To combat the dramatic increase in the number of tax appeals being lost by the borough in recent years, a reassessment, which involves inspecting all of the town’s properties to ensure fair and equitable value assessments, was approved by council last fall and conducted over the winter by Appraisal Systems, Inc. for $371,500.
To conduct the reassessment, Appraisal Systems was provided with all current Property Record Cards maintained by the assessor’s office. Appraisal Systems reps then performed an exterior inspection of every property in the borough and also made one diligent attempt at an interior inspection of every property.
“The state wanted us to make what’s called a diligent attempt to inspect the inside of every house,” borough tax assessor Tim Henderson explained. “So what the inspector did was, they walked up to the house, they knocked on the door, if the people weren’t home they had the existing record on file. They walked around the house, confirmed the measurements and they moved on to the next house.”
According to Appraisal Systems, 40 percent of residential properties in Fair Lawn received internal inspections and 85 percent of commercial properties in town received internal inspections.
A reassessment differs from a revaluation -- which the borough conducted in 2007 -- in that a lot of the information used to assess the property’s value is already on file. Any renovations or upgrades made to a property since the 2007 revaluation are on file with the borough and were taken into consideration in making assessments.
In addition to any property updates or renovations, a property’s location is also taken into consideration by the inspectors – whether you’re on a busy street, next to a gas station or in a flood zone can all affect your assessment, Henderson said.
In a revaluation, which is significantly more expensive than a reassessment, the inspectors start from scratch with each property.
“They measure every house, they make three attempts to get into every house. If they don’t get in they estimate what’s in the house,” Henderson said. “So there’s a lot more work involved in the revaluation as opposed to the reassessment.”
Results of the reassessment
As a result of the reassessment, the town's total rateable base dropped 18.4 percent, with plummeting residential property values accounting for much of the decline.
The average assessed home in Fair Lawn, previously listed at $411,663, is down 21.4 percent to $323,679.
Fair Lawn's commercial, industrial and apartment property values, also on the decline, have dipped a combined 2.3 percent.
Henderson said the properties that lost the most value were typically ones that had not been renovated in recent years.
“If you’ve kept your house up, renovated it, renovated kitchen, baths, done additions, those properties seem to hold their value a bit better with the reassessment than say, properties that haven’t been updated in the last five years, 10 years,” he said. “I think that was one reason for some of the residents declining in value so much.”
A common misunderstanding among residents is that a decrease in assessment means a decrease in taxes.
In a time when properties are being devalued – the town’s rateable base is down 18.4 percent after the reassessment– a similar decrease in taxes would prove unsustainable for the town, which must continue to collect the same amount of money, or more, than it did the year before.
Rather than uniformly decreasing taxes, the reassessment affects the town’s distribution of taxes.
Properties that decreased more than 18.4 percent in value will be taxed less than before, while properties that did not decrease by 18.4 percent, or actually increased, will pick up a greater share of the tax burden.
Why perform a reassessment?
The reassessment was conducted because real estate values had dropped dramatically since the town’s 2007 revaluation and the town’s five-year-old assessments were not in line with current market value.
With such a disparity between the town’s assessed value of a property and the property’s actual value on the market, Fair Lawn had been getting overwhelmed with tax appeals in recent years.
“The past two or three years it’s becoming increasingly difficult to defend our assessments at the county board and at the state,” Henderson said. “That was the main reason why we chose to do a reassessment -- to bring everybody’s value to where it should be and to try to do away with the excessive amount of appeals.”
Between 2006 and 2011, the number of appeals from borough taxpayers heard at the county board – which is designated for appeals on properties valued at less than $1 million -- jumped an incredible 24 times. The number of appeals heard in state tax court – used for properties valued over $1 million or on appeals of county board decisions -- more than tripled.
“It really wasn’t getting any better and a majority of those property owners did get a reduction in their assessment,” Henderson said. “The number of our appeals just continued to grow in the last handful of years and it probably would have grown this year too had we not done a reassessment.”
The borough issued more than $1 million in tax refunds stemming from lost appeals last year alone. By comparison, no taxes were refunded to borough taxpayers in 2006 and only $5,049 in taxes were refunded in 2007.
Henderson said this year’s reassessment has greatly diminished the number of tax appeals for 2012. The borough will fight only about 90 appeals at the county board this year, down more than 80 percent from last year. And even that number may drop, he said, as residents who filed before the reassessment realize their properties are in line with market value and drop their appeal.
While not part of its initial contract with Appraisal Systems, the borough has retained the company to help defend its appeals this year at a cost not to exceed $10,000.
“They’re going to provide evidence to defend the assessments that they came up with,” Henderson said. “At the hearing a representative from Appraisal Systems will be there, I will be there and our special tax counsel will be there. We will be the ones that will be representing the town against any taxpayers that file an appeal this year.”
Down the Road
Going forward, it remains to be seen whether the reassessment continues to limit the number of tax appeals. It was only a few weeks ago -- well past the deadline to file tax appeals for this year -- that members of Fair Lawn’s business community, which has been hardest hit by the reassessment, received their estimated tax bills.
A couple of apartment owners spoke out at the most recent council meeting, asking council for relief on their newly inflated tax bills.
“We just couldn’t believe it,” said one apartment owner reacting to the tax bills he’d received earlier that day. “I can’t get that money out of my tenants.”
“I, too, received my tax bills today,” another added. “Thankfully, I’m still alive, but these are absurd. My taxes are up around 50 percent.”
Henderson said it wouldn’t be clear until next year whether the shift in the tax burden from residential to commercial property owners caused by the reassessment will also result in a shift in who will be filing tax appeals.
“Now that people are getting their tax bills, some people are saying they’re going to appeal,” he said. “The misconception is a lot of times people file appeals based on their taxes. When you file an appeal you file it against your assessment, so you must prove that your property is not worth what we have it assessed for.”