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Hold the line on taxes for 4 years!

Hold the line on taxes for 4 years!

Early this month, the Mayor submitted a plan for balancing the city budget. We understand that the budget has to be balanced to comply with State Financial Control Board requirements. But taxes, a key aspect of a balanced budget, also impact the city's economic climate, and taxes here already are too high.

City officials are beginning to become aware of this: "The extent of proposed future property tax increases were reduced recently by the City Council, and the Mayor has let it be known that he would like to freeze property taxes for two years.

Nevertheless, I believe -- along with other real estate and business groups -- that reducing a proposed increase is not enough. The line on city taxes, particularly real estate taxes, should be held. We're pleased that the Administration wants to freeze property taxes, but that desire is conditional on other revenue proposals and it should not be, and the freeze should be more than a wish.

While property taxes are 28 percent of the city's total revenues -- including state and federal contributions -- the fact is that city property taxes already comprise about 40 percent of all city taxes. If the only way the Mayor will be able to hold the tax line is to cut the budget, then we urge him to cut it.

There must be limits on how much tax property owners are asked to pay. In fiscal '91, taxes reportedly rose $290 million, and another $130 million increase has been approved for fiscal 1992. Even before these revenue measures, owners here already were tax-burdened: * It's been estimated that rentals for office space in the city include on average $9.50 for taxes, reportedly more than three times as much as do rentals just across the Hudson in New Jersey * An owner of a 15-unit apartment building, writing in these columns just a few months ago, reported that she was paying about $7,500 a year in taxes and was losing between $7,000 and $8,000 a year on her investment

The tax scenario worsens when we remember that the city is phasing in metered water/sewer taxes and that the city and state have passed new, higher fees for inspections, permits and penalties. Under the metered system, some owners, whose apartments are occupied at high density levels, report 300 percent to 900 percent higher water/sewer charges.

In addition, there are a number of increases among some 24 city and state fees imposed on real estate. The fees, for example, now are $30 for elevator and low pressure boiler inspections, up from $15; $300 for an asbestos variance application for a space under 5,000 square feet, up from $200; $400 to $600 for an acceptance-application for fuel burning equipment, up from no fee before; and a three-fold increase in fees for Board of Standards and Appeals amendments to a variance, up to a range of $350 to $1,225.

All indications are that if we don't hold the tax line, affordable rental housing owners increasingly will be operating in the red. Higher taxes will be one more reason for city residents and business "to vote with their feet." A recent New Jersey report showed that 60 percent of all businesses that relocated there in the first half of 1991 came from New York, with an attendant loss of 4,000 jobs.

For many owners of affordable rental apartment buildings, the cost of operating multi-family property in New York City is already out of hand. Witness the steep rise last year of in rem proceedings, a story that also was reported in this newspaper. In rem proceedings, are continuing at a high rate.

Unless the city holds the line on expenses there will be a budget gap of $250 million this fiscal year, and more than $1 billion a year for the next three years. Most likely, there will be calls to raise property taxes to eliminate the deficit while keeping the work force intact and funding social welfare programs. But in the present weak economy, and given New York's rent regulatory system, I suspect that high taxes will kill the goose that lays the golden egg.

If higher property taxes force owners operating on the margin to abandon their buildings, there will be fewer viable properties to carry the city's property tax burden. A similar situation will arise if businesses and working people move out to lower-tax areas.

Fortunately, the city Administration has shown it is aware of the problem and has said that labor can't look to higher property taxes as a funding source for increased wages, and the Mayor in the past year has allowed attrition to cut the work force by 10,000. But we and other real estate organizations in the city still are concerned that the city will do little and do it too late. Again, I ask city officials: hold the line on property taxes.
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Title Annotation:The Owner's Voice; property taxes
Author:Klein, Ruben
Publication:Real Estate Weekly
Article Type:Column
Date:Nov 27, 1991
Words:827
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