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Tax reassessment update: December 2011

Downe loses NJ tax court case on property assessment

On November 30, 2011 the NJ Tax Court published the decision of a case involving the Kulas of Fortescue Road. The Kulas won a tax court case that resulted in a substantial greater reduction in their tax assessment that the township was willing to offer under current procedures. The property was reassessed at $377,700 in the township-wide reassessment in 2009. The Kulas appealed. The local Cumberland County Board of Taxation offered a reduction to $328,600. The Kulas still disagreed and took the case to tax court. The NJ Tax court reduced the assessment to $245,000, resulting in a tax reduction of about 35%. A copy of the tax court decision is posted here.

While the decision affects only the Kulas, the court's logic opens the door for other residents who may wish to seek reassessment based on sales of noncomparable properties where a reasonable relationship exists to establish land value.

Future impact of the tax court case

It is not clear at this point what immediate impact the new tax case will have on future assessment appeals. Considering the substantial cost of defending a tax court case like this, it seems unlikely that Downe Township would use the same basis (specifically a lack of comparable sales) to defend tax cases brought by other taxpayers who are disappointed by the current reassessment procedure. It seems that immediate adoption of an alternate reassessment procedure would appear to be in the best interest of the township and taxpayers seeking reassessment. Local property values are predicted to decline further in 2012, so it is possible that 2012 tax challenges may result in even larger tax savings.

Tony Novak of Money Island withdrew two 2011 Cumberland County Board of Taxation appeal petitions with the understanding that the township was working on an alternate method of handling a reduction in the assessed values. The current procedures used by the Cumberland County Board of Taxation that rely only on comparable sales is not effective in Downe Township especially under current market conditions and is not useful to either the township nor the taxpayers in determining a realistic property valuation. Novak cited recent lot or property sales on Money Island at $32,000, $40,000 and $45,000 but these recent sales are not allowed as a basis for consideration of value because they are not "comparable sales". Allowance of non-comparable sales might make the same appeals successful in 2012.

Earlier this year Downe Township tax assessor Doris Stanza discussed a proposal to adopt an alternate reassessment procedure (see details in the letter below) that would allow for the use of noncomparable properties as the basis for valuation. For example, if an empty lot next to your house sold for $50,000 then the value of your property might be determined as $50,000 plus the value of your building and improvements. Stanza expressed support for the proposal and requested time to work on the issue. This is a more logical way to approach valuation when few comparable sales are available.

Strategy for 2012

Novak spoke with Stanza on December 8 to discuss a strategy moving forward. Stanza has not yet worked out arrangements for an alternate reassessment procedure but encouraged Money Island residents to submit an appeal for 2012. She says that a continued lack of factual information about the underlying reason for property value declines (see the April update below) makes it difficult for the township to approach the county tax assessment board with a proposal for revaluation. She would like to see a 30% across-the-board reduction in land value assessments for Money Island. Novak pointed out that the most recent sales may indicate more than 60% reduction in lot value and that Realtor association forecasts call for further declines in local property values for 2012 and beyond.

The greater the number of residents who submit appeals, the more likely an alternate valuation method may be utilized by the county this coming year. We also believe that a lowering of tax assessments will speed up and facilitate an eventual state takeover of portions of Money Island most affected by deteriorating shorelines. 


April 2011 update to Money Island residents

Following is a copy of an e-mail sent by Tony Novak on April 28, 2011 to some Money Island property owners:

"This is a summary of the status of the 2011 Money Island tax reassessment issue based on the cumulative conversations with the Cumberland County tax board, Downe Township tax assessor Doris Stanza, several local real estate appraisers, and my attorney Terry Bennett. I want to first thank all for their diligent work while we worked through this over the past few months.

BACKGROUND

You may be aware that after dragging my feet for two years in 2009 and 2010, and at the persistent requests of other MI residents, I offered to be the first to test the waters for property tax reassessment this year. I filed an assessment appeal for my two properties this past January for a 2011 hearing. The appeal petition was based on two 2009 non-comparable sales (building lots) on Bayview Ave. at $45,000 and on a 2010 Realtor’s written counter-offer to sell a comparable Bayview house at $75,000 (not an actual recorded sale). I was seeking a reduction of approximately ½ of my total tax assessment.

2011 HEARING

The 2011 tax reassessment hearing on my properties was scheduled for May 5 in Bridgeton. Today I agreed to withdraw my request for appeal. The decision was supported by all involved. The decision was based on these four factors: 1) In the absence of comparable sales, the tax board lacks authority to revalue properties this year. None of the sales within the past three years are considered “comparable” under the rules of the tax board. The Board lacks an alternate method of making an assessment adjustment when there are no comparable sales. 2) Our ability to argue that the current valuation and appeal process results is unfair is met with sympathy and even approval, but the tax board lacks authority to make an adjustment. 3) Proceeding with the appeal would likely result in a significant waste of taxpayer money. 4) The withdraw shows our good faith in the township’s efforts and proposal to reassess all properties together in a more efficient and appropriate process.

NEXT STEPS

Doris Sanza expects to make an appeal this year on behalf of Downe Township to re-assess MI lots at about ½ of the current level. A representative from the MI homeowners association will likely be requested at that hearing. Of particular importance is the impact of recent DEP actions on property rights and resulting valuations. All parties involved already agree that Money Island is currently over-accessed. The correction procedure will be a collaborative process and not an adversarial process. In the end, the DEP’s recent actions, as may be documented in complaints, application rejections, fines or property liens may be the biggest proponent that will sway the County Tax Board in support of the MI devaluation.

IMPACT ON POSSIBLE BUYOUT

The rumors of a state buy-out never seem to go away, but appear to be only that – just rumors. We are not aware of any discussion at any level of government on this issue. In the event of an eventual condemnation or buyout of Money Island (even if this is a remote possibility), we do not believe that a final valuation of our properties will be based on the final tax assessment. In other words, since the direct cause of the devaluation is the same as the cause of the potential final buyout, it would not be logical to fear that tax reductions now would hurt us in the long run. This is the consensus opinion of those I spoke with at all levels.

IMPACT ON UNCOLLECTED TAXES

It appears that more than half of the cumulative property taxes for 2010 remain in default but I can only comment on my own situation. I was personally advised, purely as a financial strategy, to defer payment of real estate taxes for 2010 until other issues are resolved. The logic was that if the total collective liabilities (mortgages, taxes, judgments, DEP assessments) appear to be accumulating to an amount that exceeds the collective property values then there is no financial reason to continue to invest in ownership of the Money Island properties. At this point I have not made any decision to resume payment of real estate taxes or continue to escrow these amounts. The decision is likely to be swayed by the eventual outcome of a settlement proposal we recently made to DEP. As individual property owners, we should be aware that failure to pay taxes can result in a denial of access to the tax appeal board. There is no indication that an individual owner’s failure to pay taxes would impact a community-wide reassessment action.

CONCLUSION

At this point it seems reasonable to believe that 2012 taxes will be reassessed at a lower level than 2011. It seems likely that a collaborative community-wide effort will be more effective than individual appears, regardless of the level of future real estate sales activity.

Finally, Doris hopes to avoid repeating this “status report” story to each MI homeowner individually over the coming months, so we will do our best to communicate events to the community as a group as this issue progresses. Updates will also be posted on www.moneyislandnews.com. So as a personal consideration, please try not to bombard her with questions at this early point in the process.

This topic is likely to be further discussed at the upcoming homeowner’ association meetings. At this point this is all of the information that I have available".

Soon after sending this e-mail, Novak did resubmit permit applications to DEP, including a "Zane exemption" application for exemption from a waterfront development application. Processing of a DEP application is reported to normally take about one year.

On May 12 Ms. Sanza called to ask for assistance from any Money Island property owners who have made an application to DEP and been declined. A copy of the decline letter would aid her in preparing the reassessment request. Please contact Ms. Sanza at the township office at (856) 447-3100 on Thursdays.

 

 

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