Proposed Municipal Tax Rate Hike Needed to Counter Tax Appeal Refunds & Decline in Township Tax Base

Cash refunds that must be paid out and the substantial decrease to the township’s tax base that have resulted from successful appeals of their tax assessments by property owners will drain $1.25 million from Lawrence Township this year and, in turn, are responsible for the 5-cent increase to the municipal tax rate that Township Manager Richard Krawczun has included in his recommended 2013 municipal budget, Krawczun told members of Lawrence Township Council earlier this week.

Following up the presentation concerning the 2013 recommended budget he made to council on Jan. 22, Krawczun used the manager’s report segment of Tuesday evening’s (Feb. 5) meeting to discuss the “revenue side” of the budget.

Using a PowerPoint slideshow (a copy of which is available via the media box to the right), Krawczun spoke about a number of topics, from how surplus funds are used as source of revenue in the budget and how surplus is regenerated each year to how much money the township took in last year and how much it expects to generate this year from various sources like construction permits, red light camera violation fines, ambulance service fees and the collection of delinquent taxes.

Krawcun explained that the township expects to pay about $1 million in cash refunds to property owners who appealed their tax assessments. He stressed that while the only 21 cents of every tax dollar paid by township property owners actually goes to the township – with the rest going to the Lawrence Township public school district and Mercer County government – the township is responsible for dolling out the entire refund amount.

Because of those successful appeals, the township’s tax base in the last year dropped nearly $27.1 million and now stands at $2,500,748,969. That loss of $27.1 million in ratables just by itself amounts to a loss of tax revenue in 2013 of $254,952.87.

To make up for that loss of revenue and to pay for the tax refunds, Krawczun has recommended that the municipal tax rate increase 5 cents to $0.94 per $100 of assessed property value. That increase would mean that the owner of a home assessed at the township’s current average of $160,262 would pay an additional $80.13 this year in taxes or $6.68 per month.

Combined with the newly-created fee for bulk trash pickup – to be set at $25 for this year – a residential property owner with a township average assessed value will pay $8.76 more per month if the 5-cent tax rate increase is implemented.

Successive years of tax appeals have actually caused the township’s tax base to plummet more than $194 million since 2007, when the assessed value of all property in the township was $2,695,162,162, according to Krawczun.

Had the tax base remained at the 2007 level, and applying the 2012 municipal tax rate of $0.89, the township would collect an additional $1.7 million in tax revenue this year, Krawczun noted.

“Over the last couple of years, and particularly in the last 14-15 months, there has been a significant impact on the value of taxable property [from appeals]. Why that is significant, at the risk of being redundant, is it causes us to have to refund taxes. As you are aware, we refund those taxes at the full amount to the taxpayer… Though we only receive 21 cents on the dollar last year, we refund 100 percent,” Krawczun said. “It also creates a difficult situation because it causes the value of a penny on the tax rate to drop. So it actually causes the tax rate to increase because the value of a penny drops.”

The township manager’s presentation can be listened to from the 34:30 mark of meeting Audio Part 2, which is also available from the media box above.