Township Proposes Municipal Property Tax Hike For the First Time in Five Years

After four consecutive years of lowering the municipal service tax for Bernards residents, the Township Committee introduced a 3.65 percent municipal services tax increase for the 2010 budget.

The new proposed tax levy of $16,592,076 represents a $585,006 increase over last year's amount, but still sits below the levy from 2005 ($16,722,978) due to reductions over the past several years.

The budget, first introduced at the May 24 Township Committee meeting and available on the township Web site, will undergo a public hearing on June 29 at 8 p.m. in Town Hall. After public comments are heard, the committee will vote on its adoption or choose to make revisions.

Tax Burden

The new property taxes for municipal services, if the budget is accepted without changes, would amount to 25.8 cents per $100 of assessed home value – an increase from 23.5 cents in 2009. For every $100,000 of home value, residents will pay $258 dollars, which figures to $23 more per $100,000 of home value than in 2009.

Home Value     2010 Municipal Taxes    2009 Municipal Taxes     Increase

$200,000 home                  $516                                        $470                                 $46

$400,000 home                $1,032                                      $940                                 $92

$600,000 home                $1,548                                     $1,410                               $138

$800,000 home                $2,064                                    $1,880                              $184

$1,000,000 home             $2,580                                    $2,350                              $230

The tax burden is still below 2005 levels, where residents paid 26 cents flat per $100 of assessed home value. Township Administrator Bruce McArthur said that while municipal services taxes in Bernards have gone down over the five-year period between 2005 and 2010, "during that same time, the rest of the state's municipal services property taxes are expected to grow over 40 percent."

"Our record is unparalleled among the other 566 municipalities in the state," McArthur said. With the exception of Harding Township, Bernards has the lowest equalized municipal services tax rate in Somerset, Morris, Mercer, Middlesex and Union counties, according the McArthur. "When you combine that with the services we provide… I think our record is something to be proud of."

The municipal services tax is just one component on the overall property taxes residents pay, which also include the district school tax, county tax, and open space taxes (both municipal and county level). The municipal service taxes are predicted to factor in at about 15 percent of the total tax levy.

The State Aid Problem

As with the recently passed property tax increase for school funds, one of the biggest impacts in the 2010 budget cycle was the reduction in state aid to the township.

Unlike state educational aid, which is distributed by the state from a general fund, state aid for municipal services in Bernards is paid largely through taxes on energy that residents and businesses pay in their water, natural gas, electric and phone bills. According to legislation passed in 1997, the money is pooled into an "Energy Tax Receipts Property Tax Relief Fund," which is then redistributed to the municipalities by the state.

"I like to put quotes around the words 'state aid,'" McArthur said, because much of the money coming in was already taken out of Bernards' incomes through the energy taxes. The township administrator also said that the bulk of the funds have been diverted by the state for other uses in his letter introducing the budget.

In 2010, Bernards will receive $1.798 million in energy tax receipts, a decrease of 21.5 percent from 2009. "The last time the state aid was at that level in 1993 when our population was a very small piece of what it is today," McArthur said.

What's Up and What's Down

In addition to the reduction in state aid, McArthur isolated a few of the bigger cost and revenue shifts that have led to the proposed tax increase.

The police budget is up just over 6 percent, from $5.33 million spent on total public safety functions in 2009 to $5.65 million in 2010. The large majority of increased costs comes from an 8.95 percent increase in police department salaries and wages in the one-year interval. Dispatch services, police car purchases, emergency management costs and aid to fire and rescue squad expenses are either flat or decreased since 2009.

Pensions are another pain point in the 2010 budget. Public employees retirement system payments are up 18.86 percent to $558,770, and police and fire retirement system payments are up 5.31 percent to $865,748. McArthur said that Bernards has never deferred any pension payments, and is pushing to become debt free.

Over the five-year interval from 2005-10, Bernards has retired $5.1 million in general fund debt, according to McArthur. "In 2011 we will make our final general fund debt payment," he said. "Once again, I don't think any other town our size in this state will have zero level of debt."

With costs rising, Bernards also is facing decreasing revenues this year from interest on investments and deposits (down 14.6 percent), construction code fees (down 4.4 percent) and added taxes from new construction (down 5.4 percent). Combined with the loss in state aid, those four factors alone put Bernards out over $554,000 for 2010.

The Officials' Perspective

Mayor Scott Spitzer said, "We have severe challenges, but I think we've approached them head on."

The mayor and other members of the Township Committee commended McArthur and his staff for their work on the budget, and took the opportunity to make some brief comments before the public hearing later this month.

"This budget includes that which we need to have, but frankly puts off things that we'd like to have for another day," Spitzer said. "We realize the difficult situations that some of our resident are in and the great difficulty, generally, in an economic environment that faces our township as well as others. I'm mindful of that, and I think we've done a very solid job." Spitzer also pointed out that despite the challenges, the township has maintained a flat level of budgeting for general government expenditures, down 0.89 percent from 2010 at $2.67 million.

The mayor said, "I appreciate the long, hard work our staff has done, and look forward to the general comments and adoption of the budget."