For more than a decade officials in Plainsboro and West Windsor have decried as unfair the process used by the state to determine each town’s share of the annual tax burden paid to the West Windsor-Plainsboro School District.##M:[more]##
This week officials in both towns approved an agreement with the state that they hope will start to set things right.
The agreement, a settlement of tax litigation filed by Plainsboro last year, will decrease the portion of school taxes borne by Plainsboro taxpayers and establishes procedures to be followed in the future that will allow for both towns to have input in the property assessment practices of its partner in the school district.
In November Plainsboro filed a complaint in state Tax Court against the state Division of Taxation and West Windsor Township challenging the process used to calculate each community’s share of the tax burden in regional school districts.
The current system, in which each town’s share of taxes is based on the community’s overall assessed valuation, has caused huge spikes in the tax rates in both communities over the past 15 years.
For example, in the last two years, school taxes increased by more than 38 cents per $100 of assessed valuation in Plainsboro, while taxes in West Windsor only increased by 3.3 cents. However, in other years over the past decade, West Windsor was hit with bigger tax increases, while Plainsboro saw little or no tax impacts.
After the Plainsboro litigation was filed, officials from both townships and the state hashed out the settlement after the court urged that three sides come together and negotiate a settlement.
According to sources, the biggest stumbling block in the negotiations was a reluctance by the Division of Taxation to deviate from its current process.
As a result of the agreement, the equalization ratio used to determine the tax burden increased 2.59 points in Plainsboro to 61.57 percent, while West Windsor’s decreased 1.35 points to 59.73. The numbers mean that the assessed valuation of all properties in Plainsboro is at 61.57 percent of the actual market value. In West Windsor, the assessed valuation is at 59.73 percent.
The settlement means that Plainsboro taxpayers will shoulder approximately $1 million less in school tax burden for the 2004-’05 school year than they would have otherwise realized. Since the ratios impact the school budget over a two year period, Plainsboro taxpayers will receive a similar benefit for the 2005-’06 school budget.
In addition, both townships have agreed to establish procedures to share information on property sales each year. This is intended to minimize disagreements between the two communities on what sales data should be included in the ratio calculation and which should be appropriately excluded.
The complaint filed by Plainsboro charged that the method used to establish each community’s school tax share violated the New Jersey Constitution because it does not require that all properties in the respective towns be assessed according to the same standard of value.
Plainsboro also charged that West Windsor inappropriately omitted two significant property sales from its list of usable sales for computing the township’s ratio, the result of which was the shifting of additional school tax burden to Plainsboro taxpayers. They claim that MarketFair was assessed by West Windsor at $25.9 million but sold for $67.8 million, and WW Commons LLC, assessed at $32.2 million, sold for $75.2 million.
In the past, Plainsboro has argued that West Windsor was assessing the value of its commercial properties too low, unfairly shifting the tax burden to Plainsboro. West Windsor countered that differences between valuations and market value were covered by the equalization ratio.
The determination of what share of the school budget is to be paid by each town in a regional system is based on a complex formula that relies on real estate assessments and tax ratios (the assessed value compared to the current market value). The total value of all properties in each municipality is adjusted each year to current market value; this total determines the share of the budget for each town.
Plainsboro Mayor Peter Cantu says he sees the settlement as a victory. “This is an important step forward in achieving tax fairness for Plainsboro taxpayers. This settlement not only provides relief for Plainsboro taxpayers over the next two years but, more significantly, establishes procedures that will improve communications with West Windsor regarding the sales data used each year to establish the ratio.”
Cantu adds that although the settlement provides a “mechanism for fairness” in future school tax issues, he still believes the rules need to be changed. “While we’re pleased with the outcome, we still believe that the state’s process is flawed and we will continue to press for a legislative solution. It’s difficult because the state is adamant in protecting its process.”
West Windsor Mayor Shing-Fu Hsueh is also positive about the settlement. “It was a fair compromise. I see it as a win-win for West Windsor and Plainsboro.”
“Since we will have a new start,” Hsueh adds, “it’s important that we continue this kind of dialogue into the future. We can’t change history but we can move forward working together.”
Cantu says he would be open to another potential solution to the problem. Legislation enacted by the state in the 1990s allows regional school boards to calculate the tax burden on the number of school children each town sends to the district, but the change would need to be approved in a referendum in both communities.
“I certainly wouldn’t dismiss that as an option, but its not something I’m actively lobbying for” says Cantu. “Obviously this has created angst between the two communities and makes an uncomfortable situation for the school district. If (a school children-based system) were to be considered, now would be a good time based on the backdrop of what has gone on here.
According to information provided by Plainsboro, although populations are basically the same in both towns (20,”215 in Plainsboro and 21,”907 for West Windsor), only about 40 percent of the students come from Plainsboro, while West Windsor contributes 60 percent.
