WASHINGTON, D.C. – August 12, 2015 – (RealEstateRama) — Citing abatements as a major factor in navigating New Jersey’s very challenging fiscal obstacle course, Assembly Republican Jack Ciattarelli welcomed a new rule approved by the Government Accounting Standards Board (GASB) that shines light on abatements and their impact on taxpayers.
“Fiscally speaking, we’re experiencing a very painful squeeze and crowding out effect with our state budget. Tax abatements are one of the reasons why,” said Ciattarelli, R-Somerset, Hunterdon, Mercer and Middlesex. “The new GASB rule on abatements is long overdue and will go a long way toward providing the kind of transparency that can only help in addressing the abatement issue at every level of government.”
The new rule, which was approved Monday and goes into effect next year, requires municipal government officials to disclose the total of property, sales and income taxes that have been waived. This new transparency benefits taxpayers who must make up for the lost revenue, and bond-buyers who invest in municipalities.
“In trying to solve the state’s problems, we need policy makers at all levels of government to take the issue of abatements very seriously,” said Ciattarelli. “At the municipal level, these abatements are not only an exploitation of our state school funding formula, they are an injustice to homeowners and tenants who receive no break on their property taxes or rent.
“Abatements are also an issue for the capital markets. For example, when a municipality that abates property taxes sells bonds, buyers are not always aware that the community’s ability to pay back those bonds may be diminished by the abatements,” Ciattarelli continued.
Ciattarelli acknowledges that some municipalities already provide some information on abatements previously granted.
Ciattarelli’s comprehensive proposal for pension reform includes two points addressing the impact of abatements on school funding:
No community is allowed to fund less than 25 percent of their school budget through the local tax levy (some communities fund less than 15 percent of their school budget, while others fund more than 90 percent); and
No community whose local school budget is funded more than 50 percent by federal and state aid can abate school property taxes on new development.