Jersey City, New Jersey, property tax revaluation (2016)

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What is revaluation? Why is it done?

“	The need for revaluation/reassessment may be shown by any evidence which indicates properties in a taxing district are not assessed at the same rate of true value. A revaluation/reassessment program tries to distribute the tax burden within a taxing district by appraising each property according to its true value and assessing it for taxation based on that true value. During a revaluation inspectors will take exterior measurements and photographs of all houses and structures. Inspectors will also determine the amount of living space, condition of kitchens and bathrooms, basements, foundations, etc.	”
—How Property is Valued for Property Tax Purposes, New Jersey Treasury Division of Taxation Property Administration (September 2014)

Updated April 18, 2016

Jersey City, New Jersey, will complete its first property revaluation since 1988, following an order from the New Jersey State Treasurer. The decision to complete the long delayed revaluation was also preceded by the city being found in breach of its contract with the firm hired to complete a property revaluation in 2010.

Mayor Steven Fulop made halting the revaluation one of his first actions after taking office in 2013. While a majority of residents who spoke at a January 2016 public hearing on the matter were in favor of the revaluation, gubernatorial-hopeful Fulop painted the move as an attack directed at him.

State officials had argued that the city's assessed value fell $15.6 billion below its actual value. The discrepancy indicated a significant difference between the city's potential tax base and its tax revenues. Beyond the total missed taxable value, it also indicated that different parts of the city were being taxed higher or lower than their proportional value of the city. Some have called for a regular five-year revaluation cycle to avoid extreme swings in property valuations.

HIGHLIGHTS

Since 1972, the city had completed only one revaluation.

The city is appealing the ruling in the breach of contract lawsuit regarding the 2010 revaluation attempt. Legal costs for Jersey City have totaled at least $325,000, as of February 2016.

New property values will affect taxes in 2018. It is expected that taxes will increase for one-third of the city's property, decrease for another third, and remain the same for the remainder.

1) 2010 revaluation plan

Former Jersey City Mayor Jerramiah Healy

In 2010, then-Mayor Jerramiah Healy announced his plan to start a revaluation process, under which the new assessed values would have taken effect on taxes in 2013. At that time, the city's assessment ratio was already 26.75 percent. In February 2011, the city council voted 5-2 in favor of awarding the contract for the revaluation process to Realty Appraisal Co., which submitted the lowest of four bids. Then-City Councilman Fulop joined fellow Council Member Nidia Lopez in the dissenting votes; Viola Ricahrdson was absent from the vote.

2013 halt

Healy sought re-election in 2013, but was defeated by Fulop, who campaigned against the incumbent by specifically citing the revaluation decision.

After defeating Healy on the ballot, Fulop swiftly stopped the already-in-progress revaluation, questioning the political motivations behind hiring Realty Appraisal Co. to perform it and positing that it would have led to significant tax increases. "I will not allow this back-door tax hike planned by the Healy administration to take place," Fulop stated of his June 2013 decision.

2) Breach of contract

Realty Appraisal Co. won a breach of contract suit against Jersey City on April 14, 2016, when Hudson County Superior Court Judge Francis B. Schultz ruled that the city demonstrated bad faith by halting the 2010 revaluation and not paying Realty Appraisal Co. In his ruling, Judge Schultz stated, "The evidence in this trial is clear and convincing. The city simply does not want a revaluation. Period." The following day, the city announced it would complete a revaluation, but it would also appeal the ruling in this case.

Fulop had claimed that the assessment company created a conflict of interest after it hired former city business administrator and tax assessor Brian O'Reilly, following his retirement from local government on August 1, 2010. City code prevented O'Reilly from earning any compensation related to projects he was involved in through the government for one year after his retirement, but he was hired by Reality Appraisal Co. less than two months later.

Mayor Steven Fulop

According to NJ.com, a city attorney argued in a court filing that, "O'Reilly, before retiring from the city, appointed all the members of a committee tasked with reviewing bidders for the reval work, a committee that ended up unanimously recommending Realty Appraisal's bid. After being hired by Realty Appraisal, O'Reilly helped the firm create a presentation it gave to that city committee about its bid before the council awarded the reval contract."

The appraisal company, owned by Neil Rubenstein, filed suit against the city over this matter in December 2013. Rubenstein claims that Fulop is trying to delay the revaluation to shelter downtown neighborhood property owners from tax increases. Originally scheduled to begin in November 2015, the case was delayed to a new trial date of February 16, 2016. The city filed a countersuit on June 23, 2015.

Judge likens request for delays to King George III

The city requested that Hudson County Superior Court Judge Joseph A. Turula recuse himself from the pretrial motions of case, arguing that Turula would be biased because he had ran for Congress and the New Jersey State Assembly as a Republican in the past (Mayor Fulop is a Democrat) and because he owns tax-abated property in the city, the taxation of which could be affected by a revaluation.

Judge Turula rejected the arguments from the city's attorneys, stating that the city's government is nonpartisan and pointing out that the state's constitution requires county judges to reside in the counties they serve. On November 20, 2016, Turula criticized the city's actions as "judge shopping" and calling the arguments akin to "when King George the Third required his judges to swear an oath of allegiance to him, or a few decades ago when mafia dons in Sicily assassinated judges who they did not agree with." The city, represented by Shain, Schaffer and Rafanello, appealed to the New Jersey Supreme Court, but the high court denied their claim in January 2016.

On February 24, 2016, the city council voted 9-0 to approve an extension of its contract with Shain, Schaffer and Rafanello, bringing the city's total cost for representation in the case at that point to $325,000.

3) State order and a new reval

Hudson County View, "Most Jersey City residents at public hearing call for tax reval, some critical of Fulop," January 29, 2016

On April 4, 2016, the New Jersey Treasury ordered Jersey City to complete a tax revaluation by November 1, 2017, with new values to take effect for the 2018 tax year. The order followed an investigation from the state, a series of escalating statements from the treasury, and accusations of personal and political agendas in the mix. The mayor and Gov. Chris Christie (R) sparred over the revaluation, in addition to other issues. While Fulop's office called the order "more politics from Trenton" at the time of its announcement, the city announced it would go ahead with the reval on April 15, 2016—one day after the breach of contract case was ruled against the city.

State investigation

If a city's average ratio of assessed to true property values drops below 85 percent, it "generally denotes noncompliance with state regulations." According to the state's 2015 figures, the Jersey City's average ratio of assessed to true value was 27.63. Jersey City, however, was not the only city missing the 85 percent mark. While it was the lowest ratio in Hudson County, only two of the 12 taxation districts in the county had a ratio in excess of 80 percent.

A source cited by The Jersey Journal in January 2016 stated that "the state would likely give the city one final shot to proceed with a reval and, if it doesn't, the state would hire a company to do it."

Mayoral response to state criticism

On January 26, 2016, Fulop criticized those pushing for the revaluation at a public meeting, saying, "They are doing it purely for hatred of me." He also questioned the suggestion that delaying the revaluation was a benefit to downtown neighborhood property owners. He countered that while taxes could decrease for some, a "domino effect" would spread decreasing home values from the downtown neighborhoods to the rest of the city.

The New Jersey Education Aid blog criticized the mayor's opposition to the revaluation, pointing to Fulop's own home purchase in 2015. The mayor paid $845,000 for the property, more than eight times its assessed value of $104,000.

Public reactions

Approximately 40 people, including Healy, attended a public hearing on the matter hosted by state tax officials on January 28, 2016. Healy has been a strong critic of Fulop's handling of the revaluation. He also called for expanding taxation to nonprofits, churches and parochial schools at the January meeting, saying, “Right now when people are paying $6k, $10k, $15k, $19k a year, that becomes a huge burden so when more than 40 percent of properties in your city are not paying taxes, these laws has [sic] to be changed.” This echoed complaints about abated properties in 2010, when Healy called for the revaluation.

Other critics of the delay in revaluation include Bill Matsikoudis, top city attorney under Healy's administration, and David Wolfe, who has represented Jersey City property owners in tax appeal cases and is chair of the New Jersey State Bar Association's real property tax and practice committee. Wolfe's father had been hired by some citizens to sue the city following the 1988 revaluation. Additionally, Jersey City Board of Education Trustee Lorenzo Richardson leveled criticism at the January meeting, asking, “Can the mayor be put in jail for holding up the reval? Because he needs to be.”

History: 1988 revaluation

The April 1989 edition of the Riverview Neighborhood Association newsletter included local reactions to the 1988 revaluation taking effect.

The last revaluation, almost three decades prior to the current dispute, highlights the political quagmire of mixed agendas that plague the process. At the time of these disputes, The New York Times reported the situation in Jersey City as "an example of the confusion that revaluations can cause when they are postponed during years of rapidly rising real-estate values." According to reports at the time, the city's total assessed value rose from $800 million in 1972, the most recent revaluation at the time, to $5.6 billion.

Gentrification and inflated housing prices were also noted as contributing factors to the extreme swings in valuation seen across the city. Unlike the ongoing dispute, however, the 1988 valuations saw the then-mayor in support of the move, while citizens voiced strong dissent.

According to The New York Times, "the tax rate was lowered from $182.11 per $1,000 of assessed value in 1987 to $30.52 in 1988. That means that taxes would increase for any property where the assessed value rose more than six times." Citizens protested across the city, complaining that the inspectors from Real Property Appraisers "failed to enter the majority of homes, were poorly trained and assessed many properties far above or below market value." Many of the displeased banded together to form the Coalition for Fair Taxation.

While municipal appeals of the third-party assessments were common at the time, Jersey City supported the initial findings of the revaluation. Residents, meanwhile, appealed en masse, with nearly 5,000 challenges filed with the Hudson County Board of Taxation in September 1988. Others hired Saul Wolfe, then-president of the New Jersey State Bar Association and father of David Wolfe, to sue the city. Meanwhile, City Assessor Peter Casamasino disputed the revaluation company's finding and modified thousands of their submitted assessments.

Mayor Anthony M. Cucci supported the revaluations, as well as an extended appeals process time frame to allow citizens to air their grievances with the city. "We are aware there were errors, and some may be grave errors. But I can't see any reason, as long as we are anticipating everyone will get fair hearings, to put a moratorium on it or stop what we are doing. I may be the loser politically because of it, but I think in conscience I am not the loser because it is being done properly," he stated. Opponents of the 1988 revaluation claimed that Cucci lost his re-election campaign due to his stance on the matter.