It was June 2013, and in six days Steven Fulop would be sworn in as Jersey City’s 49th mayor. But for the young mayor-elect known for his decisiveness, there was no need to wait for the formal transfer of power. He was cancelling the citywide revaluation of properties begun under the preceding administration.
“I will not allow this back-door tax hike planned by the Healy administration to take place,” he told the Jersey Journal.
The decision would set in motion three years of litigation ending in a resounding defeat and earn the city a rebuke from the court.
It would also cost the city over $4 million in legal fees and other charges.
However, until now, the largest cost — that borne by Jersey City’s taxpayers outside of Ward E and the Downtown sections of Ward F — has remained unaccounted for.
At the request of The Jersey City Times, Caroline Jones, a former New Jersey state auditor, has now done just such an accounting. According to Jones’s estimate, from 2014 to 2017, homeowners in Jersey City’s Wards A, B, C, and D paid $143 million more in property taxes than they would have had the mayor allowed the 2014 revaluation to go forward.
The mayor’s office did not respond to a request for comment on Jones’s analysis.
Not all wards suffered equally. The mayor’s decision cost homeowners in Ward A, Jersey City’s least affluent ward, $81 million. Wards B and Ward D homeowners paid an extra $32 million and $24 million in taxes, respectively. Ward C had to cough up an extra $6 million.
There were two big winners. Owners of commercial properties throughout the city paid $66 million less during the delay; homeowners in Ward E (Downtown) saved $63 million; and property owners in the Downtown section of Ward F saved $14 million.
Mayor Fulop’s decision to halt the reval came as a surprise to some. As councilman for Downtown’s Ward E, Fulop had built his brand as a reformer. Running for mayor, he positioned himself as a data-driven proponent of good government and progressive values. His decision seemed at odds with his rhetoric. But, in fact, both Jersey City history and the young mayor’s close ties to certain real estate interests make his decision easier to understand.
A Fraught History
The last reval had taken place in 1988 when Downtown was still the sketchy neighborhood described by Helene Stapinski in her memoir Five Finger Discount. During Fulop’s two terms on the council, however, Downtown property values had exploded with new construction and gentrification more typical of brownstone Brooklyn.
As the new mayor prepared to take office, Downtown and commercial property assessments remained at their low, wildly outdated 1988 levels. In comparison to their Downtown neighbors, homeowners in other section of the city, especially Wards A and B, had seen much less appreciation.
In short, Downtown property owners were underpaying relative to the actual value of their properties. In the rest of the city, homeowners were paying too much.
As Superior Court Judge Francis Schultz would later write, Jersey City had “the most unfair … property tax burden in the entire State of New Jersey.”
It was clear that a reval, which would reassess every property at its actual market value and fairly re-apportion the tax burden, was desperately needed.
Since 1988 successive mayors had kicked the can down the road, hoping to avoid angering the city’s most affluent (and undertaxed) voters Downtown. Finally, in 2010, Mayor Jeramiah Healy’s hand was forced when the Hudson County Board of Taxation ordered the city to immediately begin the long delayed process.
The mayor’s reluctance to order a reval was understandable. The last one, in 1988, took down a mayor and spawned a major lawsuit.
It was during this time that Mia Scanga, a certified public accountant and community activist who had moved to the Van Vorst Park neighborhood in 1983, became a local authority on property tax issues.
In response to the 1988 reval, she organized a group of Downtown homeowners in her living room. Called the Jersey City Coalition for Fair Taxation, the neighbors spent $100,000 in a lawsuit to overturn the reval, claiming that the process was flawed resulting unfairly inflated 1-4 family properties and under-assessed commercial properties.
“People were paying around $2,000 a year. Then what happened is that everyone’s tax bills were going to be 10, 12, $13,000. Everyone went berserk. … Back then, $10,000 of property taxes was a lot of money,” she recalls.
The group also took issue with the favorable treatment given to commercial properties. “They based [the assessments] on what they [the property owners] said was their revenue stream. If you have a small business, most of them are cash. Everyone lies. Consequently, all of the storefronts came in really low, it was a joke. We even had an example where there was a one-family on Grove Street and there was a store next door, and the one-family paid like fifty percent more than the store with a couple of rentals on top.”
In the end, the coalition lost in court. Says Scanga, “We spent a ton of time, and in the end nothing came of it.” Scanga notes that the city did end up raising the assessments on land along the waterfront.
Downtown residents weren’t weren’t the only casualties. Then-mayor Anthony M. Cucci, who had pushed the reval through, lost his reelection bid. “He was a nice man but he was in over his head,” says Scanga.
In the years that followed, as Downtown continued to appreciate rapidly, it became clear to Scanga that some properties in the rest of the city were being significantly overtaxed.
In 2000, a reporter for the New York Times investigating Brean Capital came upon upon Scanga’s website that dealt with property tax issues and came to Jersey City to meet her. “We went around the city together. We couldn’t understand why any new houses that were built on these infills [individual empty lots]… their taxes were exorbitant. There was an area in Greenville, a cul-de-sac. They were paying like $13,000 [in taxes] for these houses.”
Scanga met a woman at a medical lab in Journal Square who had bought one of the houses who told her, “We bought one of those houses, but we had to sell. We couldn’t come up with the money for taxes.”
In 2012, before selling her Van Vorst Park brownstone to move to McGinley Square, Scanga remembers talking to then-councilman Fulop about a property near Greenville. “It was in total disrepair. It was going into foreclosure, and the foreclosure price was, I think, $150,000. Their taxes were like $13,000. I said, ‘Are you crazy? Those are Downtown taxes.’” Fulop replied, “Yeah, the assessments are all over the place. They make no sense.”
However, for the ambitious young politician, privately admitting that there was a problem was not the same as fixing it, as Jersey City property owners would soon discover.
“They are doing it purely out of hatred for me”
By the time mayor-elect Fulop prepared to take office in the summer of 2013, work on Healy’s reval was largely complete. Property tax bills based on up-to-date assessments would take effect in 2014. Ideally, properties throughout the city would be assessed at their market values, and each homeowner would pay his or her fair share of taxes. No longer would taxes be pegged to the out-of-date 1988 assessments.
As Steve Rubenstein, of Realty Appraisal Co., the company that Healy had hired to perform the reval, explained at a meeting of the Van Vorst Park Association in July 2011, taxes would almost certainly go up for around a third of the city’s homeowners, but they would come down for another third and remain the same for the rest.
Put differently, if one thought of the total amount of property taxes collected by the city, schools, and county as a pie, a reval would simply re-size the slices owed by each property owner.
But despite all the work that had been done and the fact that, at last, property taxes would finally reflect a property’s current value, the mayor decided to pull the plug. The reval would not go forward.
The reason for the mayor’s decision has remained somewhat of a mystery. Fear of the kind of backlash that doomed Mayor Cucci’s reelection seems an obvious explanation. But, according to an anonymous source, several people within the mayor’s inner circle argued that he could move ahead with the process without suffering serious political damage. When Downtown homeowners complained, they said, he could blame Healy and the Hudson County Board of Taxation. It was early in his first term, so any political fallout would dissipate. But, Mayor Fulop stepped in anyway.
Scanga has her own theory as to why the mayor acted. “In my opinion, he was protecting Dixon,” she said. During the early years of the Fulop Administration, Dixon Advisory, an Australian asset management firm, invested heavily in Jersey City real estate. Scanga went on. “Most of the houses that were selling Downtown were selling to Dixon. They were the number one buyer. They were the only game in town until 2015, 2016.”
In 2015, the Fulop Administration was accused of going to Dixon’s aid by attempting to stop the process by which taxes are increased on newly renovated properties. Twenty-four Dixon properties would have been affected, and Dixon would have saved $84,219 in tax hikes on five such properties alone.
Scanga then points to the large contributions made by Dixon to Fulop’s “Coalition for Progress” super PAC as the mayor prepared to run for governor. In a lengthy 2019 article that looked at Fulop’s relationship with Jersey City developers, Bloomberg.com catalogued the mayor’s other dealings with Dixon. For instance, Dixon renovated the mayor’s home on Ogden Avenue and worked on his Rhode Island beach getaway. Dixon’s then-CEO, Alan Dixon, “frequently socialized with the mayor and his wife,” according to Bloomberg. And this year, in a private deal the mayor purchased a $2.4 million “trophy” property from the outfit.
Dixon’s presence in Jersey City grew under Fulop. Delaying the reval also worked to the firm’s immense benefit. On just two of its many holdings in Jersey City, One Hampton Court and 119 Wayne Street, it saved Dixon $60,000.
A phone call and emails to Dixon for comment were not returned.
Whatever the mayor’s true motivation, once he made his decision, he did not back down. And predictably, five months after his announcement, Realty Appraisal sued Jersey City for breach of contract.
The mayor would give multiple reasons for his decision. He would double down on the argument that he used to success in the campaign: The reval would amount to a “backdoor tax” and result in a “catastrophic” tax hike. It would destroy property values as taxes rose. Long-term residents would be thrown out of their homes.
And to defeat the lawsuit, Mayor Fulop added a new rationale: The process the Healy Administration had used to award the contract to Realty Appraisal had been tainted. The former Jersey City Business Administrator Brian O’Reilly, who went on to work at Realty Appraisal, had improperly influenced the selection process.
At first, there was little pushback. The new mayor swept into office with a tailwind of good will. Few doubted that the young reformer’s motives might be open to question. The mayor’s allies on the City Council approved the ever-increasing legal fees being racked up to push any reval into the future.
But by 2016 many Jersey City residents were having doubts.
At a January 27, 2016, “Town Hall” meeting, the mayor took a question from a homeowner. “Many of us are paying thousands of dollars more each year to subsidize people who are not paying their fair share.”
The mayor would hear none of it. “The reval,” he responded, “would be “catastrophic … there are some winners, their taxes go down $200, $300 … there are a lot [for whom], their taxes go up $10,000, $15,000, $18,000. … I am telling you as sure as I am standing here that it’s not only Downtown; I’m protecting the entire city. … The people who are arguing for that [the reval] are entirely disingenuous. They are doing it purely out of hatred for me.”
Then, on April 4, 2016, the state ordered the city to begin a reval. Despite this, the mayor remained defiant.
The reval cancellation also laid bare Jersey City’s economic and racial divides. During a packed April 11, 2016 meeting of the group Jersey City Together, Rev. Dr. Alonzo Perry, Sr. put Jersey City homes on flip charts and compared them. The mayor sat in the audience. One home, in Greenville, had a market value of $175,000. The other Downtown residence had a market value of $530,000. The property tax rate of the Greenville home, he explained, was triple that of the Downtown home. “This is not political,” he said. “This is unfair.”
When it came his turn to speak, the mayor, who had pleaded with Jersey City Together not to release their findings that the delay was causing grave harm to poor communities, stuck to his guns amidst groans from the audience of 900. Of his decision to cancel the reval he said, “I did believe as I do believe today that people in this room would lose their homes,” Fulop said. “I believe that.” The audience booed repeatedly.
Three days after the church meeting, Superior Court Judge Francis Schultz methodically took apart the mayor’s arguments. “The reasons given in the mayor-elect’s letter halting the contract were clearly pretextual,” he wrote. The claim that O’Reilly had improperly influenced the process was without merit. The administration, he said, had been “intransigent” and had not acted in good faith. The city would pay Realty Appraisal what was owed. Case closed.
The following day, Fulop announced that the reval would finally go forward. The city would, however, appeal the judge’s decision and now attempt to change law at the state level. “This administration never has supported the idea of collateral damage with homeowners losing their homes in the name of social justice,” he said.
After witnessing the Jersey City Together meeting, Newark Star Ledger columnist Tom Moran wrote a scathing critique of the mayor’s policy titled “In Jersey City, poor blacks subsidize rich whites.”
On September 14, 2016, the City Council approved a $4.3 million contract with a new firm to repeat the work that had been done by Realty Appraisal four years earlier for $1.1 million less.
Epilogue
Fulop remained unbowed despite the legal setbacks. Indeed, at a debate in 2017 with former Corporation Counsel Bill Matsikoudis he reiterated his opposition — to enthusiastic cheers from his Downtown audience.
To be generous, few of these Downtown voters could have known the actual economic damage that had been done to their less affluent neighbors. Jones’s analysis lays this out in stark detail.
The average homeowner in Ward A, Jersey City’s most economically disadvantaged neighborhood, paid $9,176 in excess property taxes from 2014 to 2017. It wasn’t much better next door in Ward B, where property owners overpaid an average of $5,495. As could have been predicted, it was Jersey City’s wealthiest residents who made out best. On average, Ward E property owners underpaid $11,432 in taxes during the period. While the underpayments enjoyed by Downtown’s Ward F taxpayers put the entire ward in the plus column, Jones found that fully 42 percent of Ward F homeowners overpaid. And, as Scanga had suspected, some of the biggest winners from Fulop’s delay were commercial property owners, who saved on average $10,416 each.
Jones’s analysis has drawn support from others who have studied the issue. Civic Parent founder and St. Peter’s University Assistant Professor Brigid D’Souza responded, “Seeing these numbers in the aggregate is informing as to the scale of systemic tax injustice that can unfold when a city fails to keep its tax assessed values pegged to current market values, particularly as market values appreciate at uneven rates throughout the city.”
And a spokesperson for Jersey City Together said, “During Jersey City Together’s founding action in 2016, we told the story of the unfair property tax burden created by Jersey City’s failure to conduct a tax revaluation for almost 30 years. It amounted, we thought then, to a transfer of wealth from mostly communities of color and low-income neighborhoods to wealthier, whiter ones. Our internal analysis of the revaluation’s impact in 2019 supported this conclusion, showing that residential homes (1-4 families) in census tracts with median incomes of $76,000 and below saw their collective property taxes decrease by approximately $35 million each year as a result of the revaluation. The Jersey City Times’ findings parallel what our analysis showed in both 2016 and 2019.”
In 2018, the new assessments finally went into effect. As Steve Rubinstein had predicted seven years earlier, taxes went down for many. And, as it turns out, Jersey City Together’s analysis dovetails perfectly with Jones’s calculation: for the preceding four years, less affluent neighborhoods had paid $35 million each year too much.
Attorney Matthew O’Donnell, who served on the five person committee that chose the new appraiser, would be charged in a scheme to funnel money to Mayor Fulop through straw donors in order to secure a contract to handle the city’s tax appeals.
To Ward B resident Esther Wintner, the delay bordered on the criminal. “When you do something like that knowingly, how is that different than a robber?” she asked. Upon learning that she had overpaid by $9,000 over the four-year halt, Wintner chuckled with an air of resignation and asked facetiously, “Is the city going to write me a check for $9,000?”
One set of predictions, those of the mayor, turned out to be woefully wrong. The reval that he had fought so hard to avoid hadn’t been “catastrophic” for homeowners. Property values hadn’t crashed; indeed they had continued to rise. Seniors threatened with tax hikes could still avail themselves of the “senior freeze” and stay in their homes. Homeowners in Greenville got tax cuts instead of “losing their homes” as the mayor said would happen. And Downtown residents with houses now worth millions had valuable assets that they could borrow against or even sell, in a worst case scenario.
The city’s efforts to overturn Judge Schultz’s decision through a legal appeal failed.
Looking back on the reval saga, Rev. Perry, speaks wistfully. “Jersey City is still the tale of two cities. The wealth gap is just getting greater. … The city did the reval at our behest because they got embarrassed by it. Since then, we’ve had runaway development and a lack of affordable housing.”
Jersey City Together has moved on to a new fight against the “95/5” rule that prevents owners of affordable housing from fully benefiting in the appreciation of the property at the time of sale.
Politically, the mayor emerged from the reval fiasco unbruised. In 2017, he was reelected in a landslide to a second term.
On October 5, 2021, despite his four-year transfer of $143 million from the least affluent to the most affluent in Jersey City, Mayor Fulop was endorsed for a third term by the Working Families Party.
Video courtesy of realgardenstate.com
Jones’s analysis can be viewed here.