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Interest rate lowered on RE tax judgements.

A bill sponsored by Westchester Democrat Audrey Hochberg and signed by the governor last month, limits but floats the interest that will be paid on overpayments of taxes pursuant to tax certiorari judgements.

New York City and Westchester do not pay interest on refunds paid on out of court settlements. In Nassau County, interest is sometimes paid on settlements but the new law will not affect that interest which is a negotiation point.

Under the Hochberg measure, once an order is signed, the interest rate paid on the refund will automatically be counted into the payment. That interest rate will float and will be set as the "Federal funds rate plus two," based on the first quarter numbers that are published by the New York State Department of Taxation and Finance beginning Jan. 1 of next year. Currently, that interest rate is 6 percent.

Previously, said the Assembly's legislative counsel, Bernard Bryan, the certiorari interest rate was figured under the "all other claims against the government" portion of the Civil Procedure Laws and Rules (CPLR) and was being paid at 9 percent. "Now its under the section of the law that pertains to certioraries," he said. He said the motivation for the change was to "provide impetus for the litigants to settle."

Assemblywoman Hochberg said they tried to get the interest rate lowered to 3 percent and couldn't but then capped it at 9 percent, "so we wouldn't be worse off." The idea was originally brought to her attention by the School Boards Association in a package of certiorari relief ideas.

"I'm pleased we were able to pass this legislation and make the interest rate where applicable more in line with today's interest rates," she added.

Cap Unfair

Joel R. Marcus, a certiorari partner with Pottish & Fryberg and president of the city's Tax Review Bar Association, said he did not mind the floating rate idea as long as it was set at a reasonable level. "To cap it at nine," he said, "is really unfair and if we are in a period where interest rates are as high as 21 percent as they were in the 80's, capping it at 9 may be a form of confiscating property. If that fact situation comes about I would expect there would be a court challenge to the rate."

Marcus said he was reminded of one of his previous matters, where the judge ruled the 6 percent interest rate on a condemnation award was unconstitutional and raised it to 9 percent.

"The negative feature," Marcus continued, "is that [a low interest rate] doesn't provide an incentive for the city to settle the cases. There is less pressure on them if it does go to trial."

The owners of One New York Plaza, a certiorari case that did go to trial, received nearly $9 million in interest on tax refunds that were ordered by Judge Stanley Parness.

"It's too bad the new law didn't provide for payments on settlements as is the practice in Nassau County," Marcus remarked. "The city has the use of the money and should be paying interest on it."

Marcus said the certiorari bar has been very concerned about the long delays that are attendant to settling cases with the city. The longest delay is from filing the petition to reach a settlement of the matter, he said. But even when a settlement agreement is reached it takes six months to a year for the final papers to be signed by the city.

The issue was raised at the April 28 court conference before Justice Parness, who hears the certiorari cases. "The judge commented that six months was too long to process a settlement," said Marcus.

Bryan said there is no law that compels interest on an administrative settlement, however, those settlements do go on the books as "orders."

Settlement Interest

Jack Rubinstein, a partner with Meyer Suozzi English & Klein, said the interest rate paid in Nassau County on settlements is one of the negotiation points because obtaining are fund takes so long. The interest has been paid on both the settlements as well as those judgements obtained through trials.

Even when a settlement is reached, Rubinstein observed, it must be approved by the Board of Supervisors which can take a year, and then is entered on the assessment roll. The new roll that came out August I did not reflect many settlements made over the last several months, he noted, and clients will still have to pay taxes on the greater assessment and then apply for refunds.

After the Board of Supervisors approves the order, it can take another year or two to receive a refund. That is a primary reason the attorneys in Nassau have been able to obtain interest.

For the past few years, Rubinstein said die interest rate has been six percent, and this year it was lowered to 5 percent.

"I don't think I've ever made a determination to go to trial based on the interest rate," Rubinstein added. "It's a nice kicker at the end but it's never been the determination."

Rubinstein didn't think the new law would affect the timing of settlements either. "I can't see anybody denying or accepting a settlement because of this new bill." Little Effect James M. Coogan, a tax certiorari partner with Griffin, Letsen, Coogan & Veneruso, P.C. in Bronxville said the new law would not create a "huge" change in Westchester.

Settlements made in Westchester waive interest, Coogan noted, as long as a refund is made within 60 or 90 days. If the case is tried, however, that judgement provides for interest on return of the monies.

"I don't think it will make any difference at all," said Coogan of the new law. "I see it having very little effect in Westchester."

Greenburgh Town Supervisor, Paul Feiner, however, believes it will be a very big help to Westchester's communities. "The nine percent interest rates are ridiculous and this was one of the recommendations made by my committee. We felt the nine percent was very unfair.

In 1988, Feiner said, the town made up of several villages, was spending $300,000 in certiorari awards. "Last year it was $1 million and this year $2 million. It's one of our biggest problems.
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Title Annotation:real estate tax bill sponsored by New York State Assemblywoman Audrey Hochberg
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Aug 11, 1993
Words:1043
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