New tax rates are prepared.

Now that the 1996 New York State equalization numbers have been finalized, it is likely that the City Council will have to make re-adjustments.

The utilities showed a sharp decrease in the full value of the class, which increased the class equalization rate more than the 5 percent legal rise. The overage will therefore affect the amount of city taxes paid by the other classes.

By law, the more than 22 percent overage must be shifted to the other three property classes: the Class One small homes, the Class Two apartment houses, and the Class Four, primarily commercial property.

Before any shifting of tax burden, the figures show Class One's one- to three-family home property taxes would go up over 4.58 percent and therefore could possibly go up to the full five percent as allowed by law. Class Two goes up .64 percent; Class Three goes up 28.27 percent; and Class Four comes down 5.45 percent.

Shifting the 23.27 percent overage from Class III to the other classes could bring the residential classes up more - without going over the 5 percent mark - and the commercial properties down less, or even up to the 5 percent legal cap.

In past years, the City Council has chosen to protect residential properties, and with the agreement of the New York State legislature, has not permitted an increase of more than 3 percent. Last year, the lawmakers capped the increase at 2.5 percent, and in a previous year it was capped at 2.75 percent.

Looking toward the end of the session and not wanting this issue to be neglected, Senator Roy Goodman has already introduced a bill to cap the rise of Class II at 2.5 percent - which can be amended and changed - and there are provisions to allow the city to make a later adjustment in the tax bills, i.e. a second or mid-year tax class change.

For commercial, cooperative and apartment house owners, this year, any shift at all will mean paying more in taxes.

Since commercial owners have watched the legislative shifts destroy large decreases in taxes in the past few years, another shift designed to let them take the brunt of the upward movement will be hard to accept.

"We have to look at the numbers, but our stand is consistent," said Steven Spinola, president of the Real Estate Board of New York (REBNY), that represents both commercial and residential apartment building owners. "There should not be any change in the law [and allow the residential class to go up the full five percent]. The whole purpose for this exercise is to equalize the tax situation, and by playing with the law, you slow that down or stop it."

For the first time this July, cooperative and condominium unit owners - but not sponsors or their successors - will receive credits towards lowering their taxes, following a law agreed to by the Mayor and City Council Speaker Peter Vallone that recognized those unit owners were paying a premium for owning an apartment rather than a home.

Since the first year's abatement - which was allowed to be credited this upcoming fiscal year - is for a 2 percent decrease for buildings where the average assessment per unit is $15,000 or less, and a 1.25 percent decrease for units worth more - should the Council decide to shift onto Class II, that savings would be instantly negated.

Of course, those coop unit owners would also receive an expected 16 percent and 10.75 percent abatement, respectively, towards this year's tax bill.

Other residential buildings, and those unit owners ineligible for the coop relief, including all sponsors - even those with rent regulated tenants paying less than the current maintenance costs - would also see their taxes rise without any offset.

Martin Karp, chairman of the Action Committee for Reasonable Real Estate Taxes, said "We're aware of the potential changes and feel they match patterns of prior years. The cooperative community continues to work with the City Council and the Executive Branch of the City government to implement the requirements for last year's legislation to develop a long-term plan for attaining equity in cooperative and condominium real estate taxation. Our longer-term goals continue to be attaining greater equity in overall real estate taxation."

Billing Problems

Although the political wrangling is beginning, it is usually finalized too late for the actual printing of the tax bills, causing a re-billing and confusion.

Technically, the Council doesn't usually set the tax rates until the roll is closed on May 25th, which will be even later this year, on May 27th, because of the Memorial Day weekend.

Last year, to beef up city coffers, the Council authorized tax bills to be sent out at the prior year's tax rate so that a 5 percent annualized discount could be available for property owners that prepaid their full year taxes by mid-June.

Then, thanks to the legislation from Albany, adjustments were made on the additional January billing that included the effects of the new tax rates and the legislative cap.

The city raised over $1.2 billion by June 26, 1996, but sources say the early payments and differing amounts on the two tax bills caused a slew of administrative problems. Workers are still unwinding bank posting complications, and worse, dealing with taxpayers who paid the prominent 'prepayment" amount on the regular July 1st due date, and were then dunned for the difference, including interest running at 18 percent.

Taxpayers did not understand the idea of an "annualized" discount - which is quite small - and created their own payments, a full 5 percent less, again later having to pay the difference plus interest.

Many people, including a Council Member, also grabbed and paid whichever bill or coupon they found first when making their January payment, not realizing the amounts had changed. That too led to underpayments, interest running and unhappy tax-campers.

"In the end, I believe thousands of taxpayers paid too much simply because the bills weren't clear and the Fairtax system does not treat delinquencies properly when they are posted after the due date for payment," said Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), an owner's group.

"The ability to bill correctly is essential,' stressed Margulies. "They have not been able to bill intelligently and people have not been able to understand the bill."

Bill Overhaul

The Finance Department, now led by Alfred Cerullo III, has since completely overhauled the tax bills themselves to make them easy to read for both the bankers and the taxpayers. The new bills have color highlights and have more details about specific debits and credits.

But without a policy decision being made to either forget the early prepayment option or to change to a system of regular quarterly or half yearly statements - and not include pre-printed coupons for future payments showing amounts that are sure to change due to Senior Citizen Rent Increase Exemption and J-51 adjustments among other items - it is likely the confusion will just re-occur.

If a plan for early payment discounts is approved again this year, that decision would have to be made by early May, as the law requires a 25-day notice before taxes are actually due.

Since another legislative cap on the adjusted base proportions determined by the new equalization rates is possible, and without an agreement in Albany on the State budget and an agreement in the city on a City budget, the chances of a second property tax billing with adjusted tax rates seems a sure bet for January.

"Re-inventing the bill is a step in the right direction, but it doesn't make sense when they change the rate and you are penalized improperly for errors created by their confusion," said Margulies.

Last year, he said, people paid what they were told to pay on time and still got delinquency bills, which resulted in paying more money because of accrued interest.

"They should think about doing a bill one year for the correct amount at the correct time and get themselves straightened out," he added.