Partnership JournalismOctober 10, 2022

How climate change could sink NJ’s tax base — and not just at the Shore

By Michael Sol Warren(NJ Spotlight News) and John Upton(Climate Central)

Houses overlooking the beach in Cape May, N.J.
File photo: Houses overlooking the beach in Cape May, N.J.

The glittering high rises and apartments of the Hudson riverfront can feel worlds away from the idyllic tourist towns dotting the Jersey Shore.

In Hoboken, a compact city where property values and taxes are high, its chief resilience officer, Caleb Stratton, is confronting a threat that the city shares with the Shore: climate change in a coastal environment.

As flooding associated with rising seas and intensifying rainfall gets worse, a hidden danger lurks, one that threatens to crimp the ability of New Jersey’s coastal towns to fund their essential operations.

As warming caused by pollution forces tides to rise, coastal land and buildings on it increasingly fall beneath a state legal threshold for high tide that separates private property from public waters.

“In Hoboken, we’re a mile square, we’re relatively small, 60,000 people, but we have a relatively high ratable base,” Stratton said. The city’s ability to pull in property taxes is helping it confront future threats to that revenue.

New Jersey among the most impacted

In New Jersey, property with tax assessments of $6.3 billion is projected to fall beneath this threshold by 2050, compared with 2000, according to a Climate Central analysis. That makes New Jersey among the most impacted states in the nation.

These losses won’t just hurt property owners.

Cities and counties use property taxes to fund everything from schools to road maintenance. And a prosperous property-tax base allows local governments a higher credit score when they borrow money for public projects. A new analysis shows no county in New Jersey is more vulnerable to losses of property-tax revenue as seas rise than densely populated Hudson County, which includes Hoboken and other high rise-studded municipalities including Jersey City.

“How do you maintain the quality of municipal services as well as the bond rating and debt-carrying capacity of the municipality if there is a loss of ratable base?” Stratton said.

Ocean County at the other end of New Jersey and with nearly 15 times more land than Hudson County ranked second in terms of risk, highlighting the sweeping nature of the threat in a state ringed by tidal waters.

A sweeping threat

The cities and towns that line the Hudson River are densely populated, bustling areas coated in concrete and pavement. Down the Shore, beach boroughs see their populations swell and shrink by the season, offering generations a way to escape the demands of life for a few days each summer.

Projected Private Property Losses As Seas Rises

While few municipalities in New Jersey have started to plan for this impact, it’s something that Stratton, the Hoboken official, views as a future threat that’s commingled in a ball of financial risks associated with climate change.

The sheer value of properties jeopardized by climate change — and the ability of those properties to drive city spending through property taxes — drives spending decisions by Hoboken’s leaders.

“If the mayor can’t get reelected because he has a failing tax base, I’m not doing a good job,” Stratton said. “This is best practice.”

While no complete dataset exists, Stratton says many Hoboken homeowners are underinsured or uninsured against flooding. He said federal insurance changes will soon see nearly 10,000 Hoboken policyholders paying between $10 and $30 more per month (nearly 1,000 will see a $5 decrease), while a new levee project to protect the city from future storm surge will reduce risks and thus drive rates down once it’s complete.

It’s not just oceanfront property that’s seeing water creep higher. The tidal portions of rivers are also impacted, like the Delaware River as far north as Mercer County, or the Raritan River as far west as Somerset County. That means 17 of New Jersey’s 21 counties have land that lies within coastal areas.

Ocean, Cape May counties

The new analysis lays out what could be a financial existential threat to cities and towns, especially small ones around New Jersey that stand to lose taxable properties.

“We’re going to see places that are underwater, we’re going to see places that are going to lose their property tax base,” said Peter Kasabach, the executive director of New Jersey Future, a nonprofit group focused on urban design. “We can choose to either plan for that, or we can wait for it to happen, and then have to adjust when it happens.”

The threat is one that will shift in intensity over time from north Jersey to South Jersey. In the immediate future, Hudson and Bergen counties have the highest property and structure value at risk. But by the end of the century, it’s projected the losses faced by those counties will be dwarfed by the value of threatened land and buildings in Ocean and Cape May counties.

“The optimist in me says that I’m sure they’ll take advantage of that extra time to adjust their planning and their development in their towns,” Kasabach said. “But I think the reality of it is that we have lots of small municipalities that are overly reliant on property taxes, and they’re going to put off making difficult decisions as long as possible.”

There’s still time to adapt

The Climate Central analysis examines the vulnerability of property given existing coastal protections like levees. As agencies and individuals take measures to protect their property from rising seas and worsening floods, those efforts will also help to reduce future land losses.

The Army Corps of Engineers, with the help of state agencies, is slowly moving forward on two major coastal resilience projects aimed at sheltering communities against future storm surge.

Last week, the Army Corps announced it had selected a $52 billion plan to protect the New York harbor region from future storms. That plan includes a variety of new storm surge barriers, tide gates, seawalls, levees and more along the Passaic and Hackensack rivers and the Arthur Kill. One of the plan’s main goals is to protect the Meadowlands on the inland side of Hudson and Bergen counties — that region was among the hardest hit by Superstorm Sandy’s storm surge.

That comes after the Army Corps put forward a separate $16 billion plan last year to build storm surge gates across five inlets and elevate 19,000 homes and other buildings in bayside communities in Cape May, Atlantic, Ocean, Burlington and Monmouth counties.

As expansive and expensive as those plans are, they’re designed to protect against acute disasters, but not necessarily against rising seas. Communities can take it upon themselves to be proactive, and perhaps no place in New Jersey has been more aggressive in flood mitigation than Hoboken.

Setting a standard

Known as the “Mile Square City,” Hoboken is a bowl, with much of it nestled between the Palisades to the west and the high point that houses Stevens Institute of Technology to the east, right on the Hudson River. That unique geography mostly keeps tidal flooding at bay, but it creates other issues.

Stormwater from heavy rain events often has difficulty draining away, and that problem is worsening over time as sea levels push up higher toward the drain system’s outfalls. Eventually, those outfalls will be below the average water line of the Hudson River. When that happens, the only way to get stormwater out of the city will be to manually pump it out.

Despite not facing a threat from sea level rise as severe as most other parts of coastal New Jersey, Hoboken is setting a standard for climate resilience as it tries to rein in sewage overflows and stormwater flooding during rainstorms, which are intensifying as temperatures rise.

The city seized on collective shock and dismay in the aftermath of Sandy and pledged to rebuild and reshape the flood-prone area. That effort has taken the form of resilience parks and retention basins that can hold hundreds of thousands of gallons of stormwater. There are also sewer system upgrades and massive new pumping stations to keep stormwater from backing up into the streets — and, soon, the new levee.

A woman walks through floodwater in the aftermath of Superstorm Sandy in Hoboken, with a stalled ambulance in the background.
Oct. 30, 2012: A woman walks through floodwater in the aftermath of Superstorm Sandy in Hoboken, with a stalled ambulance in the background.

The impacts of sea level rise are already being felt, not just in Hoboken but around the state. Tom Herrington, the associate director of the Urban Coast Institute at Monmouth University, noted that many barrier island towns are already seeing an increase in tidal flooding.

‘I haven’t seen it affecting development’

But that doesn’t mean local leaders are ready to make major changes. On the contrary, ongoing coastal development in many parts of the state will increase the value of private property and the scale of property-tax revenues jeopardized by rising seas.

“I haven’t seen it affecting development, new development or redevelopment in any way,” Herrington said.

Herrington said it will likely take a major change in real estate trends, and a drop in demand for waterfront property, to change the thinking of many local officials.

“I think they think this market will continue for at least the next few decades. And maybe it will,” Herrington said. “And they’ll have that tax revenue, to maybe hopefully invest in some mitigation strategies for the communities.”

It’s also basically impossible, Herrington notes, to totally prevent any adverse impacts from sea level rise. No matter what action is taken, the nature of New Jersey’s coastal communities is going to change.

“You can’t stop the water from coming in completely. You can’t dike off these communities. Each one can’t be its own little Holland,” Herrington said. “So you have to think reasonably about how you work on these issues.”

Three solutions

Kasabach sees coastal communities as having three choices as sea level rise eats away at properties.

The first choice is to raise taxes on remaining property owners to cover the lost revenue. The second is to identify the safest places in a community for redevelopment and encourage at-risk property owners to relocate there. And the third is for towns to consolidate services in order to lower their spending; eventually, Kasabach warns, it’s likely some towns would be better off merging with a larger nearby municipality.

“It’s very difficult politically to have a mayor or a small town on a barrier island decide that it wants to be absorbed by another town on the mainland,” Kasabach said. “And then that other town on the mainland has to see it in its best interest, as well.”

When it comes to confronting threats from climate change, Hoboken is an exception.

Elsewhere around New Jersey, communities are moving more slowly to adapt to growing climate threats. In many places, the conversations and considerations don’t seem to be happening at all.

Mike Cerra, the executive director of the New Jersey League of Municipalities, said he believes local leaders are beginning to focus more on climate threats, though he acknowledges that action is often reactive, following major storm events like Superstorm Sandy or Tropical Storm Ida. He pointed to the state’s Blue Acres buyout program as a tool that has become increasingly popular in recent years.

“I think long term, it’s more about how do you change your planning, in order to address what may be coming in 2030 and 2050,” Cerra said.

A slow state response

Statewide efforts are underway, but those processes tend to move slowly. New Jersey’s Department of Environmental Protection announced an emergency rulemaking push following last year’s devastation from Ida, an attempt to create new restrictions on development in floodplains. But that effort has ground to a halt, with the state facing heavy pushback from business groups.

“This is still in discussion, it’s complicated,” Shawn LaTourette, commissioner of the DEP, told NJ Spotlight News in an interview last week. “We are continuing to engage with stakeholders, but we’ve got to make sure we bring everybody along. And I believe we’ll get there but we’ve got to do the work.”

Kasabach said it’s imperative the state move forward with the proposed floodplain rule.

“That’s going to give local officials more support to be able to make those tough planning decisions about areas where they’re not going to reinvest infrastructure dollars, where they’re not going to encourage redevelopment to take place,” Kasabach said.

Meanwhile, a recently enacted state law requires each of the state’s 564 municipalities to incorporate a climate change risk assessment into their master plan updates. Kasabach called the law a game-changer.

“As towns are starting to realize they need to meet this requirement, they’re starting to have the right kinds of conversations about their land use (and) future projections about what things are going to look like,” Kasabach said.

This story was produced in partnership with Climate Central, a Princeton-based nonprofit, nonpartisan climate science and reporting organization.