HOBOKEN’S 2020 BUDGET – 5% INCREASE TABLED: WHAT YOU NEED TO KNOW ABOUT AUGUST ESTIMATED TAX -
" ...we would need to decide if we want 5.5% in each quarter, or a smaller portion in August and a bigger portion in November."
If you remember from my newsletter from Wednesday about the budget, the administration put up for a vote a 5% estimated tax increase. As an update, the City Council voted 6-3 to delay this vote until it, and the public, has the benefit of more information. A few things you need to know:
- The estimated 5% increase that was considered is on the TOTAL tax bill, not just Hoboken’s portion. Your total tax bill is the weighted average of all of School, County, Hoboken, Library and County and Hoboken Open Space taxes for the year.
- Hoboken’s municipal rate only equates to about 30% of your tax bill and is determined by our annual budget.
- Annual tax increases are born by the last two quarters in a typical tax year resulting in a doubling effect of the rate. So, if for example annual taxes went up 5%, or $5 on $100, in the current year, Q’s 1&2 would have no increase, and would be $2.50 for each Q3 and Q4 to get to the $5 for the year. This means that the real feel increase is 10% increase in each of the last two quarters.
- If the August estimated increase were kept at 0% then Q4 would bare the full year increase determined when all budgets are approved. If we assume that this is 5% to keep the example consistent, the result would be a quadrupling real feel tax increase of 20% in November.
- School, Hoboken Open Space and Library Tax Levy’s have already been approved. These items combined total about 30.5% of your tax bill and would result in a 2.6% increase in your total tax if County and Hoboken tax levy’s had no change.
- County Tax is complicated as it is a function of the size of the budget (size of the pie) and our percent allocation of the budget (the size of our slice of the pie). The latter is determined by something called an “equalization ratio” that takes into account changes in property values – both in number of properties and valuation changes of those properties - for all Hudson County towns.
- County Tax is anticipated (by me) to go down for Hoboken this year. For several years Hoboken’s slice of the County Tax Levy increased relative to other Hudson County cities, peaking in 2017 at 21.1%, given Hoboken’s relative growth in property values and development. But in 2020, Hoboken’s ratio is down to 17.8% of the County Tax Levy, down almost 10% (or 1.9% points) since last year. What this means for us is that we would need to see a 10% total levy increase before we would see a county tax rate increase for Hoboken. If the County Tax Levy were to increase at historical 3-4% levels, Hoboken’s share of the County Tax would actually decrease by 6.5% vs. last year. Given the County Tax calculation is a zero sum game, which town is picking up most of the slack? Jersey City. Their slice of the County Tax Levy is increasing approximately 10% this year. Ouch.
What Should Our August Billing Be Is A Function of Knowing A Little More…
...about the County tax levy (early numbers coming next week), the expected Hoboken budget and increase due to gap (requested by the Council), and then estimating what the real feel impact would be to Hoboken residents in our tax bills over the rest of this year. I am going to make a straw man, moderately informed guestimate as an example:
- Hudson County will see a higher levy increase of 8% due to lack of revenues which would result in a 2.5% County Tax decrease for Hoboken.
- I think Hoboken’s funding gap will be narrowed from $19.4M to about $7M which would be a 13% municipal tax increase. This would mainly be achieved by pushing some of the burden into 2021 possibly resulting in another above average increase.
Using these, our Total Annual Tax Rate increase would be 5.5%.
Given as noted above that the last two quarters would need to reflect 11% in total, we would need to decide if we want 5.5% in each quarter, or a smaller portion in August and a bigger portion in November.
****IMPORTANT - THE COUNCIL HAS TO APPROVE A TAX ESTIMATE FOR THE AUGUST BILLINGS NO LATER THAN THE NEXT COUNCIL MEETING, IF NOT BEFORE, TO MEET THE STATUTORY MAILING DEADLINE OF JUNE 30TH.
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