There are times that rates can provide a quick metric for comparison and times that they are not appropriate.
Two common uses are:
- Tax Rates (limited utility)
– Tax Rates and amount paid do not necessarily flow together
– Rates can vary dramatically between towns based on when they conduct a reval - Debt Rates (fair comparisons)
Tax Rates
These are sample tax rates for Teaneck
| Year | Municipal | School | Total |
| 2006 | 1.592 | 1.220 | 4.640 |
| 2007 | 0.748 | 1.250 | 2.150 |
The rate plummeted from 4.640 to 2.150 between 2006 and 2007. But the budget in those years didn’t get chopped in half.
So what is happening?
| Year | Municipal | School | Total |
| 2006 | $ 41,754,975 | $ 71,404,044 | $ 130,357,925 |
| 2007 | $ 45,134,088 | $ 74,190,491 | $ 133,851,961 |
Revaluation
Tax rates are floating modifiers. They work by taking value of land, comparing it to the current budget and obtaining the relative share from property owners. If your home is worth 2x that of your neighbor, you pay 2x as much in local taxes.
Everyone must pay their fair share, but since value of homes constantly changes, at certain intervals the town is required to find the full and fair value of property.
You can read about the issue on the State website here: What is Revaluation
There is also an explanation of the programs and processes here: Appraisal Systems Inc – Revaluation
Why can’t we just compare tax rates?
Since a revaluation changes the assessed values of homes to their full and fair value, it can affect how much is paid in taxes (since everyone pays a relative amount to everyone else). If your home recently sold, it’s assessment may be an accurate reflection of it’s value. If you have lived there for years, the assessment may need to be updated.
| Assessed Value Of Home | Tax Rate | Amount Paid |
| $277,760 | .025 | $6,944 |
| $555.520 | .0125 | $6944 |
As you can see in the example above, a house that was at full and fair value before an assessment will pay the same local taxes after a reval, although the tax rate will change based on the new assessed values.
Since the tax rate and the amount paid do not necessarily flow together, historical tax rate comparisons offer limited utility.
Since revaluation years vary from Town to Town, you also cannot compare historical tax rates across different communities.
Was there a revaluation during that time that would alter the numbers significantly? If so, looking at budget values is the appropriate metric.
Debt Rates
The amount of authorized debt is very different rate. You can use this to not only compare historical data, but also to compare your data across different municipalities.
In the State of New Jersey, municipalities may bond up to the debt limit, which is 3.5% of the equalized valuation of taxable real estate.
The annual debt statement, allows you to compare historical as well as neighboring municipalities’ percentage of authorized debt, against each other.
You can read more about debt rates here:
How does Teaneck compare to surrounding areas in terms of bonding?