Reducing New Jersey’s Property Taxes Through Consolidation

The possibility of reducing property taxes by consolidating the 565 municipalities of New Jersey was called into question in a recent study conducted by the Rutgers University’s Local Government Research Center.

The study — entitled “Size May Not Be The Issue” — was conducted by Marc Pfeiffer and Raphael J. Caprio. Their main conclusion: the richest suburbs and the poorest cities actually had the highest cost of local government services.  This essentially reflected the bigger need of poorer citizens for social services and for additional police protection, they claim, which was being paid for mainly by state aid. It also reflected the fact that those who were well-off paid for a higher level of services at the end of the day.

The study also pointed out that rural communities that had smaller populations, actually had the lowest cost of municipal government services per person. These communities were often considered for municipal consolidation, but in reality they were directly countering the assumption that any small and inefficient municipalities would help in lowering property taxes.

Thus the study suggests these conventional attributes may need to be reconsidered. Forcing municipalities to become bigger may not be the answer for improved efficiency or effectiveness afterall — and chances are that there may be no reduction in costs either.

The arguments that emerged from this study seems to refute the claim that — when it comes to government – size matters.  Governor Christie insists the merger of Mendham Township with Mendham Borough would encourage other municipalities to start adopting shared services which would clearly result in a reduction in costs. It would also help to reduce state aid, he says.

But according to Caprio and Pfeiffer, people in New Jersey may be regarded as getting the level of municipal government services they wanted, or at least, what the state was willing to pay for them. On the other hand, Christie believes it is best to reduce property taxes so as to enable the state to attract new home buyers and business people to set up their businesses there, while also helping low income and middle income families remain there.

Both Caprio and Pfeiffer have relevant experience. aprio is a professor who specializes in public policy, while Pfeiffer was formerly a deputy director in the state’s Division of Local Government Services. This study was basically the first step in a series of other studies  they conducted, all relating to the need to understand the difference in costs among various municipalities, as well as to what extent shared services and consolidation could have on the possibility of controlling government costs.

The conclusion that small municipalities are essentially not efficient was not supported by studies and statistics revolving around resort municipalities. In fact 50 shore towns had high per capita costs mainly because of the fact that the population was low, but during the summer months the expenditure relating to police and other services increased dramatically because of the influx of tourists. So the reason was not because they were inefficient. With the exception of these shore towns though, the cost of municipal services per person in those municipalities where there were less than 3600 residents was not much different than for those municipalities were there were several residents. In fact for those where the population was up to 40,600 residents (which accounts for the top 10% of municipalities by population), the cost was actually lower.

The cost per person for municipal government services was recorded at $1,340. This was for suburbs such as Cherry Hill, Middletown and Toms River, which are all relatively large. However the result was mainly attributed to how cities such as Newark, Trenton and Camden brought it up.

It is interesting to note that three cities which recorded the highest cost per resident included Weehawken, Harrison and Secausus. These were relatively small cities, with 12,554, 13,620 and 16,264 residents respectively. However the cost per resident ranged between $2785 and $2893 in these cities.

There is a commonly mentioned statement that New Jersey has more municipalities for every square mile than any other state. This statement may seem to justify the image that there are too many municipalities and too much government involved, but all this is challenged by the study we are analyzing. The fact that New Jersey is densely populated cannot be denied as there are some 15.6 government units for every 10,000. New Jersey has about half as much government as the national average and ranks 34th in the nation when it comes to the number of general governments per capita.

There could be potential cost savings as well as improvements in services if there are municipal mergers. Groups such as Courage to Connect NJ held up the consolidation of Princeton Borough and Princeton Township, especially when seen in this light. But Caprio and Pfeiffer assert that both municipalities need to save money, and generally here will be less cost savings than those that are anticipated, as there will bound to be an increase in taxes to be incurred.

This scenario happened in different cases such as when there was a study in Haryston Township and Franklin Borough. There would have been a rise in taxes and school costs in that case. So, all in all, even if two towns were merged and achieved 5% savings on a part of their budgets that were not fixed costs, the result would lead to just 88% on a typical property tax bill. According to a calculation by Rutgers, his would in turn translate into savings of some $66 for a homeowner who pays $7500 as property taxes. The calculation also showed that there were a little over 50% in school taxes, 18% in county taxes and slightly over 1% in special assessments.

Since the 1970s, New Jersey municipal governments entered into several agreements of shared services, as Caprio and Pfeiffer noted. However their final conclusion is that these shared services were not considered to be a solution to lowering government costs.

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