Property Tax Revenues Hold Steady Amid Pandemic

To access the Herald’s local coronavirus/COVID-19 coverage, click here.
COURT HOUSE – The COVID-19 crisis has not yet played itself out. Infection numbers suggest that the state is heading into another surge in cases, hospitalizations, and perhaps fatalities. New county case numbers have also begun to climb.
The economic crisis caused by the pandemic is ongoing, with many experts predicting that 2021 will be a much more difficult year for municipal and county finances. 
There are too many uncertainties hidden from view by short-term protections quickly established by federal and state governments. It is difficult to get a sense of the current impact.
One of the most difficult to get a handle on is property tax revenue trends. Protections against evictions and foreclosures, widespread availability of forbearance for home mortgages, and requirements that mortgage servicers for federally secured loans make tax payments, even without sufficient escrow funds, could be masking the extent of any COVID-19 housing crisis. 
Whatever the reason, property tax revenues are holding steady as the pandemic takes a toll on individual incomes.
In spring, soon after Gov. Phil Murphy closed much of the state’s non-essential economy and issued stay-at-home orders for citizens, one major fear voiced by news reports and pundits was the potential impact of a drop in property tax revenue. 
In New Jersey, the home rule tradition means that local municipalities are responsible for most of the services on which citizens depend daily. These municipalities are largely dependent on property tax revenue to maintain their budgets.
With an economy that is badly damaged, unemployment remaining at double digits, and most federal COVID-19 aid distributed and used, local budgets are limping along, most of the damage done by shortfalls in revenue in areas separate from property taxes.
In some of the county’s island communities, an unexpected surge in the real estate market kept home prices high. 
A recent rating of financial health by Moody’s Investor Service gave the county its highest municipal investment grade rating, in part because of the “long-term positive effect” of the “material” spike in demand for shore property.
The pandemic is having an unexpected positive impact on county assets, including long-term ratables and property tax revenues.
Wildwood had a similar experience with a credit rating agency. Standard and Poor’s Global Ratings (S&P) assigned its highest short-term credit rating to Wildwood, as the municipality looked to issue $33 million in notes to fund infrastructure improvements. 
After conducting the rating analysis, S&P decided the city was in strong financial health despite COVID’s impact.
At the end of August, when Moody’s was attaching a rating to the county bond anticipation notes, the investment service discounted the pandemic’s impact on the county’s economy.
“We do not see any material immediate credit risks for Cape May County,” Moody’s opined. Part of the reasoning was that while New Jersey has been at the center of the pandemic, “Cape May County has seen only limited impact.”
In a presentation of September financial results, Cape May’s Chief Financial Officer Neil Young said the city was in “great financial shape.” The earlier dread that municipalities would see downturns in property tax revenues did not materialize. Young’s presentation showed no drop in expected property tax revenues.
The same pattern appears to be true on the mainland. Middle Township Chief Financial Officer Susan Quinones Oct. 29 said, “As of the end of the third quarter, Middle Township, overall, has not been negatively impacted in terms of property tax collections.”
Quinones detailed some areas of revenue where the municipality saw less than expected results, including occupancy tax revenues, municipal court fines, ambulance revenue, and construction fees. 
Across the county, similar revenue streams were hit by the virus. In many cases, the losses date from the months when the economy was in lockdown. They represent revenues from parking to hotel taxes to water consumption that will not be recovered.
In Cape May, a drop in water consumption during the lockdown months had a negative impact on fees charged and accelerated the need for a rate hike. 
Some of the city’s losses in parking fees and similar areas of tourist-driven revenues had to be offset with tight controls on spending, yet property taxes, the largest single source of municipal revenue, held steady.
This is the tale of municipal revenues so far this year – losses, yes, catastrophe, no. 
Many small businesses experienced pandemic-induced hardship from which some will not survive. The challenge to municipalities may be greater in the next year, as they seek to deal with the challenges of creating a 2021 budget.
For now, the early fears that property tax revenues would tumble and leave local governments scrambling appear overblown in hindsight. The virus is still here, and its economic impact will continue to challenge public officials.
To contact Vince Conti, email vconti@cmcherald.com.