“Corporate Disinvestment Property Tax Relief Act” Would Work to Prevent Immediate Property Tax Hikes in Wake of Business Departure; Measure Stems from Roche Announcement to Abandon Nutley
An Assembly panel advanced on Thursday legislation Assembly Democrats Ralph R. Caputo, Cleopatra Tucker, Connie Wagner and Tim Eustace sponsored to help New Jersey municipalities absorb the devastating property tax impact that occurs when a major business leaves.
The Corporate Disinvestment Property Tax Relief Act (A-3807) stems in large part from the June 2012 announcement by the drug maker Roche to end their 80-plus year presence in Nutley and Clifton, a move that cost New Jersey nearly 1,000 jobs and has denied Nutley $9 million in property taxes – almost 10 percent of what the municipality collects annually.
“When a business, like Roche, announces they’re moving their U.S. headquarters out of state, the number of potential jobs lost gets all the attention,” said Caputo (D-Essex), a Nutley native. “What gets overlooked is the serious financial, property tax impact such moves have on the towns that host these businesses. That needs to change.”
Under the bill, municipalities that face a catastrophic drop in their property tax base, due to a major business closure or relocation, would be eligible for special short-term property tax relief aid to help compensate for the loss of revenue and keep tax rates stable. The bill would appropriate $13.5 million in aid for this purpose.
A “major business ratable,” is defined as commercial or industrial that is utilized by the property owner as its corporate headquarters and that meets at least one of the following criteria at any point up to two years prior to the effective date of this legislation:
- It has comprised the largest assessed value of any line item ratable in the municipality;
- It equals or exceeds 10 percent of the tax base of the municipality;
- It equals or exceeds $150 million in aggregate assessed value; or
- It employs at least 1,000 employees in the municipality or a contiguous municipality, or both.
Under the bill, qualifying municipalities would be required to send an application for aid to the state Division of Local Government Services. Any municipality receiving this aid would be required to use it to reduce the school and municipal portions of the town’s overall property tax burden.
However, a municipality would be excluded from eligibility for aid if the business departing from that municipality is relocating to another municipality within the state.
“When a pillar of the community is removed, we have to have a process in place to support that community or risk watching it collapse before our eyes,” said Tucker (D-Essex). “Nutley taxpayers can’t suddenly support an overnight $9 million hike in their property taxes. I highly doubt any other New Jersey community could, either. And they shouldn’t be forced to have to try.”
“This can happen anywhere,” said Wagner (D-Bergen/Passaic). “If a major property tax payer decides to leave for whatever reason, then residents will be penalized through no fault of their own. We need to do more to make sure the taxpayers are protected.”
“Protecting taxpayers in cases like this is the right thing to do,” said Eustace (D-Bergen/Passaic). “Municipal services and taxpayers shouldn’t be held liable if a major business, for instance, decides to leave. Nutley is struggling with this now, but it can happen any place at any time.”
A municipality’s eligibility for aid would cease after the sixth distribution year or in any tax year in which the equalized value of the major business ratable returns to an amount that equals or exceeds 95 percent of the equalized value prior to the departure of the business, whichever occurs first.
The bill was released by the Assembly Budget Committee. Identical legislation is under consideration in the Senate.