERS ARE COSTING THE STATE & POOR NEIGHBORHOODS HUNDREDS OF MILLIONS OF DOLLARS

Assemblyman David Wolfe, a member of the Joint Legislative Committee on Public School Funding Reform today requested information regarding property tax abatements and exemptions offered by municipalities to developers, saying that such exemptions have shifted the property tax burden in many cities from individuals able to pay their fair share, to poorer neighborhoods and other regions of the state.

Wolfe sent a letter today to Department of Community Affairs (DCA) Commissioner Susan Bass Levin and State Treasurer Bradley Abelow asking that they provide information regarding these tax exemptions and abatements including the growth in value of these properties and the impact this has had on Payment in Lieu of Taxes (PILOTs) and school aid.

"While these exemptions and abatements can be useful revitalization tools, in many cases they can be abused in a way that has an unfair impact on school funding," said Wolfe, R-Ocean and Monmouth. "These are exactly the types of funding inequities that are driving up property taxes statewide and we should focus on this issue during our hearings."

Wolfe noted that aid to suburban and rural school districts has been mostly frozen for five years and that last year the state spent $4.18 billion -- 57.3 percent of its total school aid -- in the 31 Abbott districts while spending just $3.12 billion -- 42.7 percent -- in the remaining 585 school districts.

In his letter he points out that two of those Abbott Districts -- Newark and Jersey City -- have seen an increase in the value of tax exempt or abated property from $1.8 million to more than $355 million and from $6.5 million to more than $335 million respectively. This is a total increase in value of nearly $700 million between just two cities -- none of which generates any funds for schools. People living in tax exempt condos and townhouses in these developments often pay nothing toward supporting local schools.

"Many of the people benefiting from these tax exemptions are capable of paying at least some level of property taxes in support of their own schools," Wolfe said. "This only shifts that school funding burden to other parts of those cities and to suburban and rural areas of the state."

A copy of the letter is attached.

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August 8, 2006

Honorable Susan Bass Levin Bradley I. Abelow
Commissioner, Department of Community Affairs Treasurer
101 South Broad Street State House
Post Office Box 800 PO Box 002
Trenton, NJ 08625-0800 Trenton, NJ 08625-0002

Dear Commissioner Levin and Treasurer Abelow:

As a member of the recently established Joint Legislative Committee on Public School Funding Reform, I intend to explore the impact of property tax exemptions and abatements (awarded to developers predominantly by urban governing bodies under short and long terms tax exemption laws) has had on school funding throughout our State. While exemptions and abatements can be useful tools to revitalize our cities, they can also be abused and almost always have a profoundly unfair impact on school funding in a way that hurts older, poorer communities in urban areas, statewide taxpayers, and the State budget. I am writing to request that you provide me with relevant information to better understand the impact exemptions and abatements have on school funding.

My request for information is rooted in concerns that: (1) municipalities have an incentive to freely award exemptions because perverse loopholes in long term tax exemption laws allow municipalities to structure payments in lieu of taxes in a way that they get more money than they would get from their share of ordinary taxes; (2) payments in lieu of taxes under long term tax exemption agreements support municipalities and counties while completely excluding local schools -- even while the exempted developments may increase school population and school costs; and (3) exemptions and abatements shift school funding responsibility unfairly to taxpayers in other, less privileged, portions of these cities and into other portions of the State including my district.

By way of example, from 1996 to 2005, the percentage value of land and improvements in the City of Jersey City exempt or abated from taxation increased from .1% to fully 6% -- an increase in the value of tax exempt property from $6.5 million to more than $335 million. Similarly, from 1996 to 2005, the percentage value of land and improvements in the City of Newark exempt or abated from taxation increased from .2% to fully 3.2% -- an increase in value of tax exempt property from $1.8 million to more than $355 million. Between just these two urban areas, almost $700 million in property values fail to generate any funds for schools, and people capable of paying at least some level of property taxes in support of their own schools, are not required to do so.

So that I may better understand the impact of exemptions and abatements on school funding and craft reforms that will assist in fair school funding relief, I ask that you provide me with the information set forth on the pages that follow.

Sincerely,

David Wolfe
Member, Joint Legislative Committee on Public School Funding Reform