What is a “tax sale” in New Jersey municipal finance?

A "tax sale" in New Jersey municipal finance refers specifically to the process of selling tax liens on properties that have unpaid property taxes. This is a critical financial mechanism for municipalities to recoup funds owed to them from property owners who have defaulted on their property taxes. During a tax sale, the municipality offers these liens to investors who are willing to pay the overdue taxes on behalf of the property owner. In return, these investors can collect interest on the amount paid, as set by law, and have the potential to take ownership of the property if the owner fails to redeem the lien within a specified period. This process ensures that municipalities can maintain cash flow and continue providing services while giving property owners an opportunity to clear their debts.

In contrast, the other options depict different concepts: the auction of municipal property refers to a sale of actual property owned by the municipality, a fundraising event for the municipality does not involve taxes or liens, and a transaction to settle delinquent accounts is more general and does not specifically relate to the tax sale process. Thus, understanding that a tax sale is about the sale of tax liens on properties with unpaid taxes clarifies the function and importance of this process in New Jersey's municipal finance system.