"With property taxes increasing annually, the importance
of understanding periodic revaluations is critical."

According to a May 31, 1997 article in The Economist entitled "The Tap Runs Dry," "Twenty-six tax collectors were killed in Russia last year and 74 were injured in the course of their work. Six were kidnapped, 41 had their houses burnt down." The revaluation process in New Jersey often evokes the potential for similar feelings. With property taxes increasing annually, the importance of understanding periodic revaluations is critical.

The law defines municipal revaluations as the systematic valuation by a qualified firm of all parcels of real property in the taxing jurisdiction. Revaluations are expensive, costing hundreds of thousands of dollars. Each parcel must be catalogued and properly valued using the same standard of value throughout the community. That standard is described as fair market value.

In a perfect world, a well-done revaluation eliminates the inequity often found in taxing jurisdictions. It is not unusual for 10 years to pass between revaluations, during which property types will rise in value at differing levels. Some sections of a town will experience increases in value of 10% per year, others only 5% annually.

These jurisdiction-wide inequities can o0nly be cured by a municipal wide revaluation. When one type of property carries a disproportionately greater tax burden than another, only a uniform revaluation cures the problem. To deal effectively with revaluations, property owners need to understand the statutory standards that underlie revaluations. One is the sales ratio study, which often points up the need for revaluations. The program consists of a two-year statistical averaging study performed annually in every taxing jurisdiction in New Jersey, comparing sales prices of all properties sold in the two-year period with the last assessed value of the same properties. For example, if the assessed values of properties sold average 50% of the sales prices of those same properties, then the sales ratio for that period of time will be 50% for all properties in the municipality. As the ratio drops or rises from year to year, revaluations become more important. The sales ratio study accomplishes the goal that all property should be assessed at 100% of market value.

Another statutory standard, the Coefficient of Deviation, measures assessment uniformity. A General Coefficient of Deviation shows the average deviation of individual assessment sales ratios from the overall average sales ratio for the taxing jurisdiction. As an example, a 15% Coefficient of Deviation in a municipality with a 90% average ratio means there are significant numbers of sales ranging from 103.5% to 76.5% of assessment. This hardly stands as a uniform assessment picture. Generally, a Coefficient of Deviation greater than 10% signifies a lack of uniformity and the need for revaluation.

During revaluation, diligent taxpayers will take steps to ensure that the valuation of their property is done properly. This means meeting with representatives of the revaluation firm and examining the underlying data relied upon in setting market value. But even more important, taxpayers need to examine whether the revaluation was performed properly under New Jersey law, yielding a uniform valuation for the entire taxing jurisdiction. Both lack of uniformity and erroneous market value should become key issues for taxpayers.

Any taxpayer may make an "Open Public Records Act" (OPRA) request to obtain underlying data for a revaluation. These documents should include the municipality's revaluation contract and all relevant correspondence from the county tax board and the State of New Jersey Division of Taxation. Sometimes, correspondence occurs between the state and the assessor critiquing the revaluation for various infirmities.

Taxpayers can also request a sales ratio report from the assessor or county board of taxation. This report shows the sales ratio and coefficient of deviation for all property, testing the validity of the revaluation by class. If the sales ratio study result falls more than five percentage points below 100%, the revaluation becomes subject to attack. Also, if the coefficient of deviation rises above 10%, the revaluation doesn't set a uniform valuation standard.

Taxpayers filing their objections prior to the final certification of the tax list may be able to set aside an improperly performed revaluation. Even if unsuccessful, diligent taxpayers can monitor the entire process to ensure that the revaluation is completed competently and uniformly.

The views expressed here are those of the author and not of Real Estate Media or its publications.

John Garippa is the senior partner in the law firm of Garippa Lotz & Giannuario with offices in Montclair, NJ and Philadelphia, PA, and is also the president of American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at john@taxappeal.com