The Governor and Legislature are pushing a 2 percent tax cap as a way to deal with the state's soaring property taxes. However, a constitutional cap is not the answer to New Jersey's exorbitant taxes. Such a cap would be too absolute and inflexible and may pose a threat to our state's open space.
New Jersey has the highest property taxes in the nation. Instead of establishing a long term solution to this problem, Governor Christie and the legislature are merely rushing to come up with a solution. But the solution being pushed will have negative consequences for the people of New Jersey.
Instead of rushing to implement a cap, the Sierra Club supports comprehensive reform that will ease the financial burden for homeowners in New Jersey and will allow our economy to thrive.
A tax cap would have many negative side affects. In addition to compromising our open space, it will drive municipalities will seek creative ways of getting around the cap, creating additional consequences like increased debt, a reduction in services, and a potential for privatization of municipal service.
A property tax cap could have a tremendous impact on open space. Approximately half the towns in New Jersey have open space funds. Instead of this money being used to purchase open space, towns may use this funding as a permanent way to meet budget needs. If towns have to decide whether to lay off police officers or take money from open space, they are going to choose reducing open space funding.
A reduction in the purchase of open space will only lead to overdevelopment, as towns try to grow their revenues through adding ratables. In the long term, this solution will only mean higher taxes and more sprawl.
The Governor's plan has just one exemption to this cap — debt service. This exemption will also have a negative impact. Instead of buying open space on a pay-as-you-go basis, towns will now be tempted to bond and increase to make open space purchases so they can use dedicated money for the budget. This will offer short-term financial gains that lead to long-term problems.
The cap will encourage all kinds of development — residential, commercial and industrial. And with those new tax dollars that come from the development, comes an influx of new construction because towns will need new roads, sewers and schools. The debt-service exemption will allow this to be done through borrowing, which will lead to more costs down the road.
Towns will begin looking for ways to get around caps by charging separate billing for services like garbage, libraries and road departments. Towns could also set up authorities for water and sewer and use these to get around the cap as well as public scrutiny. Instead of a town buying a new water truck, it will have the water department buy a new truck. Instead of hiring new sewer staff, it will have the sewer authority hire staff. As seen with Passaic Valley Sewage Authority, authorities become a dumping ground for patronage. There is little, if any, public oversight. This cap will encourage more of these runaway authorities.
To raise revenue, the City of Trenton tried to sell its water to a private company. The City of Newark is trying to take its water department and create a new utility authority. The result is that rates will go up and services will go down and water quality will be compromised.
The cap could also lead to privatization as towns try to sell off assets to meet their budgets. Towns could attempt to privatize their police forces or fire departments. They may try to sell parks or open space for development to gain revenue. This will lead to higher costs long term and worse services for the people.
The state needs to develop a comprehensive plan to deal with property taxes by encouraging regional planning and good land use. We should be encouraging development in the right places; places with existing infrastructure and transportation. There should be better regionalization and duplication of services between communities and levels of government. We should be urging towns to merge and consolidate through incentives. It is key that the state also look at other sources of funding for schools aside from property tax revenues.
Only through comprehensive reform can we help the people of New Jersey deal with the burdensome property taxes that are crushing everyone in the state and driving businesses to go elsewhere.
Jeff Tittel is the Director of the Sierra Club, New Jersey Chapter.