The city won state approval for a long-term bond that enables it to settle more than $8 million in tax appeals, a move local officials say may encourage investment in downtown redevelopment plans.
The state Local Finance Board last week approved of a seven-year bond that will let the city repay $8.65 million in property tax appeals. At the same time, Hackensack adopted a plan to quickly bringing tax assessments up to date.
The city will have to request state approval for another bond of $8 to $10 million next year to settle the remaining tax appeals. But local officials and a development expert said resolving this first portion of the appeals puts the city on sturdier footing as the redevelopment begins.
"The people who want to invest in the city of Hackensack, they're going to see that we're responsible and we did the right thing," said Leo Battaglia, a city councilman.
Michael Seeve, president of NAIOP, NJ Commercial Real Estate Development Association, which focuses on commercial development, said Hackensack would become more attractive for investors by settling old debts and revamping the process for reassessing properties.
"I think it's a big deal for a lot of reasons," he said, adding that the recent moves show investors the city is "contemporary and aggressive."
Hackensack has planned a complete reassessment for 2016 and ongoing reassessments planned afterward in a four-year cycle. That plan eases concerns of developers and investors who see lagging assessments as potential liabilities when tax bills come due, he said.
"What Hackensack is doing is the right thing," Seeve said. "It's a little bit of a new wave and I think it's a terrific idea."
The decision last week by the state Local Finance Board was the best possible outcome for Hackensack because it allows the city to repay the debt over an extended seven years, said Deputy Mayor Kathy Canestrino.
The Local Finance Board could have denied the request, forcing the city to absorb the entire $8.65 million in next year's budget. That decision would have hit taxpayers with a $420 increase on a house assessed at the city average. It also could have prompted layoffs, furloughs and cuts to services, Canestrino said.
Had the board approved a shorter-term bond of five years, taxpayers at the city's average might have seen an $89.20 tax increase.
James Mangin, the city's chief financial officer, said that with the seven-year bond approval, taxpayers should see an annual increase of $64.92.
Most of the $8.65 milliion is owed to commercial entities, said Art Carlson, the tax assessor.
The city recently settled tax appeals on the Fairleigh Dickinson University property at 140 University Plaza for more than $1 million and the Sears Roebuck and Co. on Main Street for about $800,000.
Mangin and Canestrino went before the state board on Aug. 13 to show how the city had reduced expenditures and planned for property reassessments. The city got an early, positive indications on its request in a letter from Thomas Neff, director of the state Division of Local Government Services, which oversees the finance board.
"In the case of Hackensack, we recognize that the City is appropriately moving forward with efforts to modernize assessments such that they are accurate and more defensible in the face of appeals," Neff wrote in an excerpt provided by Canestrino.
Carlson, the tax assessor, said the city plans to reassess every property by 2016; thereafter, 25 percent of all properties would be revaluated each year on a rolling schedule to ensure that assessments are current every four years.
Seeve said too few New Jersey towns and cities stay current with assessments, which creates a gap that can cause funding problems seen now on a large scale in Hackensack.
Commercial and residential properties may be assessed at a certain market rate one year, but if property values drastically fall or rise, the offset between old and new values can become a target of a tax appeal. If assessments aren't current the property owner often wins a tax appeal, which requires the city to pay back the difference.
Tax appeals in recent years have rocked many municipalities in Bergen and Passaic counties.
After a real estate high in 2007, the housing market crashed and the commercial market followed.
A 2011 analysis by The Record showed a 16.4 percent drop in value of residential properties across North Jersey, which set off a deluge of tax appeals.
In Bergen County the number of tax appeals climbed from 7,242 in 2009 to 12,185 last year, or a 68 percent increase, according to the New Jersey Division of Taxation.
Passaic County saw a more drastic rise, from 4,376 in 2009 to 9,487 last year, or a 117 percent increase.
Frustrated residents in Northvale, Emerson and a dozen Bergen County towns saw tax bills rise and then lined up at county offices with tax appeal, and many of them were successful.
In 2012, for example, 1,846 Teaneck property owners filed appeals with the county tax board. Nearly 1,800 saw success of some kind, according to archives of The Record.