Tax revaluation causes anxiety

According to The Newark Star-Ledger, the average Borough resident paid $12,636 in property taxes in 2005, and the average Township resident paid $13,222, putting both municipalities in the 98th percentile among all New Jersey municipalities.

One factor that drives up the taxes, residents and officials say, is the University.

“The 800-pound gorilla is the University,” Borough Councilman Roger Martindell said, adding that according to his calculations, every Borough resident’s tax bill would decrease by 25 percent if the University began paying property taxes on all of the property it owns that is not taxable under state law.

The Borough cannot collect taxes on 43.6 percent of its land, the fourth-highest percentage of untaxable land among the state’s municipalities, according to the Star-Ledger. Nontaxable property in the Borough is valued at more than $1.5 billion, exceeding the value of taxable property by about $158 million, according to the Borough’s website.

Director of Community and Regional Affairs Kristin Appelget disputed Martindell’s calculations.

“I wouldn’t necessarily agree that it’s an apples-to-apples calculation as Mr. Martindell is suggesting,” Appelget said, noting that “the University does not place demands on the community for services as other residents and businesses do.”

This year, the residents of the two municipalities will be more wary of their tax burden, as the revaluation is likely to increase taxes for many residents.

The revaluation, mandated by the Mercer County Board of Taxation in 2006, “makes people very nervous, and with reason ... especially at a time when people are feeling pressured [financially],” Borough Councilman David Goldfarb said at a Borough Council meeting in October.

Taxes will not necessarily increase for every taxpayer, Martindell said, but the revaluation will nonetheless “create anxieties generally and create particular anxieties because we’re in a recession.”

The reality of being in the 98th percentile

Princeton residents pay high taxes both in absolute terms and relative to their incomes.

Borough residents’ property taxes as a share of their income ranks in the 84th percentile state-wide, while the Township is in the 69th percentile, according to the Star-Ledger.

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“Looking at the [Star-Ledger’s] numbers, you have to consider that our median household income in the Borough is only $68,000,” explained Dudley Sipprelle, a Borough resident who made an unsuccessful run for a Borough Council seat this fall on a tax-reform platform.

Township resident Gordon Bryant, a 2005 candidate for Township Committee, noted that Township taxes are increasing too quickly. “At the ‘low’ rate of 10 percent annual Township budget increase, Township property taxes nearly double in seven years,” he wrote in a letter to Town Topics.

Similarly, Borough taxes have been increasing at an average annual rate of about 8.7 percent since 2000, according to the Borough’s website.

Though Borough Council members explained that municipal governments will adjust tax rates to mitigate the effects of increased property values from the revaluation, Township resident Anne Robotti said she remains skeptical.

“Oh please,” Robotti wrote in a comment on The Princeton Packet’s website. “What are the chances that anybody will actually see lower taxes from a revaluation?”

How the ‘gorilla’ can help

Some Borough officials said they feel that the University has a greater responsibility to help the Borough financially. At a Borough Council meeting in July at which council members voted to increase property taxes by 5 percent, members blamed the University for not stepping in to offset such increases.

“I don’t know how the University can sit quietly by without coming to us,” Borough Councilwoman Margaret Karcher said, according to Town Topics.

The 2007-08 Princeton Profile, a University publication, notes that the University does make cash contributions to the two municipalities, explaining that the University makes tax payments on faculty, staff and graduate-student housing which “might qualify for a tax exemption under New Jersey state law.”

In addition, the University makes an annual “voluntary contribution” to the Borough. In 2006, this contribution totaled $1 million, and the University has been increasing the contribution each year to reflect increases in the Borough tax rate as well as additional acquisitions of Borough land by the University.

Appelget said that the University’s contribution will not be affected by the property revaluation.

Likewise, the University spends a considerable amount on “University-owned but publicly used facilities,” such as McCarter Theatre, the Garden Theatre and the Dinky Station, according to the Princeton Profile.

Appelget added that the presence of the University helps both the Borough and the Township gain favorable bond ratings, which make it cheaper for the two to obtain financing for spending projects.

But Sipprelle said that the Borough is getting the short end of the stick.

“The University is enjoying the infrastructure thanks to the Borough taxpayer,” he explained, “and that makes it very attractive for professors to live here, for speakers to come. And that wouldn’t happen in downtown Newark, or New Haven for that matter.”

Though he said he believes that the University should pay more in taxes to both municipalities, Martindell said he partially blames state law for causing such a large financial loss for the two governments. He added that in Connecticut, for example, the state government “rebates a certain amount of its income tax to municipalities that are impacted by nonprofits.”

‘A government that Princeton can no longer afford’

Some residents blamed sources other than the University. Township resident Alan Lee faults the inefficiency of having two separate Princeton municipalities for the high tax rates.

In a letter to Town Topics titled “Our egos have created a government that Princeton can no longer afford,” Lee wrote, commenting on the fiscal irresponsibility of not consolidating the Borough and Township governments.

Consolidating the two governments would eliminate duplication of government services, thereby reducing taxes, said Robert Geddes, the chairman of Princeton Future, an organization that advocates for a merger of the two governments.

That the municipalities have never consolidated “doesn’t make rational sense to me,” he said in an interview, adding that consolidation is “seen by many people to be a step toward greater efficiency in local governments, less duplication and greater coordination.”

Sipprelle echoed Geddes’ comments, noting that when departments do combine, taxpayers save a lot of money.

“In the past year, the combined health department saved the taxpayers a quarter of a million dollars,” he explained. The health department is one of 15 joint agencies that serve both the Borough and the Township.

“We [have] two mayors, two councils, two police departments, two city clerks, two engineers, and it’s just absurd,” Sipprelle added.

Princeton residents last voted on consolidation in 1996. Though the proposition passed in the Township, it failed in the Borough.

With progress stalled in the campaign to merge the two Princetons, residents point to excessive municipal spending as a another cause of the increase in taxes.

Borough resident and Princeton Regional Schools Board of Education member Joshua Leinsdorf wrote in a letter to Town Topics that “[t]he downtown development has been a financial disaster for the Borough.” He added that “[t]axes are being used to subsidize private, profit-making housing with rents of up to $3,500 per month.”

Martindell explained that the municipal governments have no control over many of the expenses. About a quarter of the tax revenue collected by both the Borough and the Township pays Mercer County taxes, while about half of the revenue supports the Princeton Regional School district.

Moreover, New Jersey law mandates a “rate of increase in pay” for some municipal employees “that is far greater than they would get in the free market,” Martindell said.

“After three or four years, if you include basic compensation, vacation pay, sick pay and health benefits, [Borough police officers] earn about $100,000 a year,” Martindell explained.

There are too many police officers in the Princeton area given its size, Martindell noted. He explained that “30 officers in the Borough plus 30 officers in the Township plus 20 officers on campus — that’s 80 authorized police in a community of 30,000 people” — is too much.

The municipalities should explore other ways to raise revenue besides taxes, like increasing parking fees, Martindell added.

Moving away

Helmut Schwab, a Borough resident who protested the tax increase at a July Borough Council meeting, said that steadily increasing taxes are “squeezing out the older generation and not permitting the younger generation to live here,” according to Town Topics.

Sipprelle agreed that unless the municipal governments figure out how to keep tax rates steady, many retirees on fixed income are likely to leave town.

“I’m a federal retiree with my life savings in the stock market and my 401(k), and they’ve taken a real hit, but my property taxes have gone up $1,100,” he said.

Other residents feel the same way, not only retirees, Sipprelle added. As he canvassed people on the voter rolls for his election bid, Sipprelle noticed that many no longer lived in Princeton. “Quite a few registered voters have moved out,” he said.