Holmdel Taxes - the Whole Truth

[Editorial note – Please share and cross post this to family, friends and neighbors. If you wish to receive this as an email directly, please send an email to betterholmdel@yahoo.com.]

August 5, 2019 (updated Aug. 5, 2019, 1:43 pm)– On a number of occasions, it has been proudly proclaimed that Holmdel Township has a 0% increase in taxes for the past three years. In fact, the Township currently has on its website a “Top 10 Questions Concerning the 2020 Taxes” that included a table that breaks down taxes. This table (see picture below) specifically highlights 0% change for “Holmdel Municipal Budget” from 2016 to 2019. It also highlighted that the Holmdel School District had a 7% increase in this same period.

Most people that watched court dramas know that witnesses are sworn in with the question: “Do you swear to tell the truth, the whole truth and nothing but the truth?”. Well, that may not be the case when it comes to Holmdel taxes.

By now, Holmdel residents have received their new tax bills and most, if not all, will see an increase in their taxes, on the average around 4-5% increase. Most residents will see an increase not just in the total taxes, which include the school taxes, but possibly also in municipal taxes, which is the portion of taxes within the control of the Township Committee, due to an increase in assessed property value.

It is important to understand that the amount highlighted is really the “Amount to be Raised by Taxes for Support of Municipal Budget”. It is not the budget.

In simple terms, each year, the Township determines the year’s expenditures (called appropriations) and then figures what revenues it will have. Expenditures will almost always exceed anticipated revenues and the Township must raise taxes to make up that difference. It is this amount that the Township has “advertised” that it kept at a 0% increase. Again, that is not the budget. It is the “balancing” item needed to meet the budget. The budget is the totality of anticipated expenditures and anticipated revenues plus the taxes needed to be raised.

Budget Windfall

Among the anticipated revenues is an item called “Dedicated Uniform Construction Code Fees Offset with Appropriation”. Think of fees you have to pay for various construction permits that you need for a pool, an addition to your house, or a number of other projects that required a permit from the Township. For the 3-year period from 2016 to 2018, the Township anticipated receiving $2.2 million but it actually received $5.0 million. So, in fact, the Township has benefited from a cumulative “windfall” of $2.8 million, which helped the Township to build up its surplus to $3.3 million. For budgeting purposes, the prior year surplus is counted as “revenue” in the current year.

PILOT Payments

In addition, the Township has a special program where certain entities (e.g., Bell Works and the Toll Brothers senior housing development) are allowed to pay what is called “Payments in Lieu of Taxes” (“PILOT”) instead of property taxes. Guess what? Unlike traditional property taxes, the Township doesn’t share this with the schools even though school taxes represent 67% of our total taxes. The Township gets to keep 95% of the amounts collected and the County gets 5%.

The good news is that in 2018, the Township anticipated collecting $299,000 and actually collected $621,000. In the 2019 budget, it “anticipates” $1 million in PILOT payments (an increase of $700,000 over 2018 for budget purposes). On a cash basis, it is likely that the Township will collect more than the $1 million for the year. If these payments came in as “regular taxes”, the Township would only get about $170,000 out of the $1 million and the schools would get about $686,000 and would be able to reduce the amount of taxes it needs.

Increased Spending

If you look at the budgets, the Township has actually increased its expected spending by $2.66 million or a 15.8% increase since 2016 (from $16.9 million in 2016 to $19.6 million in 2019). However, the Township is able finance these increased spendings through a combination of a “windfall” from permit fees and PILOT payments that it doesn’t have to share with the schools. It is likely that some increase in expenditures is justified. However, in light of increased revenues, the question that residents might ask is not whether the Township can have a 0% increase in municipal taxes, but, rather, how can the Township better manage its spending, especially when recent evidence showed that the Township incurred more than $58,000 in expenses by the Township Engineer for a project never publicly discussed nor approved by the Township Committee.

The Future?

Each year, the Township goes through a budget process. Typically, there is a special Township Committee meeting (normally called a budget workshop) that is devoted to going through the budget in great details. Interested residents have attended these budget workshops in the past. The Holmdel 2018 calendar listed a “Township Committee Budget Workshop” meeting on April 19, 2018.

In 2019, it was mentioned at a public meeting that the Township Committee will go off to a “retreat” to work on the budget. The “retreat” was probably properly “publicly notified” (i.e., published in the newspaper and posted at Town Hall) as a public meeting but it was not listed on the Township calendar nor disclosed on its website. Whether it was intentional or not, the combination of calling the budget workshop a “retreat” and not listing it on its website or the Township calendar meant that no members of the public attended this budget workshop in 2019. As a direct result, there is very little visibility into the 2019 budget process, the expenditures, the anticipated revenues, and, therefore, the amount of taxes needed to be raised.

While there is no forecast or projection provided, there is an expectation that these PILOT payments will grow substantially. At the 2018 budget workshop, one Committeeman made a statement that he expects annual PILOT payments to increase substantially in the next few years. 95% of that substantial stream will be a somewhat “hidden” source of revenue to the Township. This means that the Township can increase expenditures substantially while simultaneously saying it has a 0% increase in taxes.

Unless properly monitored and managed, it appears that Holmdel residents can expect future increases in total taxes even as substantial future revenue is expected.