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NYC Tax Commission under fire.


NYC Tax Commission under fire

Recent reports by the New York State and New York City Comptrollers blasted the Tax Commission, and some of its policies, questions the brevity of the hearings.

The reports recommend better record keeping by the Tax Commission, and suggested either tape recording the hearings or having a stenographer present. Both also recommend a review of all reductions, not only those resulting in assessment reductions of more than $50,000 as is the current practice.

The Tax Commission is the administrative body from which owners seek relief when they belive their properties have been overassessed.

State Comptroller Edward V. Regan said of his auditors' findings that "the management environment at Tax Commission was found to be so weak as to invite abuse and illegal activity."

David Goldstein, president of the Tax Commission and one of the six commissioners have not been reappointed, and there is also another vacant commissionership, the City Comptroller's report notes.

The heads of the two tax certiorari bar associations were quick to defend the Tax Commission saying most of the recommendations would be hard to implement because of the huge number of hearings and agreed that the Tax Commission hearings were basically fair and not subject to improprieties.

Jeffrey Golkin, head of the Condemnation and Tax Certiorari Committee of The Association of the Bar of the City of New York and a partner with Herzfeld & Rubin, P.C., said the Tax Commission "gives the fairest review of the tax under the circumstances -- dealing with the volume."

Certiorari attorneys reported a "chilling" effect at the Tax Commission hearings during March and April due to the two reports as well as from critical New York Newsday articles, and complained of not receiving warranted reductions of their client's tentative property assessments. The attorneys predicted, therefore, the Corporation Counsel will be overwhelmed this fall with petitions requesting judicial review of property assessments.

Joel Marcus, a partner at Pottish & Freyberg and the head of the Real Estate Tax Review Bar Association, said this year in particular, when he turns down an offer for reduction from the Tax Commission, he expects to take the cases to trial. "Giving inadequate settlement offers only increases the city's liability further down the road," Marcus noted.

In fiscal year 1990, nearly 53,500 protests, involving about 100,000 parcels of land, were filed and resulted in over 40,000 hearings. Although this represents only one in every nine taxable parcels, the state report said it involved the "lion's share" or 78 percent, of the total assessed value of taxable property, $86 billion. According to the commission's counsel Glenn Borin, 52,000 applications were filed for this fiscal year, 1991/92.

City Comptroller Elizabeth Holtzman's report, prepared by Associate General Counsel Marc S. Schindelheim, said in 1990, 44 percent of the properties with hearings received offers of reduction and 83 percent of those accepted the offers. Most of the remaining 17 percent filed petitions for judicial review.

A Regan spokesperson said the state report, prepared by Deputy Comptroller Elinor B. Bachrach, was to determine the basis for decisions and whether the decisions were properly documented and made in accordance with Tax Commission guidelines.

The state audit reviewed all the decisions for statistical data but also took a random sample of 30 protests, 14 of which resulted in a reduction. Although the sample was small, many errors were found. Furthermore, even with the help of Tax Commission supervisors, no explanation could be arrived at for five of the 14 reductions, ranging from $40,000 to $8 million, leading the state report to conclude that over $1 billion in reductions is unsubstantiated or unexplained.

The state auditors found 855 cases where a hearing officer heard a building's case three years in a row and 29 instances where a case was heard four years in a row. Only one case was statistically out of line and the report said the hearing officer should have given more evidence. The report recommended rotating hearing officers so that no one officer hears a case more than one year in a row.

Sources in the state comptroller's office said the focus of their next audit will be directed at the reductions made by hearing officers to individual certiorari firms, which number approximately 106. Of that number, no more than two dozen handle most of the buildings in the city. Some attorneys have complained that certain firms are favored by the hearing officers who are vying for lucrative jobs when they leave the Tax Commission.

There are approximately 23 hearing officers and, Marcus said, "You get the more experienced ones when you have an important property, and it does make sense."

Golkin said, "If certain hearing officers are hearing more cases or giving more reductions, they may have been selected to work with those that would warrant greater reductions. Numbers and statistics can be misleading," he added.

An income-producing property's assessed value is computed by dividing its pre-tax net income by a "cap" rate. The higher the cap rate, the lower the assessment. The state report found the capitalization rates to be different for both the Finance Department and the Tax Commission. Commissioner of Finance Carol O'Cleireacain has released, for the first time this year, the "cap" rates used by the assessors to set the tentative assessments published in January. These may be protested by the taxpayer or a representative to the Tax Commission.

The Tax Commission cap rates, which are different and higher, have never been released to the public, and are a reason, the state report suggests, why the taxpayer is often granted a reduction at the Tax Commission hearing. The state comptroller suggests making the rates the same. The Tax Commission responded by noting that the two bodies must remain independent, however, the Department of Finance responded that it believes the cap rate ranges are "objective and should be uniform."

Marcus said there is an undue emphasis on releasing cap rates at the Tax Commission. Certain factors such as vacancy rates, he said, cannot be measured in a capitalization rates. He did not believe it was inappropriate, however, for the Department of Finance to release its cap rate information.

Golkin believes the cap rates should be consistent. "The same standards should apply for the assessor in Finance, the hearing officer in Tax Commission or the attorney in Corp Counsel," he said.

Both reports called for either taping the hearings or having stenographic notes taken. Golkin said he did not think the Tax Commission had the staffing or the budget for taping hearings, noting several hearings are held at the same time in one room.

Marcus said, in other jurisdictions, minutes were lost and the case had to be settled because the government could not provide recorded minutes.

An attorney who asked that his name not be used, said he had the perfect example of why hearings should be taped. At one hearing, he said, it soon became obvious by the remarks made by the hearing officer that he was distracted and not paying attention. The hearing officer, the attorney said, was not prepared for all the cases, and indicated a couple of times he did not know what neighborhood they were discussing. "That was not a fair hearing," said the attorney, "But without a record, who will believe me?"

Although both reports criticized the length of the hearings, which often last only five minutes, attorneys said the five minutes could come from many hours of work prior to the hearing. If the case is complicated, the hearing officer may ask for further documentation and "reverse" his decision. Individual taxpayers need, and are given, much more time to present their arguments.

Golkin said usually both the hearing officer and attorney are well prepared and when the two parties get together they do not need to spend a lot more time.

Regan's report found 1,494 protests, totalling $176.4 million in reduction offers, were incorrectly coded and criticized the numerous key punch errors. In some instances, backup information was in the file, in other cases the Tax Commission said the supporting documentation was unavailable.

If there was no "keyed" reason for a reduction, Golkin said, the likelihood was that there was some kind of verbal communication to the hearing officer.

Holtzman's report said the Tax Commission should provide supervisory review of all determinations.
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Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Jun 5, 1991
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