Cape May County towns plan reassessments in wake of declining property values

Posted: Sunday, November 13, 2011

By MICHAEL MILLER Staff Writer pressofAtlanticCity.com

OCEAN CITY — Faced with increasing tax appeals in the wake of the national real estate bust, the city plans to reassess its highest-priced coastal properties this year and the entire island in 2012.

OCEAN CITY — Faced with increasing tax appeals in the wake of the national real estate bust, the city plans to reassess its highest-priced coastal properties this year and the entire island in 2012.

Cape May County lost $2.8 billion in taxable property value in 2010, the Board of Taxation’s abstract of ratables shows.

In terms of property value, that is the equivalent of having the entire city of Cape May break off from New Jersey and sink into the Atlantic Ocean. Now, Ocean City and many of Cape May County’s 15 other municipalities are planning reassessments to ensure everyone pays a fair share of taxes.

“We found it’s hard to justify assessments,” county Tax Administrator George Ray Brown III said. “Some towns reported a 30 percent loss in value since the real estate peak.”

Ocean City Business Administrator Frank Donato has warned City Council that there is $60 million less in property on the tax rolls this year. And that likely will drop if property owners prevail in appealing their assessments, as 622 people did this year.

In a typical year, the county tax board might approve 30 percent of appeals. But since the housing bust, property owners have been winning 95 percent to 99 percent of their appeals, Brown said.

“Assessors are simply unable to support the values of tax assessments on the books now,” Brown said. “There’s no justification for having an assessment above market value.”

Avalon took action last year to address its declining market. A reassessment last year determined the island’s 5,500 homes and businesses lost a staggering $1.6 billion in value since the 2005 peak in the local market, Assessor Jeffrey Hesley said.

As a result, the borough’s local-purpose tax rate increased this year nearly 25 percent from 41 cents to 50 cents per $100 of assessed value. But since this higher rate is levied against lower-valued homes, the effect on the tax bill is negligible, Hesley said.

“A reassessment is not a revenue-generating project. It’s about equity and fairness, and making sure everyone pays a fair share,”he said.

“When you deal with big numbers on a daily basis, the sticker shock isn’t that much,” he added. “When I speak with my colleagues, they may talk about properties that sell for $250,000. I have an oceanfront in Avalon that sells for $12 million. Numbers are numbers to us.”

Ocean City is addressing the difference between assessed property values and actual market values by reassessing beachfront, bayfront, and motel-style condominiums this year. Next year, the city will reassess the entire island and its 19,000 properties, city Tax Assessor Joseph Elliott said.

Elliott said the waterfront neighborhoods generated the most tax appeals this year. If the city did nothing to address the problem, he would expect to see more than 1,000 appeals filed in each of the next few years.

But some members of the Ocean City civic group Fairness in Taxes question whether everyone in Ocean City will pay a fair share in taxes if only parts of the island are re-examined in a single year.

“They’re going to be lowering the value on beachfront and bayfront communities for the coming year,” resident Jack Stover said. “That means if the budget does not go up $1, everybody else on the island will still be getting a tax increase. The poorest in the town will get an increase in taxes and be paying for the one year’s worth of reduced assessments on the wealthiest in town.”

Elliott did not dispute Stover’s analysis. But he said this partial reassessment would be fairer to the city’s taxpayers than doing nothing.

“We couldn’t do the entire municipality. It’s too big,” Elliott said. “The fairest solution was to do the neighborhoods that were assessed highest. It’s a fairer approach than not doing it. The Tax Board agreed with me. They approved the plan.”

There is a simple solution for beleaguered property owners, Stover said. He plans to file a tax appeal.

Elliott said taxpayers have until April 1 to file an appeal. He suggested they wait to file until at least Feb. 1 to see if their property is one of the approximately 3,000 that will be reassessed for 2012.

In the meantime, tax assessors said it is impossible to predict when the market might begin an upswing.

“People are waiting on the sidelines for things to become more stable. That’s when you’ll see the investment in property again,”Avalon’s Hesley said. “Trying to pinpoint that time is just as difficult as finding out when the bottom of the market is.”

Elliott said there have been promising signs this year.

“We’ve seen more teardowns this fall than I’ve seen in the past four years,” Elliott said. “The market is stabilizing, and there is more new construction being set up.”

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