Equalized Valuation is the market value of all the (taxable) property in a town. It updated every year by the county tax assessor and is used to apportion county taxes and, theoretically, school aid. The way county taxes are apportioned is that if a town has 10% of a county's total Equalized Valuation, it pays 10% of county taxes. Equalized Valuation also determines tax apportionment in (most) regional school districts.
Equalized Valuation is not the same thing as the aggregate assessed value, which is the sum of all the individual assessments on properties and may not reflect market value at all if the reval was not done recently. Assessed values are only used for a town's internal tax apportionment.
(see note at bottom for how Equalized Valuation is calculated)
Equalized Valuation is supposed to be used, along with Aggregate Income, to determine a town's state aid, but SFRA is a non-operating law and this use of Equalized Valuation is dormant. Even if SFRA were operating, Adjustment Aid disallows changes to the state aid of a third of New Jersey's school districts.
Nevertheless, after this review of changes in Equalized Valuation we'll look at how these changes affect districts's (theoretical) Uncapped Aid state aid.
The Broad View
The State's total Equalized Valuation grew from $1,208,823,762,826 to $1,242,801,663,665, a one year net increase of $33.6 billion, or 2.78%. The median town, however, only gained 1.6%.
Although Equalized Valutaion increases due to new construction, the change is mostly due to the increase or decrease in the existing physical stock and so Equalized Valuation is a rough way to gauge changes in real estate in a town. Since inflation was 1.9%, we can see that the state (overall), beat inflation, although we must not assume that the average home increased by more than inflation, due to the concentration of the increase in only a few places and the increase in EV that comes from new construction.
Looking longer term, this is an increase of 6.9% from 2013, when the state's total Equalized Valuation was $1.16 trillion. The five year inflation rate was 4.98%.
The towns with Equalized Valuations above $10 billion are, with their change in ranking from last year:
1. Jersey City, $28.4 billion (unchanged)
2. Hoboken, $16.427 billion (+2)
3. Edison, $16.414 billion (-1)
4. Newark, $16.1 billion (+1)
5. Toms River, $15.4 billion (-1)
6. Jersey City's PILOTed property, estimate at $12-$13 billion.
7. Ocean City, $12.2 billion (unchanged)
8. Middletown, $10.849 billion (unchanged)
9. Woodbridge, $10.839 billion, (unchanged)
10. Brick, $10.7 billion (unchanged)
11. Millburn, $10.3 billion (+1)
12. Franklin Township, $10.105 billion (+2)
13. Lakewood, $10.097 billion (+3)
The Urban Core Grows, Triumph of the Train Line Suburbs
As always, the average masks diversity and New Jersey's gain in real estate value was uneven. Half of New Jersey's growth in Equalized Valuation took place in three counties, Essex, Bergen, and Hudson.
Of New Jersey's 21 counties, only seven gained more than the state average of 2.78% and only another two beat inflation. Thus most towns in New Jersey are not doing well and homes are a poor investment for their owners.
Hudson County was, again, the biggest gainer, reaching $77.7 billion, which is growth of 8.86%, or $6.3 billion. Hudson County's gain was 19% of New Jersey's total net gain, of $33.6 billion. For last year, Hudson County's gain was 25% of the state's total gain ($11 billion out of $43 billion).
Jersey City gained $2.7 billion, growing from $25.7 billion to $28.4 billion).
Jersey City's Equalized Valuation is now more than Gloucester County
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| Jersey City's $28.4 billion Equalized Valuation is equal to 2.35% of the state's total. |
As new buildings are built in Jersey City, like 99 Hudson (shown at right), Jersey City's Equalized Valuation will continue to soar.
Hoboken gained $1.3 billion to reach $16.4 billion, putting it ahead of Edison and Newark to become the second most valuable town in New Jersey. Hoboken's Equalized Valuation is almost as much as Sussex County ($16.9 billion.).
Weehawken gained $359 million (12.6%), to $3.2 billion.
Jersey City's all-in tax rate will probably become about 1.9. Hoboken's will probably become 1.1.
Hudson County's other riverside towns also did very well, an indication that the "Gold Coast" is spreading. Bayonne gained 7.9% ($428 million), North Bergen gained $618 million (11.2%). Union City gained $290 million (8.2%). West New York gained $121 million (4.5%). Tiny Guttenberg gained $94 million (9.9%). Edgewater gained $245 million (7.1%).
These school districts are underaided, so the consequence of this growth is that their (hypothetical) Uncapped Aid will decrease.
Essex County had the second biggest gain in percentage terms, at 5.9%, or $5 billion.
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| Newark (!) Led Essex County with a $2.3 billion/17% increase in Equalized Valuation. |
The other Essex towns on the train lines did well, including urban Essex. East Orange grew from $2.7 billion to $3 billion. Orange grew by 8.8%.
The train-line suburbs also thrived. South Orange ($228 million, +8.5%), Maplewood ($250 million, +6.6%), Millburn ($637 million, +6.6%). Montclair, Glen Ridge, and Bloomfield did almost as well.
Only three other counties gained more than 3.0%. Bergen County gained 3.36%, Union County gained 3.01%, and Monmouth County gained 3.4%. Monmouth County's gain included an 11% increase from Asbury Park, already one of NJ's most overaided school districts.
Ocean County gained 2.94% ($2.8 billion), disproportionately driven by Lakewood's $1.1 billion (12%) gain.
Morris, Gloucester, Passaic, Salem, Burlington, Warren, Mercer, Camden, Cumberland, Sussex, and Hunterdon all grew, but lagged inflation. Morristown might be the best performing traditional suburb, with a blistering 12.6% growth.
Atlantic County was the only county county to actually lose Equalized Valuation, dropping from $34.9 billion to $32.7 billion (-6.4%). That loss was almost all from Atlantic City, which lost another $2 billion ($6.4 to $4.4 billion). This is remarkable because Atlantic City was once NJ's #1 town in Equalized Valuation, at $22.2 billion in 2008.
New Jersey's other cities held their own or grew. Elizabeth gained 6.5%. Camden gained 5.5%. New Brunswick had a 5.2% gain. Paterson gained 3.9%. Trenton was the laggard, with a 2.3% gain, which is still respectable considering Trenton's history.
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| Source, http://www.state.nj.us/treasury/taxation/lpt/lptvalue.shtml |
Finally, New Jersey's big suburbs had a mixed year. Franklin Township had a very good year, with 7.8% growth. Edison grew at 3.7%, Woodbridge at 3%, but Clifton, Cherry Hill, Toms River, and Hamilton lagged inflation. Brick and Wayne were nearly unchanged, so that's a significant decline in the real value of real estate there. Bridgewater actually lost valuation.
Implications for State Aid
Changes in Equalized Valuation have implications for state aid because Equalized Valuation is one component of Local Fair Share and Local Fair Share is a component of the formula for Equalization Aid.
Local Fair Share is the amount of school taxes SFRA indicates a town is capable of paying.
The state calculates Equalization Aid with this simple formula
Equalization Aid = Adequacy Budget - Local Fair Share
The formula for Local Fair Share for 2017-18 is itself slightly more complex:
(0.014009 x Equalized Valuation + 0.047823 x Aggregate Income)/2.
Although the formula looks complex, it basically means that the state expects a school district to pay property taxes equal to 0.7% of its Equalized Valuation plus 2.3% of its Aggregate Income.
So, if a district gains $100 million in Equalized Valuation, that alone would increase its Local Fair Share by $700,000. If a district gains $500 million in Equalized Valuation, that alone would increase its Local Fair Share by $3.5 million. (assuming no change in Aggregate Income or the multipliers.)
So, for Jersey City to gain $2.7 billion would cause its Local Fair Share to increase by $20 million, Since Jersey City is overaided by $152 million for 2017-18, that means its excess aid for 2018-19 will be at least $172 million. (not counting the growth in Aggregate Income)
For underaided districts, the increase in Equalized Valuation is hypothetical. Bayonne's $428 million in new Equalized Valuation would theoretically reduce Bayonne's Uncapped Aid from $105 million to ~$102 million. Since Bayonne's actual state aid is only $57 million anyway, there is no actual change for Bayonne's aid growth.
Lakewood's $1.1 billion in growth might actually be enough to erase its state aid deficit (which was only $3.2 million in 2017-18). On one hand, this justifies Lakewood increasing its own tax levy, but it means that SFRA is even less applicable to Lakewood than before.
Since Hoboken's Local Fair Share is already 4.7x larger than its Adequacy Budget, Hoboken does not receive Equalization Aid. Thus, the growth in Hoboken's Equalized Valuation and Local Fair Share has no implications for state aid.
Changes in Tax Base Indicate the Need to Redistribute State Aid and Amend the Tax Cap law to allow aid-losing districts to tap their tax bases more easily.
The fact that the tax base wealth of New Jersey towns is constantly changing underscores the need to redistribute state aid. Given the increases in Equalized Valuation in several districts who are already overaided, such Jersey City, East Orange, and Asbury Park, it is likely that the excess aid surplus will increase for 2018-19 again.
Since these towns, however, can't even tap their own tax bases due to the tax cap, we also need to amend the tax cap for districts losing state aid and/or badly under Adequacy.
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See Also
- The Divergent Fates of NJ's Big Cities
- 2016 Equalized Valuations Out (for tax year 2017)
- Biggest Real Estate Gains, Losses in NJ
- Two Cheers for County Taxes!
- New Jersey and Its Neighbors Job Growth, County by County
How is Equalized Valuation determined?
Equalized Valuation is determined by calculating the ratio of sales prices to a town's official assessment for its own local taxes. If sale prices are, on average, 110% of properties's official assessments, then Equalized Valuation would equal 110% of a town's total official assessment. If sale prices are 93% of official assessment, then Equalized Valuation would equal 93% of a town's total official assessment.
Because Equalized Valuation based on a ratio of sale prices to official assessment, a town's refusal to do a reval does not affect Equalized Valuation.
Contrary to assertions from Sen. Mike Doherty and the Toms River Board of Education, Jersey City's decades-long refusal to do a reval did not distort its state aid since JC's Equalized Valuation constantly grew along with its real estate market. Jersey City's state aid was distorted by Adjustment Aid and PILOTing, not the lack of a reval.
If a town's Local Fair Share exceeds its Adequacy Budget, a change in Equalized Valuation has no theoretical impact on state aid at all, since it doesn't matter if a Local Fair Share exceeds Adequacy Budget by 5% or 150%. Equalization Aid is $0 in either case.
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