Bill Text: NJ S3304 | 2024-2025 | Regular Session | Introduced
Bill Title: Allows certain municipalities to establish lower property tax rate on improvements than land.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2024-05-20 - Introduced in the Senate, Referred to Senate Community and Urban Affairs Committee [S3304 Detail]
Download: New_Jersey-2024-S3304-Introduced.html
Sponsored by:
Senator ANGELA V. MCKNIGHT
District 31 (Hudson)
SYNOPSIS
Allows certain municipalities to establish lower property tax rate on improvements than land.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the assessment of real property and supplementing Title 54 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The Legislature finds and declares that:
a. A land-based property tax system is a system under which taxable improvements are taxed at a lower property tax rate than taxable land
b. Although not currently in use in New Jersey, land-based property tax systems have been employed by municipalities in several other states in order to discourage land speculation, while encouraging the redevelopment of vacant land in urban areas;
c. While a land-based system of property taxation should not be perceived as the sole answer to reviving decayed urban municipalities, or under-developed municipalities in this State, it should be a tool available for any municipality looking to encourage the development or redevelopment of vacant land;
d. Neighboring Pennsylvania has multiple examples of success under a land-based property tax system;
(1) In Harrisburg, that state's capital city, in the first12 years after adopting a land-based property tax system, over $1.2 billion of investment occurred, and in the first 20 years, nearly 4,000 vacant structures became fit for occupation and the number of businesses on the tax rolls increased by nearly 7,000;
(2) In Allentown, Pennsylvania, property taxes were reduced for 70 percent of properties, and nearly 90 percent in the most at-risk neighborhoods, and the number of building permits increased by 32 percent;
(3) In Pittsburgh, the issuance of building permits increased by over 70 percent in the decade after implementation, while 15 comparable rust belt cities experienced an average 14.4 percent decline in the issuance of building permits;
e. Taxing taxable improvements at a lower rate than taxable land will make it more profitable for owners to make improvements, or perform basic maintenance, to deteriorating property;
f. Incentivizing development leads to more housing, more jobs, and greater economic development in the State, which is particularly needed in New Jersey's urban areas;
g. With more development, New Jersey's cities will enjoy more affordable housing options and greater economic opportunity for disadvantaged populations; and
h. Addressing underlying
social determinants such as a lack of affordable housing and vibrant local
economies is critical to reducing inequality and inequity in society, and a
land-based property tax system can be an effective tool to address these
issues.
2. a. As used in this section:
"Director" means the Director of the Division of Taxation in the Department of the Treasury.
"Land-based property tax system" means a property tax system, as permitted by this section, under which taxable improvements are taxed at a lower rate than taxable land.
"Municipality in need of infrastructure investment" means a municipality in which an urban enterprise zone was designated pursuant to the "New Jersey Urban Enterprise Zones Act," P.L.1983, c.303 (C.52:27H-60 et seq.), regardless of whether that designation has expired.
b. Beginning on the operative date of this subsection, a municipality in need of infrastructure investment may adopt an ordinance providing for a land-based property tax system, without applying to the director pursuant to subsection c. of this section.
c. (1) Beginning on the first day of the 84th month next following the operative date of this subsection, a municipality, other than a municipality in need of infrastructure investment, may apply to the director for approval to adopt an ordinance to implement a land-based property tax system.
(2) The director shall adopt rules and regulations to guide the application process and establish appropriate standards for approval. Such standards shall prohibit approval of an application if the municipality's developable lands are used substantially for the preservation of open space, farmland, or environmentally sensitive land. The director shall establish, manage, and maintain a system for the review and approval of applications submitted pursuant to this subsection.
d. A land-based property tax system shall provide for the taxation of taxable improvements at a lower rate than the tax rate established for taxable land.
(1) An ordinance adopted to create a land-based property tax system shall establish the difference between the rate on taxable land and the lower rate on taxable improvements, and may phase in the adjusted tax rates such that the difference between the rates grows gradually over a period of years.
(2) A municipality that employs a land-based property tax system may return to a single-rate property tax system if the municipal governing body adopts an ordinance directing this return. This ordinance may phase in the adjusted tax rates such that the difference between the rates narrows gradually over a period of years.
e. The director shall provide guidance to municipalities both in the implementation of a land-based property tax system and in the transition to and from the system.
3. This act shall take effect immediately, but shall remain inoperative until the adoption by the voters of the State of an amendment to the State Constitution authorizing municipalities, by ordinance, to adopt a property tax system under which taxable improvements are taxed at a lower rate than taxable land.
STATEMENT
This bill would direct the Legislature to allow certain municipalities to establish a "land-based property tax system," in which a lower property tax rate is set for improvements than for land. An improvement refers to a building or other man-made condition located on a parcel of real property. Historically, New Jersey municipalities have been required to apply a single value-based tax rate to both land and improvements. Land-based property tax systems have been employed by municipalities in several other states in order to discourage land speculation, while encouraging the redevelopment of vacant land in urban areas.
The bill allows current and former urban enterprise zone municipalities to adopt an ordinance providing for a land-based property tax system upon the bill's operative date, without any application process
Beginning seven years later, the bill allows municipalities, other than current and former UEZ municipalities, to apply to the Director of the Division of Taxation in the Department of the Treasury ("director") for approval to adopt an ordinance to implement a land-based property tax system. The bill requires the director to adopt rules and regulations to establish appropriate standards for approval. These standards must prohibit approval of a municipality if its developable and re-developable lands are used substantially for the preservation of open space, farmland, or environmentally sensitive land.
The bill permits the adjusted tax rates of a land-based property tax system to be phased in such that the difference between the rates grows only gradually each year. The bill also directs that a municipality employing a land-based property tax system may return to a single-rate property tax system if the governing body adopts an ordinance directing this return. This ordinance may also phase in these adjusted tax rates such that the difference between the rates narrows only gradually in any given year.
The bill would become operative upon the adoption by the voters of the State of an amendment to the State Constitution authorizing municipalities, by ordinance, to adopt a property tax system under which taxable improvements are taxed at a lower rate than taxable land.
