Budget set: tax rates fixed.

The city's new $32.98 billion budget includes an $8.5 million cost for cooperative and condominium property tax reform as part of a three-year plan.

At deadline, the Assembly and Senate had passed the Home Rule bill and it was on its way to the Governor for signature.

The agreement on the city's budget, passed just before midnight on June 12, enabled officials to set new tax rates. Since bills have already gone out based on last year's rates and the new final 1997 assessments, taxpayers will not be re-billed, as they were last year.

Instead, in November, new bills will go out for the second half and third and forth quarter payments that will reflect the new tax rates with adjustments back to July.

Since tax rates went up slightly for the residential classes, and down for the utility and commercial classes, the residential classes will not feel the pinch until they have to pay their January bills while commercial owners will pay less at that time.

The Real Estate Board of New York's President Steven Spinola warned owners not to recalculate bills using the lower tax rate because they will end up incurring late charges for the "overdue" amount running at 18 percent interest.

The new real estate tax levy is $7.835 billion and the new tax rates for Fiscal 1997 are: Class I, $10.785; Class II, $11.056; Class III, $7.840; Class IV, $10.252.

For comparison purposes, the current Fiscal 1996 tax rates are: Class I, $10.725; Class II, $10.807; Class III, $7.922; and Class IV $10.402.

This amounts to a 1.44 percent reduction for the commercial properties of Class IV, and a 1.04 percent reduction for the utilities, Class III. There is a 2.3 percent increase for the apartment houses of Class II and a .56 percent increase for Class I's one to three family homeowners and condominiums of three or fewer units.

Spinola said the budget reflects the economic conditions of the city.

"There are things we would have liked to see that are not possible, and in terms of some of the additional tax reductions that didn't materialize, the Mayor and Council are committed to figuring out how to do them in the future," he hoped.

Dan Margulies, executive director of the Community Housing Improvement Program (CHIP) said there shouldn't have been a tax increase this year but for the shifting of the class ratios.

"Unfortunately, it hits residential property owners at a bad time," he said. "And the pain will be compounded because of the need to adjust the tax for the January bill when you will pay the full increase for the full year."

Margulies said it was a "double irony" because the rate was set on a timely basis and Finance could have gotten out a new bill.

"I'm still skeptical as to whether the early payment discounts are going to be worth the administrative burden," Margulies said of the city's discounted early payment offer that expired last week.

A Finance spokesperson said over half a billion dollars was collected by the early payment program and sources said that came from primarily small owners. The city had hoped to collect $1 billion so it would not have to borrow money from pension funds at nine percent interest to make it through this fiscal year.

"Some of the owners who wanted to help the city made the payment," said REBNY's Spinola. "The five percent [annualized] discount didn't make economic sense."

Carlos M. Velazquez, president of the Real Estate Tax Review Bar Association, and a partner with Pottish Freyberg Marcus & Velazquez, said he too was hoping that the commercial owners would have been able to pay based on the new tax rates, and noted "The residential owners really got hit with this tax rate."

Spinola was generally pleased with the overall budget and tax rate although he noted the commercial tax rate should have gone down more than it did. An agreement by the Council and Mayor capped any increases at 2.5 percent, thereby causing those rates that were going down - the utilities and commercial property tax rates - to go down less. That bill, too, has to be passed in Albany.

"We understand the political reality of trying to hold down the increase on the residential sections of the city," said Spinola, "but at least it means people that own Class IV properties will have a lower tax bill on January 1st. They will get the credit [at that time] and hopefully it will help the commercial tenants to see the city is more affordable."

Most of the city's commercial tenants pay tax escalations on increases in taxes and the lower taxes will also benefit them.

Joseph Strasburg, president of the Rent Stabilization Association, the city's largest residential owner's group, was content with the 2.5 percent cap on the tax rate.

"I'm satisfied there wasn't any legislation enacted that was harmful," he said.

Pointing to the agreement for cooperative and condominium tax relief that will also kick in with the January bills, Strasburg said that part of the law calls for the city to come up with a plan by Dec. 31, containing further recommendations for closing the gap between co-ops and single family taxes and treating all homeowners alike.

"We're going to argue that it has to be expanded beyond that," said Strasburg.

Meanwhile, cooperative representatives were pleased that several years of work and broken political promises were finally coming fruitful.

"The New York City cooperative and condominium community appreciates the decision of the City Council and the Mayor to include cooperative and condominium real estate tax reform in the fiscal year 1997 budget," said Martin Karp, chairman of the Action Committee For Reasonable Real Estate Taxes. "We believe that the State legislature will pass the legislation recommended in the Home Rule message and we will work toward achieving that end. We look forward to working with the administration in implementing the first three-year phase of the program and in developing the mandated longer-term plan. The Action Committee's longer term objective continues to be equitable real estate taxation for all New Yorkers."

The relief the Albany bill calls for in the first year is a token $8.5 million - half of what was originally sought - but again, for merely half a year. The second year reduction would be an overall $70 million while the plan will cost the city $120 million the third year. Those latter costs are troubling to the Mayor but he is letting them stand for now.

Mary Ann Rothman, president of the Council of New York Cooperatives, said, "We're very pleased and grateful to the City Council, particularly [Council Speaker] Peter Vallone and [Council Member] June Eisland to make this a reality. We understand the budget crunch and are grateful that in hard times the City Council understood how important it was to bring fairness to homeowners in co-ops and condos."

The President of the Federation of New York Housing Cooperatives, Charles R. Rappaport, said he thinks the purpose of the bill is excellent and agreed with Strasburg on the reform portion. "There is one thing in there that should absolutely be passed, and that is that the city has until December 31st of this year to come up with a comprehensive real estate tax program for beyond the third year. That is absolutely great."

Sources in Albany reported the bill had been held up because Mayor Giuilani was concerned about the second and third year costs. Senator Roy Goodman asked it be put through the Rules Committee and got it out for a vote last Friday afternoon. "He is fully in favor of the bill," said Goodman's Albany spokesperson.