NYC tax rates finalized.
Under the budget adopted by the city earlier this month, property owners are expected to contribute $8.113 billion to the city's coffers. Only $7.67 billion of that is predicted to be actually collectible, amounting to some $440 million in various credits and delinquent owners.
The changes in the tax rates themselves are uneven. The Class II multi-family buildings' tax rate was increased 4.6 percent to $10,369; while Class I small homeowners will pay. 1 percent more at $10.900; Class III utilities dropped 42.1 percent to $7.404 and Class IV commercial property rates were increased .2 percent to $10,724. The rates are paid per hundred dollars of billable assessed valuation.
The utilities were affected by a change in the way the city calculated its portion of their assessed valuation as well as a large shift in equalization rates as determined by the State Board of Equalization and Assessment Review (SBEA).
Those changes added $2 billion in assessed valuation to the utilities but the other classes ended up paying for it. This was due to shifts in both equalization and class shares, and despite reductions in assessments that were made before the close of the tax roll.
With changes to tax classes varying so widely, it was not unexpected that industry representatives differed on how closely the mayor held to his promise to freeze the average tax rates. For the record, the average tax rate actually fell by 2.1 percent from last year, primarily due to the treatment of the utilities.
The Rent Stabilization Association's President John J. Gilbert III said, "The mayor should come clean and acknowledge that the Class II property owners are getting smacked in the pocketbook."
The owners were only hearing 'it won't go up,' he said, noting the Class II rates then went up 4.6 percent while at same time the Rent Guidelines Board (RGB) was proposing a 3 percent increase in rents. "We have taxes due and payable July 1," Gilbert complained, "How are owners going to pay that with a 3 percent increase in rents?" The RGB was scheduled to vote on final regulations on Tues. June 22 and Gilbert said RSA was "pushing them hard.
Kathryn S. Wylde, president of The New York City Housing Partnership agreed the increase on tax rates will affect "the synergy between the limit on rent stabilization and rising costs and its press on owners of older multi-family housing, co-ops and condos."
The New York City Housing Partnership is a non-profit organization that builds homes for moderate-income families using state and city monies to lower the cost of development. While Wylde deemed the rates "not good," she said they won't have much impact on most of the group's one to four family homes. This is because the city gives what she called "generous tax abatements" for new construction or substantial renovation.
But, Wylde continued, the impact will be felt on the Partnership's co-ops and condos and added to the high cost of water and sewer services.
Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), explained, "This is New York City's version of a tax freeze. I don't think New York City knows how to freeze water." Margulies laughed over his unintended double entendre as the city has also "frozen" water rates.
"Multiple dwellings will be paying about $100 million more," Margulies continued. "That's some freeze. I'd hate to see a heat wave. Clearly the city budget is out of control. They can talk about rate freezes until they are blue in the face but won't make any progress until they reform the budget and reduce spending." Steven Spinola, president of the Real Estate Board of New York agreed that the budget, which is dependent on too much non-recurring income, could present a problem. "We are concerned we will have to confront a budget problem in the middle of the year," he added.
Spinola was also kinder when acknowledging that the tax rates were "expected" along with the significant increase on Class II. "It's not a tax increase," insisted Spinola. "It's an adjustment, so the city has kept its commitment [to freeze tax rates]."
The City Council and Mayor promised they would not balance the budget on the property tax, the executive director of the Council of New York Cooperatives, Mary Ann Rothman agreed, saying they kept that promise.
"They have held it to roughly the same levy and we urge them in getting on with appointing the Tax Commission," she said, referring to the seven member panel that is to be convened to hear testimony and advise the mayor on property tax reform over the next six months.
Rothman said she wished the SBEA had a better grasp of current market values and the fact that co-ops and condos are overtaxed compared to owners of single family homes.
Martin Karp, chairperson of the Action Committee for Reasonable Real Estate Taxes, said they contest the SBEA methodology as well. "The increase is regrettable," he said. "The key issue, however, is that the city and state have to get on with real action on tax reform." Karp said his group is prepared to provide constructive input.
Dean M. Mead, senior research associate with the Citizen's Budget Commission, said the real issues are the class shares and the effective tax rates.
The effective tax rate is the tax levy divided by the city's market value and makes class comparisons possible on a value basis. The effective tax rates, supplied by the Department of Finance, which includes the full market value of those properties with partial exemptions and a Class II value determined by the income approach are: Class I, $.74 per hundred dollars; Class II, $3.75 per hundred; Class III $3.332 per hundred dollars and Class IV $4.824 per hundred dollars.
Mead noted Class II is effectively paying five times the tax rate than Class I and Class IV is paying six and a half times more. "That's a problem that's never going to be resolved naturally," he said. The class share is the portion of the total tax levy paid by each class. Class shares for this year are: Class I, 11.5631 percent up 2.48 percent; Class II, 30.7768 percent up 6.15 percent; Class III 5.7581 percent down 12.42 percent; and Class IV 51.902 percent down 2.34 percent.
Dean observed Class IV, which represents 30 percent of market value, pays 52 percent of the tax. "I don't think .you have to look at any other statistic to understand its an unfair system," he said.
In the last two years, Mead explained, the Class II class share has been rising. Since Class III does not pay a large share of the levy, the real problem, he believes, is the inequity between Class 1 and Classes II and IV. This is because Class I pays taxes on such a small share of their market value.
"The owners of larger residential buildings and commercial property are subsidizing the small homes," Mead said. "There's been a growing recognition of the problems of the system and a swelling of support for making some changes to at least even out some of the inequities." Mean said the only way to solve these discrepancies without just tinkering is to rewrite the law.
Joel R. Marcus a partner with Pottish & Freyberg and president of the Tax Review Bar Association, said, "They really punished the Class II taxpayers and also increased Class IV, even though the mayor promised there would be a freeze in the tax rates."
Marcus also observed the disparity between Class I homeowners and Class II co-op and condo owners is widening even though they receive the same city services. "The difference in tax burden is grossly unfair," he added.
In the case of Class IV, Marcus said, the city is continuing to try to take more money out of buildings that have less of an ability to support the tax burden. "In a year that vacancy has increased we find the tax rates have increased," he said.
Since the rate stayed about the same for the commercial owners, Jeffrey R. Gural president of Newmark & Co. as well as the co-chair of the Property Tax Fairness Coalition said, "We were very lucky the mayor pledged to freeze the taxes or they would have raised the tax rate to balance the budget."
Gural explained there is going to be a continued "huge" budget deficit as a result of the decline in both assessed valuations and revenue from Class IV. "As long as they continue to ignore it we will continue to tread on a tightrope," he added.
Certiorari attorney Allan C. Schwartz, a partner with Schwartz, Weiss, Steckler & Hoffman, agreed. "How is the city providing for the ultimate decline in assessed valuation?," he wondered, pointing to the steadily increasing refund liability from cases backed up through the protest system at the same time values continue to decline.
While the city estimates in its budget documents that $275.2 mill ion is refundable, based on extrapolating figures compiled in his own practice, Marcus believes the truth lies closer to $1 billion. And he is not alone.
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|Title Annotation:||New York, New York multi-family dwelling owners in excess of 11 units to pay largest percent increase in tax rates beginning July 1, 1993|
|Publication:||Real Estate Weekly|
|Date:||Jun 23, 1993|
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