COVID-19 had a major impact on a number of areas of the economy. As the pandemic eases, some portions—like retail and restaurants—will eventually recover.
But others, like the commercial office market, may be irrevocably changed. With more employees working from home, companies are finding that their need for space is much lower than before the pandemic hit.
The state of the market and its impact on the township’s tax base, revenues and property valuations were some of the of the topics covered in a recent interview with Mayor Bert Steinmann conducted by Ewing Observer editor Bill Sanservino. An edited version of the interview runs in the Q&A below.
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Ewing Observer: The commercial tax base is in a difficult situation. Can you tell me a little bit about what you’re seeing in the township in terms of the commercial real estate market? You’ve got quite a few office complexes, especially along I-295, right?
Bert Steinmann: So basically, we are seeing the same thing that’s across the country. We have a couple of big complexes. One on Bear Tavern Road that’s only at about 30% occupied, and the rest is vacant.
EO: Which one is that?
BS: Mountain View Office Park. There’s also the office park on Parkway Avenue and Scotch Road, where Bank of America is located. That’s 60% vacant, but I believe that one was sold to somebody else.
Church & Dwight had a number of employees that are working from home, but they’re not hiring a lot of people back. They looked at the situation, and they can do more for less. So they asked for a tax break, and they got a one-year tax relief, as did a couple of other places.
We’re bumping them back up to the normal rate (this year), but that has had an impact on this year’s budget.
And then we have the hotels, because of the occupancy—on no occupancy, basically during that period of time. They’ve asked for relief, which they got.
I don’t think that the office space is coming back anytime soon, because things have changed over the years—technology and everything else. There’s more and more people that are working from home and don’t even ever go in the office anymore. So that eliminates space for them.
So as far as that market is concerned, it’s really depressed. What we’re seeing now is that the biggest demand is for warehousing.
I would say 50%, of retail business is ordered online. So they have these warehouses, they store and they ship it out of those warehouses to your home. Retail stores are shutting down. Walmart shut down a couple of their stores. It has an impact.
People’s way of doing things, where you went out and you did your shopping in person, it’s not that way anymore. Personally, I don’t like that. I’d rather just go out and look at what I’m buying and buy it.
But even in the online version of this, if you don’t like what you buy when you get it in the mail, it’s easy to send it back and there’s no charges for that. So it’s convenient for people. But I think people lose touch with one another.
EO: I remember back in the early 2000s, the commercial market crashed and a lot of businesses filed for tax appeals. Ewing did a revaluation, which reassesed residential and commercial properties, but that was right before COVID. Since then residential has skyrocketed while commercial is depressed. What can be done about that?
BS: The revaluation was done in like 2018 or 2019, I believe—right in that time frame. The county has since come up with an equalization program. When Ewing Township did our revaluation, that was the first one that was done since 1992, and there was a big discrepancy between more modern properties, and nobody was really paying attention to the older neighborhoods in the sense that their taxes weren’t really getting equalized to what the current rate would be.
Where the newer properties—whether it was an apartment complex or condominiums and the all nine yards, they were assessed at market rate.
There was even a discrepancy in the neighborhood where I live. I didn’t see any difference in what we were paying (in taxes) until 2018 or 2019. I was paying rates from when I bought my house at very, very low price.
That was not fair to people that were living in houses that were assessed at market value. They were paying way over the amount. So my neighborhood and other neighbors all around me were basically not paying what I believed was their fair share, but the newer complexes were subsidizing the rest of us, the rest of the township.
After we did revaluation we got to a point where everything was equal. So that’s where we are. Now, instead of waiting another 10 to 15 years to do another revaluation, which is very expensive— we spent a little bit over $1 million to do that—the county has come up with an ongoing program.
Basically it’s determined on the house sale. And it’s not just based on one particular house. Say you paid $200,000 for your house and now all of a sudden you are selling it for $500,000? Well, the whole neighborhood is not going to get assessed on that $500,000, but if that’s the going rate for every house that’s being sold down the line, then those are the adjustments that are being made.
EO: So it’s based on neighborhood trends? I guess that would require the township’s tax assessor to be more proactive in terms of monitoring those transactions?
BS: You’re absolutely correct. The other thing that wasn’t occurring is that when people were putting additions on their house or making renovations, we never sent a tax assessor to look at that. That’s happening now.
Now I know a lot of individuals don’t like that—and I get it—but at the end of the day, it’s a rate equalization so that everybody fairly shares the burden of taxes.
EO: Are you also doing that with commercial properties? If you have a bunch of the commercial tax base out there filing for lower assessments and paying less, where does the brunt of the taxes end up going?
BS: It would wind up going to the residential taxpayers. And that’s when we look at our budget. We look at things like hiring people and things that maybe we would like to do, but we’re going to have to hold off on.
I mean, everybody’s always talking about, “My street needs to be paved,” and we have a fairly decent program in place, but some years we may just say, “You know what? We’re not going to borrow $1 million or $2 million to pay for it. We can wait another year.”
So in some neighborhoods, instead of paving the road, we’re doing a microchip-type situation. They skim the top, and then they put down a stone aggregate. That extends the life of the street for 5 to 6 years.
EO: Microchip? That’s an interesting name for it. I just want to clarify so some people don’t think that the township is putting surveillance chips in the street. It’s a different kind of microchip we’re talking about, right?
BS: Exactly. It’s a fine aggregate that they do. They come down the street and they fix the potholes and the whole nine yards. Then they come up and they put a tar coat down, and then they come over and they have this fine stone dust that they run over the top of it.
It’s not the end-all, but it does save a lot of money, and in the meantime the street will be in pretty good shape. I mean, it has some drawbacks to it. Obviously, it’s not good to skateboard on, or maybe ride your bike, but for traffic, it’s good.
EO: So, I guess you would probably say this is time for all levels of government to do a little bit of belt-tightening due to the financial situation out there?
BS: Correct. You’re absolutely right.
EO: I recall a situation a number of years back where the owner of a large corporate complex went bankrupt and they had a bunch of unpaid taxes. In that case, the town had to set aside a lot of money as a reserve for uncollected taxes. Is that a possibility?
BS: No. Basically what we do now is an accelerated tax lien, and we do it every year. If you’re in default of your taxes, then a tax lien for the property goes up for sale and then other people wind up bidding on the lien.
For example, if you owe $1 million dollars in back taxes, somebody can buy up the lien and then pay the town $1 million dollars. That way we don’t have the problem where we have to put that in reserve. We had that back, I think it was around 2009 or 2010, just before I came into office.
The law was changed, because people weren’t paying their taxes and they were really taking advantage. Not that they couldn’t afford it, but they were taking advantage of the fact that the interest rates on the money they were saving by not paying their taxes was far greater than the penalty for not paying their taxes.
So, it would almost take a year-and-a- half or two years before we could collect those taxes. In the meantime, whether it was $2,000, or $1 million, we had to put all of that in reserve and all the other individuals that who were paying taxes were paying the price.
I would say we are probably 98 or 99% compliant now. We do have some tax liens that are still outstanding, but they’re very minimal and they’re smaller amounts.
EO: What do you think will happen with commercial properties that might not rebound from the current situation, or developable properties that are currently zoned for office use? Do you see, a situation where the township is going to have to re-evaluate the zoning?
BS: We are constantly looking at different zones in the township and see what is best suited for those properties. What was good 20 years ago as a commercial property, may not be that good now, because there is no commercial.
Maybe the property would be better as a condominium-type or residential or other types of things that are current today. We look at those situations and we’ve established zones.
We have the industrial zones, we have commercial zones, we have the Town Center development, and those types of things where we can offer incentives or other things that make it better for individuals to come and develop those particular properties and get them off the non-taxable rolls and onto a tax roll, even though it would be phased in over time. At least something is being done as opposed to the ground sitting there fallow.
EO: You have to keep in mind, I guess, that depending on what type of residential you add to the community you might be impacting the school district. You could be adding children to the schools, which is expensive. Where does the district stand in terms of space in school buildings for additional students?
BS: As we speak today, even with the new developments that are going in, there’s ample room in our school system to handle the situation as far as the number of kids that come into the program. The school district does a study every year to evaluate student projections through Rutgers.
This year there’s going to be a slight uptick in the number of kids that are going to be going to schools, but with the overall graduation rate, the numbers are actually going down.
What has happened because of the population shift from one location to another, the schools they would ordinarily go to may get changed. For example, there might not be room at Lore School, but there’s plenty of room at an Antheil, so that population could shift to that school.
As far as overcrowding, there is none. So we are in good shape. The township and the school board cooperate with one another. We have meetings on a regular basis., and we’re not in any situation where we have to build a new school or do anything else.