| EQUALIZATION ORIGINEqualization for State
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| | data.INFLATION / DEFLATIONEither
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| school aid purposes is the process of
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| | inflation or deflation assures trouble in
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| determining the aggregate true value of
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| | the equalization process --- lots of
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| all real property in each of the State's
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| | trouble. State government cannot hope to
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| 566 taxing districts. This figure is
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| | moderate the force of inflation that
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| established by a program of assessment to
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| | impact on the changes in the sale prices
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| sales ratio analysis. The aggregate true
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| | of property which sale prices determine
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| value of real property, together with the
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| | the assessment to sale ratio that is used
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| value of second class railroad property
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| | in the equalization process.However,
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| and the assessed value of locally
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| | underlying the use of the assessment to
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| assessed business personal property, is
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| | sales ratio for equalization purposes has
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| known as the "equalized valuation."The
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| | been a tacit belief that most real estate
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| present equalization program had its
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| | values will be largely stable from year
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| origin in 1954 when a considerably
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| | to year. As a matter of course the State
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| expanded State aid program for education
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| | relies upon an equalization process which
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| was enacted, with the distribution
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| | is based on this assumption. Most
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| formula based on "equalized valuation,"
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| | changes in value for equalization
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| rather then upon assessed valuation.
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| | purposes are expected to be gradual
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| Equalized valuation has been carried
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| | rather than large or sudden.
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| forward as a basic component of newer
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| | CAUSES OF INCREASES IN PRICES OF REAL
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| formulae set forth by the Legislature
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| | ESTATEMany forces of demographic change,
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| from time to time to calculate the
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| | large stock market capital gain
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| distribution of State school aid
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| | realizations, desire to live in the
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| funds.The equalization process is
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| | municipalities with the best school
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| intended to provide stability in the
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| | systems, trends in personal tastes for
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| total market value of a municipality over
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| | larger homes, an increase in real
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| time. This is an important goal for the
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| | personal income, and so on, have been
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| sake of stability, predictability, and
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| | operating on real estate prices. All of
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| fairness in municipal and school finance.
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| | these wants of people raise the demand
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| It is intended to completely reflect
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| | for housing and for places to work and
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| changes in market value each year, and
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| | play. And, they are not making any more
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| thus to bring the assessments in all
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| | land on which to satisfy these wants.
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| municipalities to a common standard. On
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| | Therefore, the increase in the demand for
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| the other hand, it is constrained not to
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| | space will continue to have a relatively
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| change "too much" by the averaging
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| | larger influence on land prices. Also,
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| together of two years' true values to
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| | the prospect of inflation leads some
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| prevent large fluctuations in municipal
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| | investors seeking protection from
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| equalized values. This two year
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| | inflation to acquire real property.
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| averaging is used in order to preserve
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| | While inflation at the same time induces
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| stability in municipal and school
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| | other owners to hold property when sale
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| finance.THE SALES RATIO PROGRAMThe sales
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| | would have been the normal action, thus
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| ratio program is based upon a comparison
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| | hyper inflating property sale prices.
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| of the assessed values of parcels of real
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| | Historically, through innumerable
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| property which have been sold, and for
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| | inflations, the possession of land and
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| which deeds have been recorded, with
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| | buildings has preserved real value when
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| their sale values. It is assumed that
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| | money and may other assets have lost much
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| the assessments on the properties sold
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| | of their worth. Our own recent history
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| will be representative of the assessment
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| | seems to confirm the principle. Within a
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| practice in the taxing district. Thus,
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| | locality the specific changes can diverge
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| if the assessment of the properties sold
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| | significantly. These specific changes
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| average 90 percent of the sale prices,
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| | can create wide swings in the price
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| the assumption is that all similar
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| | people are willing to pay for property
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| properties in the taxing district are
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| | and in particular land.State government
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| being assessed at an average of 90
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| | must learn to live, somehow, with an
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| percent of their true value or market
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| | annual equalization process that conforms
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| value.DIVISION OF TAXATION
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| | to a frequency of value changes that in
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| RESPONSIBILITYResponsibility for the
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| | the past were brushed aside because the
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| sales ratio program rests with the
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| | amounts involved seemed too small to be
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| Property Administration Section in the
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| | troubled about.Perhaps one way to
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| Division of Taxation. Procedures of
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| | stabilize the annual equalization process
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| sales data collection and analysis have
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| | would be to double weight the previous
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| been developed by that section, but the
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| | years' true value when the "Hyper Land
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| success of the process requires the
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| | Change Factor"is one. A factor of one
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| cooperation of every county board of
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| | means that the percent change in land
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| taxation and every local assessor. The
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| | assessed values statewide have increased
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| results of the section's work, in the
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| | at a rate of growth twice the rate of
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| form of the Table of Equalized
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| | change in the State CPI in a particular
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| Valuations, is certified by the Director
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| | year. During the period from 1971 to
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| of the Division of Taxation on October 1
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| | 1999, a period of 29 years, a factor of
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| of each year to the Commissioner of
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| | one occurred ten times in New Jersey.
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| Education for State school aid purposes,
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| | Remember, that 43% of the CPI index is
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| and delivered to each county board of
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| | comprised of housing. This periodic
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| taxation for the purposes of apportioning
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| | adjustment to the equalization process
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| the costs of county government and of
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| | would serve to stabilize the total market
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| school districts covering more than one
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| | value of municipalities in the State over
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| taxing district. This calculation of
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| | time. This is an important goal for the
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| equalized values is one of the most
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| | stability, predictability, and fairness
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| important tasks of the Division of
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| | in municipal and school finance. It
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| Taxation. The results of the calculation
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| | would remove the sudden increases in
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| have widespread ramifications for the
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| | equalized values reflected in periods of
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| fiscal condition of the municipalities
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| | hyper inflation as reflected in land
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| and school districts in the State, and
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| | prices and thus bring the annual
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| therefore (indirectly) the welfare of
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| | equalized values in all municipalities to
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| every resident of the State.THE SAMPLEThe
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| | a more common stable standard. In
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| utility of any property equalization
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| | preventing large fluctuations in
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| program, including the one used for State
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| | municipal equalized values from year to
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| school aid, is contingent upon the extent
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| | year in this manner stability in
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| to which the sample of sales-assessment
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| | municipal and school finance could be
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| ratios is representative of all property
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| | preserved. Perhaps many suburban and
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| assessments within the taxing district.
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| | rural municipalities have their county
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| Although it is generally assumed that a
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| | tax apportionment costs increase rapidly
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| large sample is preferable to a smaller
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| | when double digit land increases occur.
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| sample, this is not necessarily true in
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| | Other municipalities may lose State
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| all cases. The test concerns the
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| | school aid dollars because of becoming
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| randomness of selection in a manner to
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| | property rich in short order. Stability
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| represent all areas of the taxing
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| | has a lot of friends in local public
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| district and all characteristics of
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| | finance.Biography: Gerald 'Jerry' Dowgin
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| property within the tax roll of the
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| | "The Property Tax Doctor" and the author
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| taxing district. The implied appraisal
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| | of the Homeowner's Assessment Review
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| of the sample requires information not
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| | Guide ( a former tax assessor worked in
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| presently available in any centralized
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| | the field of public finance at the State
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| tabulation of "usable sales." One way to
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| | and local levels in New Jersey for more
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| increase the randomness in the process of
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| | than three decades until his retirement
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| estimating market values is to use sales
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| | in 2001. As a Supervising Tax Analyst
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| data from a period of time longer than
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| | in the Office of Research and Statistics
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| one year. The equalization process
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| | in the Division of Taxation in the New
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| currently in place does exactly this by
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| | Jersey Department of Treasury he worked
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| averaging the estimated market values
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| | principally on local property tax issues.
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| from both the current and previous year
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| | Then he joined the Office of Legislative
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| when calculating the equalization ratio.
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| | Services (OLS) in 1983 and served as the
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| More precisely, the current system
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| | Secretary to the New Jersey Property Tax
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| averages two year's values each computed
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| | Assessment Study Commission for four
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| using one year's worth of useable sales
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| | years.
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