Sandy and Recession to Deliver Double-Whammy to Tax Base
Ocean City's ratable base continues to decrease.
The combined value of all real estate in Ocean City continues to shrink, and that could lead to higher taxes for some property owners.
Damage assessments in the aftermath of Superstorm Sandy and an ongoing project by the city to reassess properties based on lower market values could combine to wipe out about $900 million in Ocean City property value this year.
Ocean City's ratable base is anticipated to be about $11.3 billion this year, down from $12.2 billion last year, according to Ocean City Finance Director Frank Donato.
"The lion's share of that decrease will be from the compliance plan (the city's reassessment project), but appeals and storm damage assessments (which are still underway) are pieces of that decrease as well," Donato said.
Donato does not have final figures yet, and municipalities were granted extra time this year to finalize their books. He said the city administration will have a final figure by the time it presents a budget to City Council on Feb. 14.
With more than 19,000 taxable properties, many of them valuable waterfront homes, Ocean City enjoys one of the highest ratable bases of all municipalities in New Jersey (seventh in 2010). The high value of Ocean City's properties allows the city to keep tax rates low. But as the ratable base falls, tax rates increase.
Even if the city were to collect the same overall amount of money from taxpayers this year (a flat tax levy), taxpayers would be affected unevenly. The owners whose properties were not damaged would pay more in taxes to compensate for owners whose properties were damaged (and assessed at lower values).
It's a situation that existed in 2011 when the ratable base fell by more than $681 million in Ocean City through tax appeals and the compliance plan. Even though Ocean City's overall tax levy decreased (because the city delivered a lean budget), the tax rate increased by 4.91 percent.
Owners whose properties were reassessed (on average) paid less in taxes (as the decrease in their property value more than offset the rate increase). But owners whose properties were not reassessed paid more.
A similar situation will likely exist this year. But with the city administration still drafting a budget that will have to take into account expenses related to the recovery from Superstorm Sandy, the city administration will be hard-pressed to deliver another budget with flat increases.
But even as difficult as the estimated 7.4 percent decrease in Ocean City's ratable base may be, other towns have it worse.
"More than a dozen municipalities in the state could lose at least 10 percent of their tax bases," according to a report in the New York Times by Alison Leigh Cowan.
Toms River reported that property tax receipts could drop by as much as 15 percent, according to the New York Times story.
Tuckerton in Ocean County lost almost 20 percent of its property tax base, and in Sea Bright, only half the homes are inhabitable.
"Without new revenues, state and local officials and Wall Street analysts said, these areas may have to make deep cuts in spending on schools, police and fire departments and other services," Cowan writes. "They also may be hard-pressed to finance rebuilding."
Read "Towns' Next Hit From Hurricane Is to Tax Revenue" in the New York Times.