Some assessments still too high, owners say.

Reacting to the release of the 1996/97 tentative property tax assessment roll, industry executives maintained that while the roll overall was reflective of the lack of growth, many assessments were still too high, particularly in the Downtown office and hotel segments.

They gave a Bronx cheer to the 9.23 percent rise in actual hotel assessments, noting that such a rise will create a setback for the segment's comeback. Rises in retail sector tax assessments, including those of commercial condominiums, may also come back to haunt assessors as the retail industry retrenches after disastrous end-of-year sales.

Quietly, the administration has also bumped up taxes on cooperatives and condominiums in general, as well as small coops, even while publicly admitting they are working on a legislative cut that will cost $17 million this coming fiscal year.

It is the budget and its dependency on the property assessments for a quarter of the city's income that sent analysts back to their calculators after the roll's release. While the administration had hoped for a tax collection of about $7.99 billion, that has been dashed to closer to $7.82 billion.

City Council finance mavens broadly calculated the drop in revenues to be about $212 million.

That could easily be made up, however, should Mayor Rudolph Giuliani decide not to continue the tax rate freeze that was promised by his predecessor, Mayor David N. Dinkins, and continued by Giuliani for the last two tax collection periods.

A Giuliani spokesperson, Diedra Baccu, said the Mayor has not yet made a formal decision on the tax rate freeze. "More latitude with rates could help close the budget gap, but that would happen on the backs of the property owners," she said.

The Mayor has already discussed the tax rate freeze with the Real Estate Board of New York (REBNY). Steven Spinola, REBNY's president, said the Mayor told them he would not formally announce a freeze, but was against even the perception of raising taxes.

Council Spokesperson Michael Clendenin also said there is no talk about raising tax rates. "We haven't any plans to lower or raise them," he said.

The tax rates for bills payable beginning July 1st will be set after the release of the final roll on May 25th. In past years, the rates have been set very close to the end of June, after some New York State legislative intervention, for one reason or another.

The average tax rate in the city actually went down from 10.591 to 10.366 per $100 of assessed valuation during the Giuliani watch. But there are also no assurances that class shifts or equalization rate changes made by the State Board of Real Property Services and the City Council that formally sets the rates won't change the bottom line on individual bills.

Certainly, a simple shift in rates can bump up revenues another $300 million. But what it won't do is bump up revenues another $2 billion; what is expected to be the budget shortfall, give or take a couple of hundred million.

Challenges to the tentative roll can be filed by March 1st for Classes 2, 3 and 4 and through March 15 for Class 1 for review by the Tax Commission.

An informal change by notice procedure is also available, but Commissioner Alfred C. Cerullo III noted that only during such an informal Finance review, the assessment can be changed upwards as well as downwards. Class II, multi-family residential properties, have until February 13th; Class One, small residential owners, have until February 28th; and Class IV's commercial properties have until April 1st to file such a request.

Martin Karp, chairman of the Action Committee for Reasonable Real Estate Taxes, observed the roll was basically stable. "We welcome Commissioner Cerullo's statement that the city intends to implement the first phase of co-op and condo tax reform," Karp said.

Cooperatives in Manhattan saw an increase of 11.71 percent in their billable assessments; 7.35 percent in The Bronx; 6.49 percent in Brooklyn, and 10.44 percent in Queens.

Former Tax Commission President David Goldstein, who is now practicing with Stroock, Stroock & Lavan, noted that unlike in many other years, there are far fewer dramatic increases and decreases in the tentative tax roll.

"Basically, it's a non-event," he said. But Goldstein noted that many properties which should have been increased were not, and some which should have been decreased were not.

"I don't really feel that the RPIE's [real property income and expense statements] that were submitted by the owners of the properties were really fully considered," Goldstein said.

Robert A. Kandel, of Kaye Scholer Fierman Hayes & Handler, said each owner has to look at their operating statement and make a judgement as to how to distinguish themselves from the pack to get the fairest assessment on their property.

"Hotels got whacked, disproportionate to any increase in income due to occupancy and disproportionate to any increase they got due to the drop in the hotel occupancy tax," Kandel said. "That was bad news."

Another certiorari attorney was far more critical. "It is a terrible, inaccurate roll," declared Hubert J. Brandt, of Peter H. & Hubert J. Brandt. "There were sporadic increases that were made that over-judge the fragile state of the economy."

Brandt pointed to the uptick in hotel assessments and said, "There is a perception that the hotel industry has turned around. I think this over-judges it. This industry suffered dreadfully for the last several years and they need the breathing room to get themselves back to the level they were. This rise is retarding the whole thing."

Property tax payments are made on the lower of the actual or transitional assessment and the resultant number is known as the "billable" assessment.

The city's fluctuating transitional assessments therefore affect the actual property tax payments. In some cases, the rising actual assessments are modified by the slower to be affected transitions.

Overall, while the Manhattan actual hotel assessments were up 9.23 percent, that sector's billable assessments were up 3.13 percent.

The Marriott Marquis, which has the highest hotel value in the city, has a tentative actual assessment of $130.5 million, up from last year's $117.261 million. But the hotel will only be paying on the transitional assessment of $115.178 million, up from $111.635 million last year.

In other instances, while the tentative actual assessment went up and reflects a rising hotel property value, the billable amount still went down from last year, as it slowly allows in the rise.

The Algonquin, for example, has an actual tentative assessment for 1997 of $6.075 million, up from last year's $5.94 million. But the hotel will pay less than last year's tax bill as the transition of $5.453 million is less than last year's $5.661 million, on which it paid property taxes.

The slow market is also reflected in Manhattan office properties. While the market value of Manhattan office buildings is down 2.73 percent, the billables were down 3.27 percent. Overall, the city-wide Class IV actual assessments, accounting for 45.6 percent of the city's billable tax assessments, increased .57 percent, and the market value was up .74 percent, but billables declined .37 percent.

The city's 3,800 commercial condominiums were also given the royal bump, moving up 14.96 percent in actual assessments in Manhattan and 12.57 percent in billable assessments.

Goldstein explained those numbers are more attributable to the retail sector and are not office condo rises.

The rental segment was hit hard by billable assessment rises. The Bronx rose 26.96 percent; Brooklyn 15.3 percent; Queens 10.95 percent and Manhattan 13.74 percent.

Nevertheless, Commissioner Cerullo noted they have decreased assessments for owners who invested in the rehabilitation of apartments.

Dan Margulies, executive director of the Community Housing Improvement Program, was concerned these cuts were given to non-profit operators and not to the small business owners. "It doesn't mean they are reducing the taxes next door - where private owners are struggling," he said.

Margulies said the non-profits have mounted a tremendous lobbying effort to get their costs reduced further. "They are beginning to see some success. But it's ironic the administration is focusing on these squeaky wheels rather than the regular owners next door, who have long been over-assessed. It's frustrating."

Many of these benefits, however, did go to those small walk-ups and elevatored apartment building owners who obtained J-51 benefits.

Margulies is also concerned that rental owners who have experienced some deregulation of rents, as well as those that are expected to see some deregulation in the future, have had assessment increases.

There were also quirky upticks in the tentative roll: Garages in Queens went up 11.66 percent in value, while Queens factories rose 11.66 percent, translating to a 12.02 percent rise in billable assessment.

The addition of 43 commercial condominiums in Brooklyn helped bring up that billable assessment 99.47 percent.

In The Bronx, 375 office buildings were socked with a 41.42 percent rise in actual assessment and 40.28 percent in billable assessments. At the same time, 25 loft buildings lost 21.75 percent in actual assessments from the final 1996 roll, amounting to 22.77 percent in billable assessments.

Attorney Brandt is also concerned because, he says, the supposedly speedy administrative review procedure with the Tax Commission "has deteriorated so much that it gets more difficult to get the quick relief."

The hearing period, which fifteen years ago ended prior to the summer and even five years ago ended by the end of the summer, now extends well into November and even December.

This means that a taxpayer who files a March 1st protest application may have to pay their full July property tax bill and file a petition with the court that costs upwards of $170 before even reaching the first level of review with the Tax Commission. And many have to keep paying the higher level of property taxes for several years before obtaining an interest-free refund.

If a settlement is reached at this first hearing level - and fewer than two out of six applicants do so - a remission order authorizing the Department of Finance to change the assessment must be obtained before a refund application can be filed.

Most taxpayers who had fall hearings in 1993 are still waiting for the remission orders to be issued, and as Brandt says, "When you speak to people Downtown, they give you no firm promise of when that will be. I am still waiting for '93, '94 and now the '95 recovery [of the property tax overpayments] to be made... and that is intolerable."