Where Do Your Tax Dollars Go?

In the five-year period from 2008 to 2012, Lawrence Township paid out a total of $7.8 million in cash refunds and credits to property owners who successfully appealed their tax assessments, despite the fact that the township’s share of those refunds and credits should really only have been $1.6 million.

In a perfect world, the other $6.2 million would have been paid out by the Lawrence Township public school district and the Mercer County government. Instead, thanks to archaic state laws, the full burden of issuing those refunds and credits fell to the township. While the township did receive some reimbursement in the form of credit in successive years for the county’s share ($2.1 million), the township received none of the remaining $4.1 million back from the school district.

“I have to tell you when we were looking at some of this data, as many times as I have spoken about it, it was still profound in the impact it has on our fiscal condition. [In five years] we have refunded or credited $7.8 million in taxes,” Township Manager Richard Krawczun said during last Tuesday’s (March 5) Lawrence Township Council meeting. “That’s an astounding number. That’s an astounding amount of revenue to have to absorb a decrease of.”

Krawczun’s comments came as he offered a PowerPoint presentation showing exactly where the tax money paid by township property owners goes and how that apportionment has impacted the township’s finances and municipal budgeting.

(A copy of that presentation can be found in the Patch media box above, together with full audio from the March 5 council meeting.)

Krawczun has repeatedly explained that Lawrence Township receives only 21 cents of every tax dollar paid by property owners, with the remaining 79 cents going to the school district and the county government. To illustrate the significance of this fact, the township manager presented several charts showing that of the $113,471,327.20 in taxes paid by Lawrence Township property owners in 2012, only $23,276,941.80 went toward funding municipal operations.  

2012 Total Levy / Amount To Be Raised By Taxes

School

$ 59,452,163.87

52 %

County

$ 30,742,221.53

27 %

Municipal

$ 23,276,941.80

21 %

$ 113,471,327.20

100 %

“When you look at the three levies versus the municipal budget, the school levy of $59.4 million exceeds the total budget of Lawrence Township in 2012. Our budget last year was approximately $44 million. The school [district] collected more in taxes than we had in total budget expenditures by $15 million,” Krawczun said. He added that the township’s budget even included “non-direct municipal expenditures” like the $3.5 million reserve for uncollected taxes and $5 million allocation to the Ewing Lawrence Sewerage Authority (ELSA).

2012 Tax Rates

Taxing Entity

In Dollars

As A Percent

Amounts paid on Average Assessed Residential Home of $161,569

School

2.352

52 %

$3,800.10

County (including Library Tax)

1.176

26 %

$1,900.05

County Open Space

0.040

1 %

$64.63

Municipal

0.891

20 %

$1,439.58

Municipal Open Space

0.030

1 %

$48.47

4.489

100 %

$7,252.82

Krawczun next turned to the reserve for uncollected taxes – the amount the township, by state law, must build into its municipal budget each year in anticipation of a certain percentage of property owners not paying their taxes.

In 2012, the reserve for uncollected taxes total was $3,592,531.01, of which nearly $1.9 million was to cover unpaid school taxes, $973,431.43 to cover unpaid county taxes and only $737,278.25 to cover unpaid municipal taxes.  

With one penny on the municipal tax rate equal to $252,784, the reserve for uncollected taxes accounted for 14 cents of 2012’s municipal tax rate of $0.89 per $100 of assessed property, with 11 of those cents needed to cover unpaid school and county taxes.

“I understand that people are frustrated. I get that. But I also think that it’s important that there’s a level of objectivity that everyone steps back and gives some review to understand where their tax dollars are going. As you can see, 79 percent of that taxes collected are spent by the other two taxing districts,” Krawczun said.

“There’s no denying it, taxes did go up,” he said, acknowledging that the municipal tax levy in 2012 was $3.4 million more than the amount in 2008.

“But I think it’s important to tell the other side of the equation,” he added and proceeded to point out that, despite the $3.4 million municipal tax increase, the township in the last five years absorbed a loss of more than $5.5 million in revenue due to it receiving less state aid and because the township’s tax base dropped over $165 million in assessed valuation as a result of property owners’ successful tax appeals.

“We are told we should run this place like a business. We can take certain business practices and apply them to our organization, yes, but on the other hand you can’t find me any retailer that could have sales of $3.4 million and have refunds of $8.9 million and stay in business. And that’s what we did,” Krawczun said.

“I think it’s important for everyone to recognize that, yes, taxes have gone up, but we have taken a major blow on the revenue side. We have made a lot of changes. We have refinanced debt. We have cut staff. We have a new police contract that over three years has a net cost of a negative $9,000. There have been a lot of things that have been taking place. And we have been seeing it and we did anticipate it. Therefore, I would hope this can help explain to everyone why there’s been such a dramatic change and where some of the focus has to also shift to in order to be objective and to be effective if you want change.”

See Also:

• Feb. 8: “Proposed Municipal Tax Rate Hike Needed to Counter Tax Appeal Refunds & Decline in Township Tax Base”
• Jan. 30: “Recommended 2013 Budget Presented to Council”