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Co-op industry speaks up on unfair taxing policies.

The need for equity in taxes for cooperatives and condominiums in New York City was the common cry at the Second Annual Legislative Breakfast of the Apartment Owners Association.

Held Downtown at Harry's, in the seat of city government, the breakfast drew an impressive number of City Council members and committee leaders as well as cooperative and condominium managers, board leaders and representatives.

"We are here to open up and continue a real dialogue with the City Council," said Richard Siegler, Esq. general counsel, The Apartment Owners Association, Inc. Strook & Strook & Lavan.

"We have a common goal with the City Council," added AOA President Irwin Gumley. "That is the future of this city into the next century." According to Siegler a major concern of the organization is the inconsistent method by which the franchise tax is computed in New York City. The city, he said, uses alternating means for figuring the tax -- between balance sheet or "historic book value" and a multiple of the real property assessment. It seems, he said, the city is using whatever method will bring them the highest revenue.

The organization also wants the state to stop using IRS 277 to increase taxes has yet to be achieved. (See Sidebar) There are law suits pending and Congressmen Rangel and Green and Senator Moynihan are backing legislation that would exempt cooperative housing corporations from provisions of the code. The code, as it currently reads, taxes co-op's non-member income--fees from garages, stores, or interest on reserve funds. Essentially, the co-ops are expected to keep two separate sets of books.

"It is only when the federal law is clarified should the city and state be taxing," he said.

Member Charles Rappaport, Federation of New York Housing Cooperatives, which represents 700 member condominiums and cooperatives, emphasized three areas of discrimination against co-ops. First, he said, a co-op is only eligible for a J-51 abatement if they do one of six major capital improvements and can get other benefits if it does more. Non-cooperative buildings are not limited to those six tasks.

"If a building was a multi-family rental building," he said, "it could get the J-51 in and of itself."

Second, he said, the elderly would be entitled to Senior Citizen Rent Increase exemption if they were a renter, but cooperators are not given a break on their property taxes. Condominiums, he said, are entitled to these exemptions.

Third, he said, was the general disparity between the property taxes paid by co-op unit owners and those paid by single-family home owners. A recent survey, he said, showed that the owner of a co-op unit, in Queens, valued at $57,000 paid three times more taxes than the owner of a single-family home valued at $170,000 in the same borough.

Other issues that were raised include: Finding ways to encourage bank lending to healthy co-ops; water metering; petroleum business tax; and the imposition of application fees for owners of landmark property; how to help co-ops get over "tax shock" as thousands of J-51's expire.

Council Speaks

of Legislative Power

A number of Council members spoke to the gathering. Each seemed to stress that the new expanded City Council is now a powerful legislative body that has greater strength in solving the city's woes.

Speaker Peter Vallone gave examples of some where the Council showed its muscle on issues of concern to the cooperative and condominium community.

While the mayor boasts his Safe City/Safe Streets program brought more police to the city's streets, Vallone said the program grew out of a Council mandate.

"We passed a law," he said. "We had 30,000 cops in 1974. We want 30,000 cops in 1993."

He said they also passed a resolution that cooperatives and condominiums are homes and "its time they be treated like homes."

The key to improved government, he said, is not to raise taxes, but to come up with better ways of operating.'

One feather in the cap of New York City, Vallone said, is that it is governed by Generally Accepted Accounting Principles (GAAP) and it must have a balanced budget at the end of every year.

Vallone also credited the council with putting the brakes on Dinkins plan to integrate homeless shelters into residential communities throughout the city. Simply giving shelter to each homeless individual, he said, is not a solution to the crisis when many of the people have additional physical and emotional maladies. "The answer to sick people is to treat them," he said. "... If it wasn't for the City Council, it would be happening. We not only have budgetary power, we now have land-use power."

Councilman Herb Berman, Finance Committee chair, spoke of a sense of pride when the Council "truly emerged as a legislative body."

"There was a change happening in government and nothing would ever be the same again," he said.

The council, he said, can now truly affect quality of life issues through savings, consolidation and through intelligent manipulation of government.

Berman said he was unaware of problems with the franchise tax but he is well versed in the need for equity between apartment owners and private home owners.

"We are committed, over a period of time, to deliver equity in taxation between the various levels of ownership," he said.

The council is committed, he said, to creating a city that encourages ownership, encourages business and encourages development.

Councilman Archie Spigner, chair of the City Council Housing Committee, attributed the healthy attendance of Council members at the meeting to the prevalence of cooperatives in the city. (Frank Karelsen, III, Esq., of AOA emphasized in the beginning of the meeting that there are about 55,000 cooperatives in the city and about 80,000 condominiums.)

"There are few of us who do not have co-ops and condos in their district," he said.

In many cases, he said, "they are the most stable and best housing in the district."

Spigner urged cooperators and managers to call his office with their questions, complaints and suggestions.

"We need you to tell us what to do and how to do it," Spigner said. "We don't pretend to be all things to all people."
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Title Annotation:Second Annual Legislative Breakfast of the Apartment Owners Association, includes related article on Internal Revenue Code Section 277
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Feb 19, 1992
Words:1028
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