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PROPERTY TAX FAIRNESS – COULD THIS BE THE YEAR?

Published: Spring 2014

There has been growing recognition that New York City's property tax system, that dates from 1981, is now badly skewed, difficult to maintain, and patently unfair in many ways. Mayor DeBlasio, City Council Speaker Mark-Viverito and many citizens groups including CNYC have called for tax reform. Reform can't be tinkering or making small changes to one class or another. The courage must be found to restructure the entire system, with fairness and transparency as twin goals. Taxes should be levied equally on properties of like function and like value. Consideration for seniors, for veterans, for persons with disabilities -- and for home ownership, if that is recognized as a desired end to promote--all must take the form of separate overlays, administered by City government. CNYC and the Action Committee for Reasonable Real Estate Taxes seek to be active participants in the reform process. We dare to hope that by the time the present abatement program sunsets on June 30, 2015, a fair and equitable program of taxation shall have been created, vetted by interested parties, and prepared for introduction in the State legislature.

HOW DID IT BEGIN?
The New York State legislature passed S-7000-A over the governor's veto in 1981, establishing four property tax classes in New York City. It was cobbled together to solve problems raised by a lawsuit that successfully challenged the prior tax structure. By 1990 it had already created more problems than it had solved. Assessments were increasing at a gallop for multiple dwellings, utility properties and commercial property while one, two and three family homes were sheltered from increases by assessment caps, and by a system that took advantage of additional opportunities, not to maintain each group's 'share of the pie', but rather to skew the system even more in favor of individual home owners. Cooperatives and condominiums were included in the Multiple Dwelling class. Their number had grown exponentially during the 1980s. CNYC had been established in the early 1970s by newly converted buildings eager to share experiences so as not to continually 'reinvent the wheel'; CNYC, too had grown significantly by 1990, and its members were staggering under their ever-increasing property taxes.

ACTION COMMITTEE SUGGESTION
In February of 1990, CNYC called into being the Action Committee for Reasonable Real Estate Taxes. Its chairman and officers studied the tax structure and proposed a simple solution, two tax classes, one residential and one commercial, with a fixed ratio between the two, so that neither sector would be overtaxed to benefit the other. "Circuit breakers" such as homeowner exemptions and government provided relief for senior citizens, etc. were also considered.

'TEMPORARY' ABATEMENT PROGRAM
Mayor Dinkins convened a blue ribbon commission in 1993 to examine the property tax system. Its report confirmed that housing cooperatives and condominiums pay far higher property taxes than other homes of comparable value. In 1996, Mayor Giuliani called for an abatement program for home owners in cooperatives and condominiums as a first step toward tax fairness. This was to be a two years program while the city developed a long term plan for tax equity. Instead, the abatement was repeatedly renewed in 1999, 2001, 2004 and 2008. As it was due to sunset in 2012, legislation was introduced for yet another four year extender. Instead, just days before the end of the legislative session, the City put forth a complex bill that modified the abatement program in several ways and also addressed J-51, Subchapter S Corporations and the 421A program. Lawmakers didn't have sufficient time to study this proposal before the end of the legislative session, so the abatement program remained in limbo. The Department of Finance continued to apply abatements to Fiscal 2013 property taxes following the format of previous years.

MANY MODIFICATIONS BRING IMPLEMENTATION CHALLENGES
Finally, in January of 2013, a new state legislature passed the City's legislation. It significantly increased abatement percentages for buildings whose assessed value averaged $60,000 per unit or less. This has resulted for affordable units citywide and for most of the cooperatives and condominiums outside of Manhattan in significantly higher abatements a most welcome development. PRIMARY RESIDENCY ISSUE However, the new legislation also restricted the abatement to an individual's primary residences (plus up to two additional units in the same cooperative or condominium as the primary residence), phasing out abatements on other units over the fiscal years 2013 and 2014. The Department of Finance had the task of implementing the changes in the abatement program. It worked diligently over many months to try to confirm all primary residences, but still some owners have lost abatements to which they are entitled. The concept of providing a benefit only for owners who live in their units is a frequent practice in other jurisdictions, where it is termed a homeowner exemption. But no such criterion affects taxes on Class One properties with absentee owners, making home owners in cooperatives and condominiums even less like home owners in Class One.

TAX REFORM IS NEEDED
It is heartening to see the Commissioner of Finance, the Mayor and the City Council all speak of examining our property tax system. This effort should focus on developing an easily understood tax structure that will deal equitably with all New York City tax payers. CNYC will keep members posted of progress toward this vital goal.

 
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