Plainsboro officials are mad as hell, and they’re not gonna take it any more. That’s the message they sent last week when the township filed a lawsuit against the state of New Jersey in an attempt to overturn the year’s 14 percent school tax increase.##M:[more]##
The township, coming off two years of massive increases, has filed a complaint in state Tax Court challenging the process used to calculate and divide costs for the West Windsor-Plainsboro Regional School District.
“The inequitable method the state uses to determine how schools are funded in a regionalized district has become a tremendous burden on our taxpayers,” says Mayor Peter Cantu. “It’s time for a serious examination of this process and to find ways to make it fair and equitable.”
The determination of each town’s share of the tax burden each year is based on a complex formula that considers property values and not the number of school children each town sends to the district. The total value of all properties in each municipality is adjusted annually as compared to current market values.
The formula can cause wild swings in the amount of school taxes paid in each town. For example, in the last two years, school taxes increased by more than 38 cents per $100 of assessed valuation in Plainsboro, while taxes in West Windsor only increased by 3.3 cents. However, in other years over the past decade, West Windsor was hit with bigger tax increases, while Plainsboro saw little or no tax impacts. According to the school district, over the last 10 years West Windsor has seen an average tax increase of 6.38 percent, while Plainsboro’s average was 6.12 percent.
The last five years alone show a history of the tax burden flip-flopping back and forth between the two communities.
In 2000, Plainsboro taxes rose by 6.28 percent, while West Windsor’s increased by 4.72 percent. But the following year, the burden shifted to West Windsor, which saw an increase of 7.66 percent, while Plainsboro’s taxes decreased by .67 percent.
The trend continued in 2002, with Plainsboro’s taxes again decreasing by .41 percent and West Windsor’s going up by 5.44 percent.
In 2003, the burden shifted back to Plainsboro, which saw a 4.78 percent increase, while West Windsor’s taxes increased by 1.98 percent.
This year Plainsboro saw a huge jump in taxes of 14.28 percent, while West Windsor’s decreased by .64 percent.
Legislation enacted by the state in the 1990s allows regional school boards to base the tax burden on the number of school children each town sends to the district, but the change would need to be approved in a referendum in both communities. Cantu believes such a proposition would have little chance of success in West Windsor because the voters would effectively be raising their taxes.
According to information provided by Plainsboro, although populations are basically the same in both towns (20,"215 in Plainsboro and 21,"907 for West Windsor), some 40 percent of the students come from Plainsboro, while West Windsor contributes 60 percent.
“We have for years thought that the system might have been better and fairer if it was done on a per pupil basis, but that is not the thrust of our lawsuit,” says Cantu. “Over the years, we have paid a significant amount — tens of millions of dollars — that Plainsboro otherwise would not have had to pay. Our attack is not on the method of allocating the taxes, it’s on the process.”
Cantu says he hopes the court hears the case and renders a decision quickly. “The process is blatantly unfair and needs to be addressed. It’s not something that has the luxury of time.”
Plainsboro’s complaint claims that the state’s approach to determining this year’s tax ratio was “arbitrary, capricious, unreasonable and unjustified.”
It also alleges that the process is unconstitutional special legislation affecting municipalities, because it violates the provision requiring all property to be assessed according to the same standard of value, and because “it violates the clause requiring a thorough and efficient system of free public schools.”
Cantu says the township is looking for the court to accept the fact that the system is “flawed” and look for a remedy. “If the courts make a determination in our favor, we hope they will order the state treasury department to look at this differently.”
“This is not something we did lightly,” says Cantu. “It’s a very significant issue for us. This has been a problem in past years, and this year it was an even greater problem. It’s outrageous and speaks to a system that doesn’t work from a standpoint of fairness. Aside from looking at the issue from a common sense standpoint, we feel we have strong proof to make our case.”
In Plainsboro last year, for example, there was a substantial increase in the value of residential properties, but there were no commercial property sales to indicate how much commercial property had increased in value.
The township believes that the state Division of Taxation unfairly applied the percentage increase in residential values to commercial property values, which have remained essentially flat in recent years.
Plainsboro says that the calculation falsely inflated the total value of properties for the township. “Since approximately 60 percent of the properties in Plainsboro are commercial, this had a substantial effect, increasing our share of the school tax burden for the year,” says Cantu.
Another problem is the fact that Plainsboro is under the auspices of the Middlesex County Board of Taxation, and West Windsor is governed by the Mercer County Board. Each body has its own methods and requirements for the way its communities are allowed to go about property assessments.
“Each municipality has its own tax assessor, who uses his or her judgment to assess value and update it to current market value each year,” according to a statement issued by Plainsboro. “The sales each year for properties are also used in factoring the updated value. Each assessor also determines which of their properties that were sold qualify as a ‘usable sale’ based on numerous guidelines determined by the state. A usable sale is intended to be any sale that is reflective of fair market value, although some of the guidelines are rather vague and open to interpretation by the assessor.”
Plainsboro claims that because of the complexity of the process and the opportunity for “adjustments” by the various tax assessors and the state, the total assessed values are not representative of true fair market value. “If one town assesses property at a lower rate, the other town pays the price.”
Plainsboro alleges that West Windsor omitted two “significant” property sales from its list of usable sales for computing the township’s tax ratio. They claim that MarketFair was assessed by West Windsor at $25.9 million but sold for $67.8 million, and WW Commons LLC, assessed at $32.2 million, sold for $75.2 million.
“Had those two sales been included in determining the tax ratio, the outcome would have been significantly different,” says Cantu. “This means that our share of the school funding depends on changes in the real estate market and the judgment of the tax assessors in each town. The current method allows for quite a bit of disparity from year to year, which makes it difficult for municipalities to plan their budgets and protect their residents. We’d like that to change.”
Cantu says that his township’s school tax problems are a state issue and have nothing to do with the WW-P School District. “Our concerns are about equitable treatment in partners in a school district. The school district is outstanding, our problem is the way the costs are allocated. It works to the detriment of the school district. People don’t like to pay taxes, and they like it even less when they feel those taxes are based on a flawed process. We’ve looked at this problem over the years and there’s really limited recourses that you have. At this point the tax appeal was our only option.”
Another alternative would have been a joint revaluation. “I for years have suggested that the two communities come together and do a joint revaluation to forestall this type of problem, but was never able to do it.” Plainsboro moved voluntarily this year to conduct a township-wide revaluation to bring the assessments of commercial and residential properties in alignment with market values in time for next year.
Cantu points out that West Windsor had to be ordered to conduct a revaluation by the Mercer County tax board, and its new valuations won’t be on the books until 2006.
West Windsor Mayor Shing-Fu Hsueh says that although he has not reviewed the lawsuit, he has been a long-time advocate for changing the tax system in New Jersey.
“Plainsboro definitely has a right to file the lawsuit and we’ll be happy to work with them,” says Hsueh. “Their concern is that the state system is not fair. It’s a system we have been using for many, many years, since before I became the mayor.
“There’s always room for improvements to make the system better. The state has a formula, and overall, West Windsor still probably pays more in school property taxes.”