Opinion: The Alcatel-Lucent Tract Tax Ratable is Not 'The Golden Goose'
Resident Robert Way challenges conventional knowlege by sifting through some historical tax data.
All too often when discussion about Holmdel's current budget crisis comes up the inevitable mention of the Acatel-Lucent tract having been the "Golden Goose" is referenced and made out to be one of -- if not the main -- contributing factor to the town's economic woes.
Not willing to accept this notion at face value, and with a little curiosity to go along with that skepticism, I decided to get a realistic view as to whether or not the "Golden Goose" had indeed stopped laying eggs.
In its heyday, Block 11, Lot 38 -- that being the Lucent tract -- a Class 4b Industrial ratable, was assessed at over $208 million from 1992 until 1997.
In 1997 alone, it contributed over $4.5 million in property taxes which is the largest raw dollar amount I could find searching Monmouth County Records back to 1988.
While $4.5 million sounds like a very significant amount of tax revenue, and by most accounts it is, what matters most is not how much tax dollars Lucent generated but instead what percentage of the overall Township Tax Levy it shouldered.
Why this matters is because there is a direct relationship between how much of a tax burden percentage Lucent has compared to the Residential tax burden.
In an effort to exemplify why the raw dollar amount Lucent generates is not as important as the percentage of the overall tax burden it bears: In 1988, it contributed $3.26M of the $20.48M needed to be raised by the ratable base. This represents Lucent carrying almost 16% of the overall taxes to be raised while the rest of the ratables in town were responsible for the remaining 84%.
As recent as 2006 the property contributed $3.09M which by most would still be considered a lot of revenue, the problem is that revenue was only a 4.6% contribution towards the $67.03M needed to be raised in 2006 and represented an 11% shift from 1988 to 2006 where the non-Lucent ratables were required to make up the responsibility Lucent was shedding.
Fast forward to the 2011 tax year and the picture gets even worse, Lucent contributed $522K in taxes against a tax levy of $75.28M which equates to it carry a scant 0.69% of the overall ratable load.
Since 1988, the non-Lucent ratables in town have had to bear an additional 15% of the total taxes to be raised, what was once a $208M ratable is now a paltry $26M one.
Does all this mean that if Lucent were still generating revenue like in the late 90's to the tune of over $4 million everybody's taxes wouldn't have gone up? Not exactly.
It does mean that if Lucent hadn't eroded so drastically as a ratable compared to the rest of town, household taxes would have risen at a much slower rate. From 1988 until the current tax year, a residential ratable has not only been impacted by the traditional year-over-year increase in taxes as a result of ever-increasing budgets, it has also had to bear the additional responsibility resulting from Lucent's assessment erosion.
Residential households have effectively been on the receiving end of a two-fold tax increase since at least 1988 and even more significantly when the bottom started really falling out from under the Lucent assessment from 2006 until the current tax year.
The Lucent assessment brings a very real issue to the forefront, that being the balance between Residential and Class 4 (commercial and industrial) ratables.
In 1988, Residential ratables made up 66.7% of the tax base and Class 4 represented 28.6% based on their respective net taxable values.
By 2011 that relationship had shifted to 87.6% Residential and 10.9% Class 4.
1988 represented what our current Township Administrator alluded to at the Feb. 4th 2012 Budget Workshop as a healthy balance between residential and commercial ratables of roughly 65% to 35%.
Where we sit now could arguably be called "unhealthy" and results from residential development far outpacing Class 4 development while at the same time being a spectator to the decline of the Lucent tract.
In light of what I have presented above, it doesn't seem that Lucent was really the "Golden Goose" it was made out to be, I would argue it was more of a "Golden Shield" by deflecting a larger percentage of the year-over-year total tax levy increase.
A tax levy is a zero-sum game in that what you appropriate during a given budget year is what you have to raise through tax levy and other revenue streams.
It isn't a game where you can say "hey, we just got $4M more tax revenue now that Lucent has been developed so we have that much more we can spend."
The only way to spend that "windfall" revenue is to appropriate the spending in the budget where it then gets distributed amongst the ratables.
That is a situation that has the possibility of raising everyone's taxes if the shift in rate distribution to the Class 4 ratables and away from the Residential ones isn't significant enough to absorb the tax rate increase the Residential base would normally realize from the increased spending.
With Lucent's decline so often cited as a contributing factor to our current budget deficit, it requires that notion be addressed within the context of what has been laid out so far.
It is at this point that I will have to start speculating and seek feedback from others that may be more "in the know."
If Lucent were to become the ratable it once was overnight and bring a theoretical $4 million or more to the table for 2012, I don't believe it would close the $2.5M to $3M gap the Municipal Budget is currently faced with.
It would just mean that every other ratable in town would shed responsibility having to raise $4M less, a mere shift in the tax levy burden percentages as mentioned earlier.
This is a point I am more than willing to be challenged on to make sure I am not misrepresenting the situation and help clarify the overall impact Lucent is having on the Residents of Holmdel and the current projected Municipal Budget deficit.
It is not apparent to me, without seeing the 2012 preliminary Municipal Budget directly compared to 2011, where the deficit has been created.
Is it a result in changes that have specifically happened in appropriations vs. revenues between the two budget years or the impact siphoning off our reserves since 2008 has had (if that is even what happened) in an attempt to shield the taxpayer from Lucent's ratable decline, the 26% increase in the Municipal Budget Tax Levy, the $700k reduction in State Aid, and the $660k loss in investment revenue over the same period of time?
Or is it maybe the $2M in sewer surplus used to subsidize the Municipal Budget in 2006 and 2007 is having an impact, as well as that redirection of funds seems to have been a quick fix to the budget woes at the time.
My main point here is "I don't know" nor do most other folks in town which is why transparency is so crucial at this time and perhaps a "Roadmap to the Deficit" is in order but that may shed light on any mismanagement that has occurred over time so I am not holding my breath for that one to get published.
In any event, Lucent's status as a "Golden Goose" may have once been the case, but now it simply stands as a "Lame Duck."
Until some serious progress is made to restore a similar "healthy" balance in ratable distribution between Residential and Class 4 as was the case in 1988, with Lucent remaining at the forefront of that effort, the households in Holmdel will continue to shoulder the vast majority of the tax levy.
In the meantime, the 2012 deficit is right in front of our faces and we are presented with either a tax increase or the selling of some Open Space as it has been expressed by the Township Committee that there is "no stone left to turn over" to try and cut appropriations any further.
Given how much my taxes have gone up since 2006 when I moved here, as long as I have a vote, it'll be to preserve what is becoming bigger open space in my wallet.
Any comments, corrections, feedback, or alternative viewpoints are totally welcome. If I have misrepresented any of the information here I encourage the reader to please point them out as the data I have gathered have led me to the observations I have made here.
All data has been gathered from the Monmouth County Open Public Records Search System and aggregated in spreadsheet format represented by the two PDF Documents posted here.
JerseyGirl
8:13 am on Friday, February 10, 2012
"Given how much my taxes have gone up since 2006 when I moved here, as long as I have a vote, it'll be to preserve what is becoming bigger open space in my wallet"....
WOW! couldn't have been said any better! I agree WHOLEHEARTEDLY and will being doing the same with my vote! NO TAX INCREASE!!!!!!!!!!!!!!!!!!!!!!!!!!!
Jeff Gollin
9:33 am on Friday, February 10, 2012
A thorough well-reasoned analysis. (Quite possibly I skimmed past a few points and apologize if I repeat them here as food for thought).
First, I get a pretty good sense of the history of Lucent-Alcatel's tax contribution as a percent of our total budget, but what's missing is a year-by-year estimate of its future tax contribution as its use greadually shifts from "inactive" to "fully up and running."
Also missing (but I bet exists somewhere in Mr. Katz's files) is a document which charts - parcel by parcel in the town - (1) current tax revenue, (2) tax revenue as a percentage of total town taxes and (most important), (3) it's percentage of the total township line-item costs for public safety, infrastructure, administrative, education, recreation and other services (both past and projected forward).
Without an examination of the line by line cost/revenue details, it's nearly impossible to fairly evaluate "bang for buck" value or establish fair priorities for cutting (or conceivably even increasing) specific line-item costs.
Robert Way
12:56 pm on Friday, February 10, 2012
Thanks for the reply Jeff, I am hoping to try and gain just such a "future impact" perspective by looking at Block 13 Lot 15 (the Vonage Class 4a Commercial parcel) as well as Block 795 Lot 5.01 over in Middletown (the AT&T Class 4a Commerical parcel). I am not sure if their history over the past decade or two would in any way give some perspective on what the Lucent tract would theoretically assess at if it were still running full bore since Lucent is a Class 4b Industrial parcel being an R&D facility whereas the other two I mention are "office space".
I agree with your desire to know the three items you listed, especially number three which would in theory represent the additional appropriations required to support developing certain classes of ratables. My guess is that is know information and something Mr. Katz would possibly be able to explain or someone of a similar background. It would be nice to see for every assessed dollar of Residential or Commercial development, it brings with is "X" amount of budgetary appropriations to support it.
Martin B. Brilliant
11:08 am on Friday, February 10, 2012
The deficit Holmdel is trying to close is in the municipal budget, and the referendum seeks to allow an increase in the municipal tax rate, but this opinion piece is mostly about total tax and total tax rate. That's confusing. The whole piece should be resubmitted with facts identified as to whether they pertain to the municipal tax and budget or to the total.
Tax rate certifications are available from 1988 through 2008 on the county open public records site, showing the totals and components of Holmdel's tax and tax rate. Samples:
1988: municipal tax $1.65 million at a tax rate of $0.185 per $100, which was 8.11 percent of the total tax of $20.48 million at a total tax rate of $2.281 per $100.
1998: municipal tax $4.57 million at a tax rate of $0.263 per $100, which was 11.15 percent of the total tax of $41.07 million at a total tax rate of $2.360 per $100.
2008: municipal tax $9.48 million at a tax rate of $0.207 per $100, which was 13.3 percent of the total tax of $71.22 million at a total tax rate of $1.556 per $100.
For later years I have only the total tax rate from the state website: $1.609 per $100 in 2009, $1.946 in 2010, and $1.961 in 2011.
I'm running out of space for a comment. The point is, although totals grow as the town grows, tax rates are at a historic low now, and if (like JerseyGirl) you want to keep the even lower tax rate you had just a few years ago, you're being totally unrealistic.
Martin B. Brilliant
11:29 am on Friday, February 10, 2012
Replying to myself: Sorry, I realize this opinion piece is not about the current municipal budget crisis, it's about the role of the old Bell Labs, then Lucent, now Alcatel-Lucent property in the overall tax budget. So it can stand as is as long as we are aware that is does not specifically relate to the municipal tax.
Nevertheless the same point remains: the tax rate is at a historic low now, and was even lower a few years ago, and it's unrealistic to suppose it can stay that low.
Robert Way
12:40 pm on Friday, February 10, 2012
Regarding your listing of the municipal tax and rates above, you are right in shedding light on the fact that the Municipal portion of the budget is becoming a larger and larger percentage of the overall tax levy to be raised and this is actually reflected in "Municipal % of Tax Bill" column in one of the PDFs posted where it has steadily increased from 8.08% in 1988 to 15.87% in 2011. The School portion of the tax bill it roughly at its average over that time period having been 66.81% in 2011. Strangely enough, the County portion of the tax bill has steadily decreased from 26.47% in 1988 down to 14.35% in 2011. There has been a significant shift in spending from dollars going to the County Budget to dollars going to the Municipal Budget. Since 2001 the total tax levy to be raised to pay the County Bill has remained pretty much dead flat while the Municipal Tax Levy has gone up 110% and the School Levy 57%.
With the County Tax Levy flat over the last decade, it doesn't seem to be the "drain" it is sometimes made out to be, we're sending them the same raw dollar amount we were a decade ago. It is the Municipal Budget that is bursting at the seams which is why I suggested a "Roadmap to the Deficit" to try and identify through numbers, not rhetoric, where the gap came from.
Robert Way
12:43 pm on Friday, February 10, 2012
Thanks for the feedback Martin. I just want to mention to mention a few things in response to you post.
- I did indicate the current gap exists in the Municipal Budget; "I don't believe it would close the $2.5M to $3M gap the Municipal Budget is currently faced with".
- The piece is not specifically about total tax rate and total tax as it is more focused on the distribution of taxes to be raised on the ratable base. If Lucent was responsible for 15% of the total tax burden then at the same time it was responsible for 15% of the Municipal portion, as well as 15% of the School portion, and 15% of the County portion. With that being said I would disagree that the piece need to be resubmitted.
- Thanks for pointing out where the tax Certification sheets for 1988-2008 can be found. You must not have read the last line of the piece where I said "All data has been gathered from the Monmouth County Open Public Records Search System and aggregated in spreadsheet format represented by the two PDF Documents posted here." Being that they are only available on there up until 2008 is why I took the time to visit the Township Assessor's Office and get copies of 2009-2011.
- In regard to the tax rate being so low I am not sure I fully understand the point you are trying to make so I would appreciate you elaborating on that point.
continued........
Martin B. Brilliant
9:04 pm on Friday, February 10, 2012
I'm saying Holmdel's tax rate is lower now than it was in 1988 when Bell Labs (before Lucent even existed) was contributing 16 percent of the total property tax revenue. The total tax rate then was 2.281 per hundred. Now (for the 2011 tax year) the rate is lower, at 1.961 per hundred. The rate was even lower in 2008: 1.556 per hundred.
The tax rate went up 26 percent in the last three years, but it's still 14 percent lower than it was when Bell Labs was carrying 16 percent of the load!
The point I wanted to make is that the low tax rates of a few years ago, and even now, are not typical of Holmdel's history and shouldn't be expected to continue.
The point I didn't expect to make, Robert, is that you're absolutely right. The decline of the Bell Labs / Lucent ratable has nothing to do with the current situation.
Part of the it may be the state balancing its budget on the backs of the municipalities. Let me quote from a statement by our Mayor, Pat Impreveduto, in the May 2011 Township Newsletter (downloaded from the township website): "We are proud to say that our Town has continued to provide quality services to residents while State Aid to the Township has dwindled." How did we manage to do that? Partly with tax increases, partly with one-time fiscal maneuvers. We've come to the end of the road.
bud
1:03 pm on Friday, February 10, 2012
One more time! Trying to fix the municipal budget problems while ignoring the COUNTY and EDUCATION budgets is like Obama ignoring Medicare, Medicaid and Social Security while trying to reduce the horrendous amount of debt WE have created. We will NEVER get anywhere squabbling over the 15% of the property tax dollar represented by the municipality, while ignoring the 65% going to education, and 20% going to Monmouth County. What will we do NEXT year and the year after? What will happen to the REAL ESTATE market in Holmdel if we continue to raise property taxes? I promise you, it will go DOWN. Q.E.D.
Robert Way
1:45 pm on Friday, February 10, 2012
Thanks for jumping in bud, I am going to have to respectfully disagree with you on this one. The Municipal, County, and School budgets are three beasts unto themselves. While they absolutely do have an aggregate impact on the overall tax burden the ratable base is responsible for, fixing problems in one of them doesn't fix problems in another.
If the 2012-2013 School budget were to come in $3 million less than last year, those "saved" dollars wouldn't be immediately available to close the projected Municipal Budget deficit. The fact remains that the items in the Municipal Budget that are governed by the 2% cap are projected to exceed a 2% increase in appropriations and if the Town Council wants to cover those increases by raising the Municipal portion of the tax levy it has to be voted on by us.
Look, I'm for scrutinizing all three budgets just like you and I hope my piece doesn't suggest that the Municipal Budget is the root of all our current woes, but I definitely don't think paying significant mind to the 15% of the aggregate is "squabbling". If that 15% is allowed to run wild, it can easily erode any cuts you're able to achieve in the 65% and 20%.
Overall I think we may agree on more than it seems bud. Thanks again for your input.
Tony Orsini
3:51 pm on Friday, February 10, 2012
You are making the SAME mistake the TC is: "there is no stone unturned." Oh really? You take that on faith? Knowing the history and abilities (or lack thereof) of some on TC and, and having served on TC and worked on 3 budgets and 1 school budget, I believe that to be false. Where there is a will, there is a WAY. And if we look beyond 2012, what then? Sell more land? What then Jersey Girl, our first born? Here's a newsflash for you all: next time you go to the polls, vote for the person (pay attention) and not the party. Otherwise this is what you get. As for our taxes continually rising since 2006, I do believe there was 1 year where the tax incerase was zero (thanks to blowing out the surpluses)...coincidently the year Mayor DiMaso was up for re-election. But the first year she was mayor, the budget incerased by $2 million: there's your culprit.
bud
3:51 pm on Friday, February 10, 2012
I stand corrected. Just paid my property taxes. The school budget consumes 67% of the property tax dollar. The county budget consumes 17.4%. We do NOT have a tax problem, we have a SPENDING problem, just like the Federal Govt. These two budgets must be "reeled-in" if we are to fix our municipal budget. These are not green, blue and red dollars, they are DOLLARS. We do not have the choice as to which portion of our burgeoning tax load we want to support. You CANNOT fix one without fixing all THREE. We need "fiscal synergy", and soon.
Robert Way
5:08 pm on Friday, February 10, 2012
Tony, thanks for getting engaged as I know you have a solid understanding of what goes into the budget process having served on TC and folks like myself can only speculate and loosely gauge the talking points of our elected officials. Having said that, I definitely do not hold blind faith in the TC stating "there is no stone unturned" but I am also not readily inclined to call them blatant liars (and I don't think you are doing that either). I simply mentioned it because that seems to be the stance they have taken to justify the tax referendum vs land sale options. I attended the Feb. 4, 2012 budget workshop at Town Hall for the first few hours and then the very tail end so I didn't catch all the department heads going through their budget. I did catch the whole Police Department presentation and the Recreation Department though and it seemed all the "big stones" were being stepped on by contracts so the TC had to poke around and look for some pebbles to look under.
I am unfortunately just another observer on the outside of the process speculating, if you know of stones that could definitely be turned over and don't come up against a contract, State mandate, or County mandate I would hope you would share them here. It is not enough to say "I believe that to be false", if you know specific cuts that can or should be made, call them out specifically as it can only help substantiate your claim.
Thanks again to you for getting involved...
Tony Orsini
7:22 pm on Friday, February 10, 2012
Robert, first off I should have commended you on the time and effort you put into your analysis. Wish everyone did, but I understand. I really hesitate to impugn the work ethic of individuals based on hearsay, but when similar stories come from different individuals I respect with working knowledge, I take it seriously. I regret with my work schedule I was unable to attend a budget workshop, but Larry Fink had some good suggestions, and if I could come up with a few just off the cuff, I wonder how many more there can be? For instance: why do we need 3 fire houses? The fire house on Centennial Ave is about 2 miles from the Hazlet Middle Road fire house, and I'm sure there are members in common. Most of the time when there's a fire in my area, Hazlet gets there first. Do I need to mention the cost of equipment? Do we need to buy new police vehicles every year? Vehicles these days are engineered to last 100K miles or more. How about forgoing equipment for 1 year? How about cutting the capital budget 10-50% and delaying projects? I repeat, instead of looking for one big hit, as in the sale of land, look for 100 little hits that add up.
Tony Orsini
9:29 pm on Friday, February 10, 2012
...also 10% cut for our professionals or we go to market. Across the board cuts has been done in the past.
Robert Way
9:57 am on Saturday, February 11, 2012
Tony, thank you for the recognition in regard to the effort that went into the analysis. Knowing you and I are more often than not on the opposite side of issues, your compliment is appreciated.
All of the points you bring up are valid and I am aware of the recommendations that Mr. Fink had made and appreciate his effort in trying to identify additional reductions and revenue generators. Those suggestions are only one part of the equation though as I am sure you will agree. What is more important is putting a dollar amount to them and identify any additional revenue that could actually be generated or any decrease in appropritaions along with their related reductions in service any cuts would create. It is only then that the aggregate impact could be determined.
As for the Fire House, has that been studied as an opportunity to create a shared service and determine what impact it would have on each town if one were to be eliminated?
As for Police Vehicles, I have a very solid understanding of the turnover that exists in a fleet since my father just retired from having maintained one of the local municipalities' Police vehicles for over 20 years. While I agree cars are made to last over 100k miles, Police cars are not used in the same way and 100k miles on a Police vehicles is like 300k miles on your car or mine. You can only defer capital equipment investment so long before the maintenance costs erode the benefit of not having to replace a vehicle with a new one.