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Politics & Government

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.

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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. 

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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.

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