Revaluation or Malassessment In New Jersey

What is it? – A revaluation is an activity performed by the local tax assessor for the municipality to appraise all real property within its borders according to the prevailing market value. The difference between a revaluation and a reassessment is that the assessor hires a revaluation company to perform the work if it is called a revaluation versus doing the work in house with the staff of the assessor’s office in the case of a reassessment.

What is its purpose? – The sole constitutional purpose of a revaluation is to spread the property tax burden equitably among all property owners within a municipality.

What if its not done? – Generally, delays in updating assessments to reflect changing physical and economic conditions lead to Malassessment. Properties once similar in value became dissimilar. Owners of properties with rising value became accustomed to paying a lesser share of the tax burden than would otherwise be the case and after reassessment “suffer” sharply higher property tax payments. Other property owners “benefit” from decreased taxes because the value of their property has declined or only slightly increased – these taxpayers have been paying a higher tax than they should have been.

What causes Malassessment? – Each property in the same municipality with the same market value at a given point in time should be paying the same amount in property taxes. Malassessments or inequitable assessments result from the following situations causing a lack of assessment uniformity:

o changes in neighborhood characteristics;

o changes made to individual properties;

o fluctuation in the economy (inflation, recession);

o changes in style and custom (desirability of architecture, size of house);

o changes in zoning which can either enhance or affect value adversely.

What is wrong here? – Assessors are asked to find “the price” at which a willing buyer and willing seller would agree to transfer a piece of property on October first. Well, common sense tells you there is a whole range of prices at which a willing buyer and a willing seller could transact a sale. So assessments are only predictions, and even the best predictions go astray. The need for a reassessment or revaluation, therefore, grows with the passage of time that erodes the old information based upon which the original assessments were made. Statewide in New Jersey, these assessment predictions or estimates constitute the tax base on which 2/5ths of all our state and local taxes are collected. Its on this set of predictions that local governments in New Jersey collected $19.6 billion in 2005.

Is there a better way? – Yes, first we must realize we have an indefensible tax structure that places too much weight on a property tax base that at best is only a set of predictions. Second, we must make provision for accurate regular assessments by strengthening and beefing up the assessment function with a sound investment in computers, assessment data base management and appraisal education resources for assessors.