The sprawl tax

by: Hank Kalet

Mon Feb 19, 2007 at 12:16:21 PM EST

Simply, New Jersey's over-reliance on property taxes to fund government -- in particular, its schools -- creates a ratable chase that has combined with a tradition of home rule on land use to clog our roades and chew up what little open space we have left.

Basically, the property tax system puts municipalities in the position of trying to attract large taxpaying properties to defray the cost of local services. And they can do so without considering what happens outside their borders.

How have property taxes encouraged sprawl? Just do the math. The average cost of educating a child in this state is $12,981, while the median residential property tax bill (only part of which covers education costs) is $5,352, according to the census.

Clearly, property taxes fail to pay for schools, so many towns in New Jersey have made the perfectly logical choice to favor the creation of business zones, essentially outlawing family housing. Commercial properties like shopping malls are preferred because they bolster the tax rolls while making fewer demands for services. Sadly, when towns opt for commercial business development, they seldom take into account how it will affect transportation, sewer service, the water supply and workforce housing.

If New Jersey is to remain economically competitive, lawmakers must look beyond short-term fixes like tax credits or rebates and promote long-term reform that eliminates the ratables chase and slows sprawl. More state financing for schools and regional service sharing, which would reduce the competition between municipalities for commercial development, are just a few ways to address these systemic problems.

More importatnly, of course, New Jersey's property tax structure encourages towns to engage in a chase for ratables even as its home-rule tradition sends a message to the state to stay away.

So, rather than a system that grants average citizens a say in the planning process, we get planning by aversion -- towns zone undesirable, but tax-generating projects, at their borders, away from their own residents.

Development decisions are made based on tax revenue -- warehouses and senior housing are built, but family housing is not -- rather than on economic feasibility or the need for jobs or housing.

We could impose new planning structures -- overlapping regional planning boards, for instance, could review local master plans and zoning and planning decisions -- but they can only do so much. We have to remove the negative incentives to good planning. And that can only be done by reducing our reliance on property taxes.