Property Taxes Part III – Residential Property Tax

-Authored by the Short Hills Association and submitted by Jay Morreale

This is the third in a series of articles by the Short Hills Association on property taxes and the reassessment process.

This is the third in a series of articles by the Short Hills Association on property taxes and the revaluation process. In this article we cover how the municipal tax rate is calculated and how individual residential property taxes are computed.

Individual residential property taxes are driven by three distinct budgets: the School System, the Municipal Government, and the County Government. While each entity draws revenue from fees, grants, state aid, and other sources, the remaining funding gap is bridged by property taxes.

Millburn Township serves as the central collection point. It gathers the funds required for its own operations and the school district, while also fulfilling its mandated obligation to Essex County. The County determines each municipality’s share by calculating an equalized total value for all taxable property. Because towns perform assessments at different times, this adjustment to current market value ensures a fair comparison across the county. A town’s specific tax obligation is set based on the percentage its equalized value represents of the county-wide aggregate.

In 2025, Millburn’s county contribution was $45.3M (9.5% of the total collected). This is a decrease from $50M in 2018, primarily because development in other Essex County municipalities has expanded their tax bases relative to Millburn’s.

Municipal Property Tax Rate

The municipal tax rate is a simple calculation of the total property tax required to be collected divided by the total assessed value of all taxable property in town. In 2025 that was $202M / $10.009B or 2.019%. Each individual property tax bill is then the assessed property value multiplied by the tax rate. Using the 2.019% tax rate with the average residential property value in Millburn of $1,302,529 this gives an average property tax bill of $26,298.

Residential Property Assessed Value

In Essex County, residential property assessed values are determined by a “revaluation” process which occurs at the discretion of the Essex County Board of Taxation. This last occurred in Millburn in 2017 and is expected to occur next in 2029. Changes to assessed residential property value can occur in a limited number of cases between revaluations. These include: tax appeals, change of use, and major renovations.

It is important to note that when a municipality performs a revaluation this does not change the total amount of property tax needed to fund the schools and local and county governments. That is determined by their respective budgets for that year. However, when the tax rate for that year is calculated, it may be substantially different from the prior year if the total assessed property value has changed significantly. Some properties may see an increase in their property tax while others may see a decrease. It is based on the individual property assessed value as determined by the revaluation.

Equalization

Since revaluation of individual municipalities across the county occurs over the course of several years, an equalization process is performed annually to adjust each town’s estimated assessed value and keep them in line. For residential property, the equalization is based on recent home sales. Note that assessed values of individual homes do not change as part of equalization. Instead, a factor is computed to adjust a municipality’s aggregate property assessment to equalize it relative to other towns in the county. This is referred to as the Equalization Ratio and is calculated using an estimated aggregated “True Value” of property in a municipality versus its current “Assessed Value”. Below are charts of the Essex County Equalization rates as well as a history of changes.

The tables below show the current assessed property values and the equalized property values for Essex County municipalities as well as the historical equalization factors.

Changes to Assessed Value

While revaluations set the baseline, three specific events can trigger a change to a residential assessment in the intervening years:

1. Renovations: When a major renovation is completed, the township assessor determines a new value for the property. Crucially, this is not a current market valuation. To maintain equity, the value is “indexed back” to the date of the last revaluation (2017 in Millburn). This ensures a newly renovated home is assessed as if the improvements existed back in the baseline year, keeping it in line with the rest of the community.
2. Tax Appeals: An assessment may change if a property owner successfully appeals their valuation through the county tax board or the court system.
3. Change of Use: A shift in how a property is utilized—such as a retail space becoming apartments or a residence transitioning to a tax-exempt religious use—will trigger a reassessment.

It is important to note that these individual adjustments do not affect the total budgets required for schools, municipal services, or county government. Instead, they shift the relative tax burden. When one property’s assessment rises, it absorbs a larger share of the total tax levy, slightly reducing the burden on others. Conversely, a successful appeal that lowers an assessment must be offset by the rest of the tax base.

Annual Reassessment

Several counties in NJ, either fully or partially, have moved to an annual reassessment process whereby each year the assessed property values are changed to reflect their current market value. These include Monmouth, Gloucester, and Somerset. One advantage of Annual Reassessment is reduced risk to “tax spikes”. These occur when different areas of a municipality appreciate at different rates over time and revaluation moves all properties to their current market value. In this case, areas that have relatively large increases relative to the overall municipality can see large jumps in their property taxes.

Non Residential Property Tax

In addition to residential, property tax is collected on non-residential property as well. This is a bit more complicated as there are 3 different methods used to determine the assessed value for commercial property. Commercial Property Tax will be covered in a later article.

Summary

In summary, property tax is driven by the combined funding requirements of the municipal government, the school system, and the county. While the tax rate is set to meet these budget obligations, individual property assessments serve as the mechanism for allocating that cost among owners. While all assessments are reset during a town-wide revaluation, individual values remain stable between cycles unless triggered by specific events like major renovations, successful appeals, or a change in property use.