Trenton Seeks $10M a Year to Offset Revenue Lost on Tax-Exempt State Buildings

John Reitmeyer | March 19, 2019 | Budget
Measure to reinstate ‘Trenton Capital City Aid’ clears Senate committee, looks to have the backing of Murphy administration

trenton statehouse state house
Trenton’s mayor, a former state lawmaker, wants to bring back money to the state budget that once compensated the capital for having a large share of its real estate occupied by tax-exempt state-government buildings.

Under a measure that cleared its first legislative hurdle in the State House yesterday and seems to be supported by Gov. Phil Murphy’s administration, the state would reinstate the category of “Trenton Capital City Aid” in the annual budget and fund it with at least $10 million each year.

The city would also receive a supplemental appropriation of $10 million before the current fiscal year runs out on June 30, according to the bill.

A fraction of lost property-tax revenue

The new funding wouldn’t fully offset the property-tax revenue that would be collected if all state buildings were instead commercial or residential properties, which is an estimated $45 million a year, said Mayor Reed Gusciora, who served in the state Assembly from 1996 until his election as mayor last year. But it would help the city pay for services like road maintenance and public safety that are used by the thousands of state workers who come into Trenton each day but don’t pay any city taxes.

“If we’re going to be successful, if we’re going to reinvigorate the city and get economic development, we just need more funding,” Gusciora told members of the Senate Budget and Appropriations Committee.

“It’s an investment into the capital city that I think the state should make,” he said.

In all, about a third of Trenton’s roughly eight square miles is covered by state buildings or parking lots, neither of which are subject to local taxation. Those facilities are also used by nearly 20,000 state workers who come into the city daily, roughly equal to a quarter of Trenton’s residents. And the capital’s tax-exempt acreage grows to about 50 percent of the entire city when other properties with a similar designation are factored in, including federal and county courthouses, hospitals, and churches.

Strain on property owners

Having so much property off the tax rolls but still needing municipal services has put a strain on the owners of commercial and residential properties who are subject to local property taxes, Gusciora said in testimony submitted to the committee yesterday.

Credit: Martin Griff
Trenton Mayor Reed Gusciora
“The significant amount of tax-exempt property has resulted in Trenton having one of the highest local property-tax levies in the state, which is one of the impediments to residential and commercial redevelopment,” he said.

First established in 2004, the special budget line item for Trenton Capital City Aid was originally intended to help compensate the city for at least the state’s portion of the tax-exempt properties. The line item peaked at $37.5 million during fiscal year 2008. But the allocation was eliminated in fiscal 2011 by the administration of former Republican Gov. Chris Christie as the budget was tightened in response to revenue losses brought on by the Great Recession.

As a result, Trenton was forced to compete against dozens of other New Jersey cities and towns for special municipal funding that was reclassified as “transitional aid” by the Christie administration. Trenton initially received $27.1 million in fiscal 2011, but its allocation soon dropped to $9 million by fiscal 2018, Christie’s last year in office.

Shifting the burden

Despite the drop in state aid, the city continues to provide services for the state offices and their workers. That’s effectively shifted the burden back to the city’s commercial and residential taxpayers, said Gusciora, who was elected mayor last June.

Under the bill passed by the Senate committee yesterday, Trenton would be provided with “not less than $10 million” in state funding each fiscal year via the reinstatement of the budget line item for the Trenton Capital City Aid Program. The bill also calls for the state funding to be used “solely and exclusively by the city for the purpose of reducing the amount the city is required to raise through the property-tax levy for municipal purposes.” If there’s any extra money, it could be used to offset school and county taxes, the bill says.

Murphy, a Democrat, has promised to do more to help New Jersey’s urban communities, including Trenton, since replacing the term-limited Christie last year. And while overall funding for municipal-aid programs essentially remained flat last year, Murphy did sign an executive order that established the “New Jersey State Capital Partnership.”

The goal of the executive order was to better integrate the city’s goals with the various state departments that are located in Trenton, including Community Affairs, Environmental Protection, Law and Public Safety, Transportation, and Treasury, Murphy said in a statement at the time. But yesterday the Murphy administration also signaled a willingness to work with lawmakers to reinstate the special budget funding that Gusciora is seeking for Trenton.

“This program recognizes the enormous footprint that the state has in Trenton, which accounts for roughly 57 percent of all jobs, over $1 billion in property, and well over one-third of all tax-exempt property in the city,” said Treasurer Elizabeth Maher Muoio, a former state lawmaker who also represented Trenton in the Assembly.

“The restoration of this funding is in line with the goals of the Governor’s Executive Order 40, which established the Capital City Partnership to help spur the revitalization of Trenton,” Muoio said.