FISCAL NOTE TO

SENATE, No. 810

STATE OF NEW JERSEY

DATED: JUNE 30, 1997

      Senate Bill No. 810 of 1996 authorizes municipalities to tax for real property taxation State owned property, except State property used or held for future use for highway, bridge or tunnel purposes or property which is qualified under State law for any State payment in lieu of taxes, at the general tax rate of the municipality. The bill repeals P.L.1977, c.272 (C.54:4-2.2a et seq.) which requires the State to make payments to municipalities in lieu of taxes.

      The repeal of P.L.1977, c.272 (C.54:4-2.2a et seq.), the statute which requires the State to make payments by formula to municipalities in lieu of taxes for State owned property, has no State or municipal government fiscal impact because the payments to municipal governments under the State In Lieu of Tax law have been frozen and incorporated into a State aid program called the Consolidated Municipal Property Tax Relief program which is funded each year in the State Budget. However after such a repeal, the State Treasurer in the Department of Treasury's annual budget request for State aid to municipalities could request that the Consolidated Municipal Property Tax Relief program not include funds for the statutory in lieu of tax formula aid.

      The Department of Treasury advises OLS that a precise State cost estimate based on a calculation in each municipality of the appropriate assessed value of State owned property and the general tax rate in each municipality is not available. However, the department reports that the 1995 $5.785 billion in total assessed value of State owned property subject to in lieu of tax payments under P.L.1977, c.272 (C.54:4-2.2a et seq.), is the same as the State owned value specified in this bill which excludes the State owned property used or held for future use for highway, bridge or tunnel purposes. That assessed value multiplied by a weighted 1995 State average general tax rate of $3.00 per $100 of value, would result in an estimated State payment of $174 million in property taxes payments to municipal governments.

      Presumably, the department used a weighted 1995 State average general tax rate of $3.00 per $100 of assessed value, which is higher than the actual 1995 State average tax rate of $2.80, to adjust the estimated cost upward because the cities that contain State owned property generally have a higher general tax rate than the average municipality.

      The OLS does not concur with the department's estimate. The latest available data from the Division of Taxation is for the 1994 assessed value of State owned property reported by municipality. Those values were subject to in lieu of tax payments under P.L.1977, c.272 (C.54:4-2.2a et seq.) which is the same as the State owned value specified in this bill. Those assessed values by municipality which exclude the State owned property used or held for future use for highway, bridge or tunnel purposes, multiplied by the general tax rate of each municipality, yields a State cost and a statewide municipal government revenue gain of $242.8 million for 1994. The OLS believes that since the value of State owned property is increasing by 5.8 percent a year, by calendar 1998 four years of increase would result in an estimate that is 23.2 percent higher, for a 1998 State cost and statewide municipal revenue gain of $299.1 million.

 This fiscal note has been prepared pursuant to P.L.1980, c.67.