New Jersey Gov. Chris Christie today is set to sign an initiative to limit annual property tax increases to 2% in the state, which has some of the nation’s highest taxes.
Property tax levies will be held at 2% for school districts, counties, cities, and towns. The state’s current cap is 4% and includes many exemptions.
The bill reflects the compromise the governor reached last week with the Democratic-controlled Legislature. The proposal passed yesterday in the General Assembly by a vote of 73 to 4 after the Senate approved the measure last week.
“New Jersey families can finally look forward to the kind of real, long-term property tax relief that Trenton has failed to deliver for decades,” Christie said in a statement after the bill passed the General Assembly.
“A hard cap of 2% with limited exceptions that puts final authority to exceed the cap in the hands of the people is the substantial and sustainable reform New Jersey needs,” he said.
The bill allows local governments to bank unused increases for three succeeding years.
Voters can override the 2% limit with a 50% majority vote in a local referendum. Christie’s earlier proposal set that threshold at 60%.
The bill is a statutory measure and not a constitutional amendment. The governor’s original plan called for a constitutional change.
Exemptions to the 2% cap include debt-service payments; increases in pension and health care expenses above 2%; increases in energy costs exceeding 4%; costs of new court, state, or federally mandated services; and extraordinary costs due to declared emergencies such as floods and blizzards.
Even supporters of the bill pointed to other issues and government costs that are not included as exemptions, such as decreases in state aid, special education costs, and current labor agreements that could boost a locality’s expenditures.
Assemblyman Reed Gusciora, D-Mercer, who voted in favor of the measure, said that he was concerned about the bill’s impact on existing contracts.
“If a town contracted out with the police department [for] a 4% increase over three years and they’re only one year into the contract, how are they going to live within that cap?” Gusciora said on the Assembly floor. “They’re going to have to have layoffs or they’re going to have to substantially cut back on services.”
The deal on the property tax cap comes as New Jersey is struggling with unemployment and revenue concerns. The state’s jobless rate in May was 9.7% on a seasonally adjusted basis, compared to 4.2% in May 2007. The U.S. unemployment rate in May of this year was 9.7%.
Lawmakers are working on a “tool kit” that Christie proposed in May, which aims to help local governments live within the 2% cap. That bill, S2171/A3075, would require future labor contracts to limit employee costs to avoid boosting a municipality’s property taxes above 2%, restrict sick leave and carry-forward vacation days, allow local governments to implement furloughs, and other reforms.
The New Jersey League of Municipalities believes the tool kit must become law before the state implements the 2% cap. S2171/A3075 currently sits in committees.
Christie, who took office in January, said he is looking forward to working on the tool kit with the Legislature.
“Caps do not address the real cost drivers confronted by local leaders,” League executive director Bill Dressel said yesterday in a statement, echoing Christie’s position that the 2% hard cap is “unworkable” without the tool kit.
“No one can declare the cap a victory for reform, until the tool kit reforms are passed,” Dressel said.
“Now that the proverbial cart has been placed before the horse, the Legislature and administration must immediately prioritize and pass the tool kit reforms,” he said.
