Property taxes in New Jersey are some of the highest in the nation, due in large part to the way the state funds its schools. This has significant land-use consequences: municipalities want higher-income residents in houses on larger lots because they cost less and bring fewer schoolchildren, and they want commercial development because the tax revenues are higher and the municipal costs are lower. These problems can be addressed by expanding the geography over which a school district has jurisdiction, so that costs and taxation are distributed more evenly.

1. North Jersey Public Policy Network
“Creating Thriving Communities in Challenging Times”
Tim Evans • New Jersey Future • February 16, 2012

2. Median Real Estate Tax Bill (2010)
New Jersey 6,828
Connecticut 4,903
New Hampshire 4,660
New York 4,090
Rhode Island 3,734
United States 2,043
Data source: 2010 American Community Survey

3. Over-Reliance on Property Tax
Percent of Total State and Local Tax Revenue Derived
From Property Tax
New Hampshire
Vermont
New Jersey
Texas
Rhode Island
United States
0% 10% 20% 30% 40% 50% 60% 70%
Data source: U.S. Bureau of the Census, 2007 Census of Government Finance

4. Basic Property Tax Facts
• Schools represent the bulk of local
government expenditures
• Residential development doesn’t pay for
itself, unless it’s age-restricted
– RESULT: Nobody wants kids
• Wealthy residents demand fewer services
than poorer ones
– RESULT: Large lots encouraged; multi-family
housing discouraged
• Commercial development does pay for itself
– RESULT: Every municipality wants to be Teterboro

5. Over-Reliance on Property Tax :
Why Is This a Land-Use Issue?
• Incentive to zone out children [keep
out housing if you can]
• Large-lot/exclusionary zoning [keep
out people who can’t pay their own way]
• Competition for commercial
development (the “ratables chase”)
[generate revenue without school costs by
attracting malls and office parks]

6. Over-Reliance on Property Tax :
The Consequences
• Downward spiral of disinvestment, wherein
a declining tax base causes tax rates to rise, which then
chases away the more prosperous residents and
businesses, further depleting the tax base and leaving
behind the neediest residents most in need of
government services, necessitating another tax rate
increase etc.
• This creates a high-stakes system of winners and losers

7. Is It Really a Property Tax Problem?
Many of the land-use side effects of the property tax
system are actually more properly ascribed to NJ’s
fragmented system of local governance
From a land-use perspective, tax reform might better be
accomplished by increasing the geographic size of the
units of competition:
– Tax base sharing
– Municipal consolidation
– Regional school districts

8. 3 big counties, similar populations,
dissimilar school systems
number munis per
2010 number of of school school
population municipalities districts district
Bergen County NJ 905,116 70 75 0.933
Montgomery County PA 799,874 62 23 2.696*
Montgomery County MD 971,777 19* 1 NA
• Three school districts in Montgomery County PA contain at least one municipality in
another county; counting these additional munis brings the muni/district ratio close to 3:1.
• Only one in six residents of Montgomery County MD lives in an incorporated municipality.

9. North Penn School District, Lansdale PA
operates all schools, K thru 12
2010 population
North Penn School District: 97,957
Hatfield borough 3,290
Hatfield township 17,249
Lansdale borough 16,269
Montgomery township 24,790
North Wales borough 3,229
Towamencin township 17,578
Upper Gwynedd township 15,552

10. 2010
population
3 Bergen regional high school districts: 93,502
1 PASCACK VALLEY REGIONAL (9-12) 33,452
2 Hillsdale borough (K-8) 10,219
3 Montvale borough (K-8) 7,844
4 River Vale township (K-8) 9,659
5 Woodcliff Lake borough (K-8) 5,730
6 RAMAPO-INDIAN HILL REGIONAL (9-12) 40,040
7 Franklin Lakes borough (K-8) 10,590
8 Oakland borough (K-8) 12,754
9 Wyckoff township (K-8) 16,696
10 WESTWOOD REGIONAL (K-12) (a “true” regional) 20,010
Washington township 9,102
Westwood borough 10,908

11. Bergen County school system much
more fragmented
number of
2010 number of school
population municipalities districts
North Penn School District 97,957 7 1
3 Bergen regional districts 93,502 9 10

12. Bergen County school system much
more fragmented
number of
2010 number of school
population municipalities districts
North Penn School District 97,957 7 1
3 Bergen regional districts 93,502 9 10
Woodbridge township 99,585 1 1

13. North Penn School District, Lansdale PA
North Penn School District
Hatfield borough
Hatfield township
Lansdale borough
Montgomery township
North Wales borough
Towamencin township
Upper Gwynedd township

14. North Penn School District, Lansdale PA
North Penn School District
Hatfield borough
Hatfield township
Lansdale borough
Montgomery township – 1977:
North Wales borough
Towamencin township
Upper Gwynedd township

15. North Penn School District, Lansdale PA
If this were New Jersey…
Property tax
North Penn School District: rate change
Hatfield borough ↑ LOSE
Hatfield township ↑ LOSE
Lansdale borough ↑ LOSE
Montgomery township ↓ WIN
North Wales borough ↑ LOSE
Towamencin township ↑ LOSE
Upper Gwynedd township ↑ LOSE

16. North Jersey Public Policy Network
“Creating Thriving Communities in Challenging Times”
Tim Evans • New Jersey Future • February 16, 2012