Quarterly property tax payments are due May 1 — the first since the start of the COVID-19 health crisis that has thrown at least 718,000 New Jerseyans out of work.
Municipal leaders are getting ready for a likely shortfall in payments, which are officially late after a 10-day grace period in most towns. State legislators have not taken action to give people more time to pay during the pandemic, and Gov. Phil Murphy has not encouraged such action.
The New Jersey State League of Municipalities has issued an advisory on how localities can lower the fee and interest charged to late payers, but league Assistant Executive Director Micheal Cerra said the real problem may come in August.
“Because of escrows on mortgages, most of those payments are required to be made,” Cerra said. Escrow is paid ahead, so May’s payments were likely made by homeowners before the full effect of COVID-19 hit.
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“Not knowing what lies ahead, a lot of us are looking at the Aug. 1 deadline as the bigger concern,” Cerra said. “Obviously, some individuals and businesses might have issues (now). The bulk of it (payments) will probably be OK.”
State law sets the property tax deadline at quarterly payments, the next of which is due May 1, then Aug. 1, Nov. 1 and Feb. 1. The maximum interest rate that can be charged is 8% a year on the first $1,500 and 18% on any amount in excess of $1,500. The minimum interest rate that can be charged is not set by law.
Hammonton Mayor Steve DiDonato estimated 10% to 20% of property taxes might not be paid on time, but stressed it is a guess on his part.
Town Council is planning to pass an ordinance at its meeting Monday lowering interest charges and fees on late payments, he said.
“Hopefully the residents that can pay their taxes on time — we’ll accept their money,” DiDonato said. “But if a resident has a problem, we will work with them one on one. We are not going to charge any penalties.”
The town’s cash flow may be tight, he said, “but luckily we had some surplus from other years. I think we can bridge the gap.”
If municipalities want to change the interest rate on late payments, they must do so ahead of the due date, according to the league.
“A governing body cannot retroactively change the interest rate on payments already late,” according to a recent posting on the league website, alerting towns of the need to act quickly if they want to help residents struggling during the pandemic.
Cerra stressed the advisory is not a recommendation, and it’s important for municipal leaders to confer with attorneys, financial experts and others before taking such action.
“If your governing body is considering this option, it is strongly suggested that they discuss the proposed change with the Administrator, Chief Financial Officer, Tax Collector, Financial Advisor, and Attorney,” the advisory said. “This will help you understand the short-term impacts, such as meeting the statutory payments to the county and school district(s), and the long-term impact of such a change in the context of the specific circumstances facing the municipality.”
He said towns are facing manpower issues, with some essential workers unable to do their jobs because of symptoms or other factors.
“Obviously, certain essential services have to be provided,” Cerra said of police and firefighters, health and code officers, public works employees and more. “How you back fill some of these operations has been a real challenge. There is no one answer — just a lot of innovation and improvisation.”
