Wall Street Journal: Do-It-Yourself Tax in New Jersey

Feb 12, 2011

The following article was published in the Wall Street Journal on February 12, 2011:


Do-It-Yourself Tax

With Cap in Place, N.J. Town Considers Raising Own Rate

By Lisa Fleisher

Officials in Lambertville, N.J., are considering asking voters to raise their own property taxes to deal with a quintessential municipal issue: trash pickup.

The vote could be the first test of a property-tax cap championed by Gov. Chris Christie as a way to control local tax increases. Opponents of the cap, which limits towns to 2% increases in annual collections with several exceptions, said it would force towns to slash services and create inequities among rich and poor areas.

Lambertville, a town of 3,900 residents, wants to reverse an unpopular practice it implemented last year—charging residents a separate $200-a-household fee for trash pickup—to deal with budget problems under the previous 4% cap.

The town instead aims to add some, if not all, of the $460,000 cost of picking up trash onto the tax levy, which was $1.75 million in 2010. That would require a majority vote under the cap—because municipal property taxes, technically, could go up by an eye-popping 25%.

Mayor David Del Vecchio said residents will see no real difference in how much they pay for services, because the fee would be reduced or go away, depending on which trash program is chosen. Plus, taxpayers could write off the price of garbage if it’s included in property taxes.

The law Mr. Christie signed in July limits towns to increasing overall tax collections by 2%—not including money for debt payments, pension and benefits increases and emergencies. The cap had previously been 4% (with more exceptions), and towns were allowed to go over the limit if approved by a state board. Now, if a town wants to exceed the limit, it has to hold a referendum. School districts and counties are under similar constraints.

Democrats stress that homeowners’ individual bills could go up much more than 2%, because of the exceptions and because the rule applies to the entire town, not individual property owners. If businesses leave town, for example, the burden of supporting the budget will fall onto a smaller number of shoulders.

The law was modeled on a stricter 2.5% cap Massachusetts has had in place for 30 years. There, opponents say libraries, schools and other town services have suffered, especially in middle-class towns where voters are hesitant to raise their own taxes. Supporters say it has given residents control over spending.

The town’s reasons for making the switch back are slightly technical, reflecting the acrobatics budget officials perform to conform with state rules. Folding the cost of trash back into the budget would give the town a bigger base to increase taxes in the future, and Mr. Del Vecchio said trash was a more stable cost than other frequent budget-busters, such as salaries.

The question is whether voters will be able to hold their noses, look past the words “increase property taxes” and pull the lever in the town’s favor.

“I think it would get shot down,” said Dana Cormier, who lives in Lambertville and owns an Italian restaurant there. “People would probably rather keep the $200 collection fee annually than have their taxes go up any more than they have.”

Referendums to override the cap must be held on the same day as votes on school budgets, which some school officials worry could lead to more defeats for their budgets.

But Steven Wolock, the town school board president, said he supports the garbage reversal and thinks it will pass.

“I would prefer that it be on another day, but I’m not losing any sleep over it,” he said. “The referendum…is an easy choice. I think it will pass easily.”