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Tax roll out.

New York City's taxable assessments decreased by $1 billion from last year according to figures released by the Department of Finance last week.

The billable assessments decreased since the tentative roll from $79.18 billion to $78.18 billion. This was due primarily to the way utilities are handled and despite other assessment cats amounting to more than $1 billion that were won in challenges by the other three classes of property.

Deborah Beck, executive vice president of the Real Estate Board of New York said the roll is closer to being a fair reflection of the market than last year's but it is still too high. REBNY is concerned the city either. maintain the. rate freeze or not increase the projected levy.

The release of the roll was delayed until last Thursday, more than a week later than usual. The holdup, according to Finance officials, were these special franchise issues relating to the utilities assessments and some computer glitches.

A Con Edison lawsuit prompted an administrative change in the way the assessments of special franchises are valued and will save the utility millions of dollars this year. The change in valuation could increase costs to Brooklyn Union Gas and other special franchises unless the Class III utility tax rate is dramatically lowered, as is being discussed.

Shifts in the equalization rates of the other property classes will result in increases in their tax rates.

Despite entering the third year of a four-year property tax "freeze," tax rates are expected to go up because of changes in the value of the four classes and their proportionate shares. The freeze is also on the average rate.

Estimates on new rates by industry experts depend on whether the city is ready to capture the $2 billion increase - boosted by the revaluation of Class III - in its rolls in the form of more tax revenue or remain with its levy estimates and actually reduce the average tax rates.

"You still have people that want that revenue and others saying, if we can give relief let's do so," one source explained. "They could always do a mid-year increase after the election. Others are saying 'let's just take the money now.'"

Actual tax rates will be set by the City Council in a tax fixing resolution. Sources say the tax fixing would not occur with the release of the budget this week but later in the month after Albany takes a swipe at various problems.

Among those problems is the screaming that will occur over the class share shifts. The shifts determined by the SBEA for FY94 are: Class I up 3.7 percent, Class II up 6.9 percent; Class III down 15.3 percent and Class IV down 2.7 percent.

Before commercial owners in Class IV begin cheering, however, the law does not permit class shifts of more than 5 percent even though there is no limit to the downside. This means that the overage on Class H - amounting to 1.9 percent - will have to be "weighted" and spread over the other classes. Additionally, new adjusted base proportions, or "pieces of the pie," could stretch the actual Class II increase up to 6 percent. Estimated class shares are: Class I - 12 percent, Class I 31 percent, Class III - 6 percent and Class IV - 52 percent.

Jack Freund, director of research for the Rent Stabilization Association said even with a rise of 4.5 percent, the multi-family apartment owners would be hit with an additional $105 million tax bite. "That would be disastrous for the industry," he said. "Everyone knows values and rents are going down."

Martin Karp, chairperson of the Action Committee for Reasonable Real Estate Taxes, a coalition of many groups throughout the city blames the mess on the current property tax law, S7000A and the validity of the SBEA data.

The SBEA, he notes, was originally established to ensure equitable distribution of state funds based on reasonable distribution of full assessed value in the state. However, he charges, the SBEA assessment techniques are not sufficient to keep track of current real estate values.

"Their data is two to three years old, they do not have a large enough sample and their adjustment techniques are improperly related to real estate tax assessment,' charged Karp. "We just protest a tax increase based on unreliable data.

Karp said they definitely will pursue the same pattern as last year to expect legislative relief.

The real problem lies in the inequity of the total real estate tax process in New York City as governed by state he notes, is publicly acknowledged with the agreement of the City Council and Mayor to appoint a Tax Commission to come up with an equitable reform. 'The answer to the problem is getting an equitable real estate tax system that doesn't require SBEA adjustments," said Karp.

Sources say the appointees to that Commission are having background checks finalized and 'appointments could be made public as early as this week, albeit later than expected. The Commission is charged to hold public hearings and report to the mayor in December, after the elections. The decision to appoint such a commission has also dashed the hopes of real estate industry groups that had participated in Finance Commissioner Carol O'Cleireacain's Real Property Tax Reform Advisory Committee and expected to have new legislation passed this year.

Last year, the Class II full shift was 8.2 percent. An increase of 31 cents on the tax rate -- based on the 5 percent shift - was averted when Albany legislators placed some of the cost onto Class III by limiting all class shifts upwards to 2 percent. Even so Con Edison saved $17 million.

Insiders report the utilities are already lobbying to prevent a shifting scenario this year and are pointing legislative noses towards Class IV.

According to information from Finance officials and State Beard officials, Con Edison filed a lawsuit against the city because its property was being assessed in two different ways. The city had assessed Class III utility property

on the basis of 50 percent of its value.

Meanwhile, the SBEA had valued other property owned by utilities known as "special franchise" and consisting of items such as under-ground piping - on the basis of the average equalization rate of the city, which hovers around 22.5 percent. The basis for the lawsuit, now before Judge Stanley Parness, is that Con Ed's property was not being assessed at a uniform percentage of value.

The tentative assessments of special franchises for FY94 is $2.16 billion while other utility property was tentatively assessed at $3.88 billion. The final assessment breakdown was un-available at deadline, but special franchise assessments did go up.

The city's potential loss in revenue, one official said, is $150 million per year if the lawsuit is decided on the basis of 22 percent. This is footnoted m city bond offerings.

The city, after months of discussions with the SBEA, applied to the SBEA for the first time to have the entire roll certified as being revalued. The roll was certified on May 25 and under State regulations, this enabled the city to set one rate for both the special franchise and other utility property, explained T. Robert Kitchen, deputy director of the SBEA. That rate has been set at 45 percent.

While the change was conducted administratively, sources report the SBEA was uncomfortable just 'doing it,' and bills are now before the Albany legislators to 'legalize' the move.

Joel R. Marcus, a partner with Pottish & Freyberg who is president of the Tax Review Bar Association, said the handling of the special franchises represents a radical departure from longstanding assessment policies. 'There was no public debate and it is resulting in confusion to owners of special franchises,' he said.

'It nets out to a reduction for Con Ed and provides the groundwork for the withdrawal of the litigation,' said Bill Thomas, deputy commissioner for Policy with the Department of Finance. He noted this is an issue that was not adequately addressed when the four-class system was developed in the early 80'S.

Bob Loftus, a spokesperson for Brooklyn Union Gas, said the 45 percent equalization rate overall would raise its taxes substantially under current tax rates. "It will go up and we will vigorously contest it," he said, noting the change in assessments would hurt the outer boroughs the most. "Most of our property is assessed at 22 percent," he added.

"If they in effect have raised every-thing they will have to drop the rate," said Victor Hade, a tax certiorari partner with Schwartz Weiss Steckler & Hoffman. "What it really has done is tossed value into a completely different light."

Apparently dropping the rate is what is happening. "What the city is gaining is a higher assessed value and while it seems like a loss, the rate is going down," said one source who asked to remain anonymous.

Additionally, the $2 billion increase in taxable assessments for Class III will actually be parceled out according to the adjusted base proportions and might barely affect Class III.

City officials estimate that Con Edison will save money because only one-third of its property is assessed at 22 percent.

A Con Edison spokesperson, Richard Mulieri, said since litigation is still pending he could not comment. Con Edison is the largest taxpayer in the city and when taxes are decreased, he noted, a portion is usually passed on to consumers. In 1992, Con Edison estimated its New York City real property taxes to be $320.37 million while special franchise taxes in the city amounted to $230.42 million. If the lawsuit were settled, Mulieri noted, "It's a savings for everybody.'
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Title Annotation:New York, New York Department of Finance reports decrease in taxable assessments for 1993
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Jun 9, 1993
Words:1614
Previous Article:J-51 passes Council 49-0.
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