Tax dodgers put burden on businesses and residents.

We've all heard that the only two things in life that are for certain are death and taxes. Everyone pays taxes, or do they?

When it comes to real estate taxes, this is not necessarily true. Some entities actually do get off, tax free.

In light of the past years' spikes in real estate taxes for most landlords and homeowners, (as high as 18.5%), there were many on the sidelines, unscathed by the debilitating increases.

One can only wonder how equitable our real estate tax system is when the percentage of New York City properties that were tax-exempt in 2005, accounted for 58% of the total inventory of real property.

While some are legitimately exempt, many appear to be abusing the exemption. So, who is exempt from property taxes? Well, it all began many years ago....

In 1938, the New York State Constitution, created tax-exempt status for certain not-for- profit, religious, educational and charitable institutions, whose properties were used exclusively for these purposes.

The reason behind this exemption was that these institutions provided services, like education, which would decrease the state's burden of providing such services. In essence, the state was saving more money than it would have had to spend, by just making these institutions exempt. These were known as "revenue neutral" public benefits.

While this may have been the case at the time, it is most certainly not the case today.

While government owned real estate is tax-exempt and provides a distinct service, most other tax-exempt properties provide virtually little or no benefit to the average local taxpayers. Any investigation of this problem must focus on the not-for-profit entities that seem to be for-profit.

Property related taxes are and continue to be New York City's largest source of revenue. In 2005, over $14 billion of the city's income was derived from property taxes. This accounted for almost 45% of the city's revenues. The city also has the ultimate power over increases. It sets the annual assessments and tax rates.

As calculated today, tax-exempt institutions, cost the city of New York an estimated $10 billion in taxes that may or may not be legitimately exempt. Even more startling is the fact that many of these properties' ownerships are not easily identified by their deeds. Therefore, this estimate may very well be extremely lower than reality.

In actuality, several religious and educational organizations have been very profitable in selling or renting many of their vacated schools or other buildings. They have significantly reduced their services to the city and yet they continue to sell for a substantial "tax free" profit.

New York City has seen a surge in enrollment in its city-based private schools, colleges and universities.

If admission is not easily available to the local residents, can it be said that they serve the same major public benefit as a city-owned school, college or university?

If the majority of attendees are not even residents of New York City, should these institutions continue to be exempt from property taxes, when they are actually increasing the need for the city's public services and drawing upon the city's revenues?

If their non-educational activities service international or otherwise non-local needs, should local taxpayers be subsidizing them? Should they continue to be allowed to profit from their activities, without any contribution to the city's fiscal well being?

The impact of billions of dollars in tax revenues not allocated to the city's budget is that an unfair tax burden is shifted to other taxpayers and residents. Since the city controls the annual increases and assessments, tax-exempt properties are not included in the equation. Therefore the burden of tax is placed squarely on the shoulders of the remaining property owners, who are 'covering' the shortfall.

As more properties are exempted from taxes, the tax gets higher for those still paying. We can safely say that those owners who are paying property taxes are actually subsidizing those who don't.

As with most taxes, any increases get passed on to the tenants, store owners, businesses, families, etc. This trickle down effect impacts the entire economy. While the services offered by those who are exempt, may not.

What does the future hold for the city? Well, in 2005, approximately 989,000 properties had some form of tax-exemption. This represented a 16% increase from the prior year. What is in store for us if it continues to increase at this rate?

Think how much more we could accomplish in the greatest city on earth, if we only had a redirection of these funds. Our Freedom tower would have already been built and paid for. The Second Avenue subway would be rolling at full speed.

The far west side would have its transportation system, and public waterfront parks.

Attention must be focused on this inequitable property tax system if we are to retain our position as the greatest city on earth.

* Special thanks to Ms. Bonnie Brower of "City Project" for her valuable insight and research.

BY ADELAIDE POLSINELLI, SENIOR EXECUTIVE BROKER, BESEN & ASSOCIATES, INC.