Call to Ban Tax Assessors From Moonlighting With Reval Firms

Carly Sitrin | May 1, 2019 | More Issues
State watchdog finds multiple cases of officials working for companies around time a municipality’s property assessment overhaul was underway

Philip J. Degnan
Municipal tax assessors in New Jersey are seen as impartial appraisers of property values to ensure that the tax system is fair and unbiased. But the state comptroller says some assessors have side jobs with firms hired to conduct revaluations in their towns — a finding that raises serious ethical concerns.

An investigation by the Office of the State Comptroller (OSC) — New Jersey’s independent watchdog agency — found multiple instances of municipal tax assessors working for these firms at or near the time the municipality’s property-tax revaluation took place, “leaving ample opportunity for unethical self-dealing.” One town business administrator told OSC that when he expressed concern to a revaluation firm regarding this behavior, he was advised “not to worry” and that “this happens all the time.”

When a town undergoes a revaluation — a wholesale recalculation of property-tax assessments done to realign them with actual market values — the tax assessor acts as the “project manager” or “supervisor” of the process, according to State Comptroller Philip Degnan. As such, the assessor is tasked with making sure benchmarks and contract terms are met on time. In this overseer role, Degnan wrote in his report, “an assessor cannot reasonably maintain his or her objectivity and independence on behalf of the town while simultaneously performing work for the revaluation firm.”

Using data from 2015 to 2017, the OSC was able to identify at least five tax assessors who worked for, or had worked for, the revaluation firm hired to perform the assessment in the town in which they were employed as assessors. At least one of those individuals appears to have worked as a town’s assessor and for the revaluation firm that was hired to conduct the revaluation in the town at the same time.

“Taxpayers rely on municipal tax assessors to conduct a fair and above-board assessment of their tax liabilities when a revaluation is conducted,” Degnan said in a statement. “My office’s recommendations of increased enforcement and new regulations will help to ensure that these assessments are done fairly.”

Andrew Cliver, a spokesperson for OSC, said the agency would not be releasing the names of the individuals and towns in question due to strict due-process requirements that necessitate giving those mentioned time to respond before going public.

Degnan, though, is recommending that two agencies — the state Division of Taxation and the Division of Local Government Services of the Department of Community Affairs — conduct a more extensive investigation and draft regulations that keep an assessor from having any employment with, or financial interest in, a revaluation firm performing work in any municipality within the county in which the assessor serves.

Is it legal?

While the OSC believes the concurrent employment practices of tax assessors is a conflict of interest, its legality is a bit of a grey area.

Municipal tax assessors hold what OSC calls “a unique hybrid employment status” in New Jersey. They have responsibilities to the citizens of the town, the local governing body, the county Board of Taxation and Tax Administrator, and the director of the Division of Taxation at the state level. In terms of ethical requirements, assessors are considered “local government officers” and are governed by the state’s Local Government Ethics Law.

The Local Finance Board within the Division of Local Government Services has jurisdiction over tax-assessor conduct and governance.

A spokesperson for the agency said the Local Government Ethics Law does not require a tax assessor to seek approval for secondary employment from the Local Finance Board. Tax assessors are required, however, to file an annual financial-disclosure statement.

Recusing oneself from performing any actual work for the revaluation firm may not fix the ethics problem, according to the comptroller’s report. Experts told OSC that the assessor “could still receive a financial benefit from the revaluation firm by virtue of the contract having been awarded to the firm with which he or she is associated, even if the assessor is not actually performing any revaluation work.”

The comptroller noted that, while several local-government ethics rules appear to prohibit a tax assessor from simultaneously working for, or having an interest in, the revaluation firm, there’s no law that rules the practice out definitively.

In 1993, the Division of Taxation adopted a regulation that expressly restricted an assessor from having any interest in a revaluation firm doing business in the state. However that rule was rescinded the next year, a move that critics said would allow assessors to hold the kind of dual-employment that OSC found this week. The rule does apply, however, to commissioners and employees of boards of taxation.

The OSC report also notes that several Attorney General opinions over the years “appear to support a finding that this type of concurrent employment constitutes a conflict,” but, none of them explicitly stated that dual employment would create a conflict.

What happens now?

With the legality around this practice blurry at best, OSC announced they will be referring evidence from their investigation to the Department of Community Affairs to continue to look into the matter.

At the same time, the comptroller’s legal research puts much of the responsibility on the Division of Taxation, which “has clear authority to enact restrictions on the outside activities of tax assessors.”

OSC is putting pressure on both agencies, recommending that they consider adopting strict rules barring an assessor from having any employment with, or financial interest in, a revaluation firm performing work in their municipalities. The comptroller also wants the Division of Taxation and the DCA to start putting municipal assessors on notice for engaging in such practices.

Legislation (A-1169) sponsored by Assemblyman Edward Thomson (R-Monmouth) has also been introduced this year that would codify those recommendations. That bill is awaiting action in the Assembly State and Local Government Committee.