Senate President Steve Sweeney told the New Jersey Business and Industry Association that businesses and homeowners can expect increases greater than 2 percent unless the economy improves dramatically. A stagnant economy means local governments collect less in taxes.
"If the economy turns around and you have growth in your tax base, you should be able to cover your costs," Sweeney said. "The problem is, I don't see growth in the economy."
New Jerseyans already pay the highest property taxes in the country, averaging nearly $7,300 per year. Businesses pay about 40 percent of property tax collections, totaling $8.3 billion last year and contributing to the state's notoriously unfriendly business climate.
The Legislature approved and Gov. Chris Christie signed a 2 percent cap on property tax growth this year. Pension and health care costs are exempt. Those costs have been rising at double-digit rates per year.
County, local and school officials who will be forced to create a budget within the cap or seek voter approval to exceed it will face tough choices, including layoffs and service cuts, Assembly Speaker Sheila Oliver said.
"The 2 percent property tax cap will restrain and constrain the growth of property taxes at the local level," she said. "It will not necessarily reduce property taxes."
Assembly Republican leader Alex DeCroce said municipalities should be able to meet their obligations and stay under the cap so long as the Legislature passes most of the ancillary bills Christie has proposed.
Mayors and other local officials have been clamoring for help to keep their budgets under the pending cap. They have been pushing for a so-called "toolkit" of bills designed to rein in local costs.
On Monday, the Legislature passed an arbitration reform bill that sets a 2 percent annual cap on the salary increases that can be awarded to police and firefighters who dispute their contracts.
It also passed a civil service reform bill that makes it easier for municipalities to fire or transfer employees and cuts red tape for towns that want to share services. The governor said he is prepared to veto the measure because it does not allow towns to opt out of civil service.
Phil Kirschner of the NJBIA said the cap will help stabilize taxes.
"I think you will see less of an increase in property taxes than you have before — around the 2 percent level," he said. "By law, the property tax cap is half of what it used to be. There are only a couple of limited exceptions instead of 17 exceptions in the past."
Sweeney, who has been advocating for more shared services, said the cap pushes local governments in that direction to save costs.
"If the economy's not better, the towns are forced under this cap to find ways to cut, share, do whatever they've got to do," he said. "They'll make it, but the struggle is pension and health care costs are outside the cap."
The Legislature is expected to tackle pension and health care reforms early next year.
NJ Residents Brace for Property Tax Hike, Despite Cap
New Jerseyans are likely to see their property taxes rise by more than 2 percent next year despite a levy cap that takes effect Jan. 1, the leader of the state Senate said Tuesday.
