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TAX ACTION

Published: Spring 2008

FOUR MORE YEARS OF PROPERTY TAX ABATEMENTS FOR HOME OWNERS IN NYC COOPERATIVES & CONDOMINIUMS

The Council of New York Cooperatives & Condominiums and its Action Committee for Reasonable Real Estate Taxes extend heartfelt thanks to Assembly Speaker Sheldon Silver, to State Senator Frank Padavan and to Governor David Paterson for the important legislation that continues for four years the property tax abatement program for home owners in New York city cooperatives and condominiums. In these difficult economic times, with budgets strained to meet unprecedented increases in fuel costs, extremely high water rate increases (see page 6) and other financial challenges, this legislation provides welcome relief to housing cooperatives and condominiums and their resident owners who now know that the abatement program will continue seamlessly into fiscal year 2009 as it begins on July 1, 2008.

THE ABATEMENT PROGRAM
Since its inception in 1997, the abatement program has made progress in bringing the property tax paid by cooperatives and condominiums somewhat closer to parity with taxes paid by other New York City home owners. It provides an abatement of 25% on the property tax of qualifying cooperatives and condominiums whose assessed value averages $15,000 or less per unit, and an abatement of 17.5% for those with higher assessed values.

PROBLEMS WITH THE $15,000 CUTOFF
In 1997, more than 37% of the cooperatives and condominiums in the city were able to benefit from the 25% abatement. But in the intervening years, property values in New York City have increased, and assessment increases have followed. As a result, there are only a very small number of cooperatives and condominiums benefitting in 2008 from the 25% abatement. As they have crossed the $15,000 line of demarcation, many, many cooperatives and condominiums that are the homes of moderate income families have had to absorb the double blow of increased taxes concurrent with a lower percentage of those taxes being abated.

CNYC and the Action Committee had hoped that in 2008 there could be some improvement in treatment of these less affluent home owners. The City is mandated to develop a long term plan for property tax reform to deal equitably with all New York City taxpayers, but this has not been forthcoming. In the absence of such a plan, CNYC and the Action Committee had sought an updating of the $15,000 cut off to restore its original intent of affording higher protection to about 37% of the cooperative and condominium population who are lower income families.

ACTION COMMITTEE PUSH FOR EXTENDER
On January 31, 2008, the Action Committee for Reasonable Real Estate Taxes held a meeting on the abatement program. The members present agreed that the top priority had to be simply to extend the abatement program. Not enough time was left to work also on fine tuning the 25% issue.

Action Committee members began a strong letter writing campaign to ask Mayor Bloomberg, City Council Speaker Christine Quinn and each cooperative and condominium's own Assembly, State Senate and City Council representatives to support extending the abatement program. Once Speaker Silver and Senator Padavan introduced the extender legislation, all of the members of CNYC were asked to join this letter writing campaign.

TIMING IS A FACTOR
In addition to the most important goal of ensuring that the abatement program would continue past its June 30, 2008 sunset date, CNYC and the Action Committee also wanted to have the extender legislation in place as early as possible in the year, so that the property tax bills for July payment could include the abatement. This had not always been the case, and problems arose when it was not.

COMPLEX IMPLEMENTATION
When the abatement program was first enacted in 1996, a good deal of time was required for its implementation. The NYC Department of Finance had to develop computer programs to capture and work with the massive amounts of information needed to determine which cooperative and condominium units qualified for the abatement. Buildings and their management personnel were asked to provide specific information about all qualifying apartments and their owners. Sponsor units do not qualify for the abatement program, but individual owners of up to three units in any cooperative or condominium building can qualify by providing their name and social security number (now collected at the closing on the apartment and updated by management on forms provided by the Department of Finance).

Once all this information was accumulated and integrated into the DOF database, the abatement program was implemented for property tax bills for fiscal 1998. Condominium unit owners each receive their own property tax bill, making this a simple thing. But housing cooperatives pay one property tax bill for the whole cooperative; to help with apportioning of the abatement, the Department of Finance provides each cooperative with a chart showing the abatement amount attributed to each qualifying apartment. The cooperative must distribute the abatement to those apartments before the end of the fiscal year on June 30th. The abatement goes with the apartment, which means that the cooperative is not responsible for apportioning the abatement when an apartment is sold in the course of a year. Seller and purchaser may come to their own agreement in this regard, but the responsibility of the cooperative is simply to distribute the abatement to the apartment

DELAYED EXTENDERS
The original legislation sunset on June 30, 1999. The City had not put forth a 'long term plan for property tax fairness' as the legislation had mandated, and so it was decided to extend the abatement program to permit time for development of this plan. But, as the time arrived to prepare tax bills, although extenders had been introduced in the State legislature they had not yet passed. In the absence of an existing program, July 1 property tax bills reverted back to full property taxes for home owners in NYC cooperatives and condominiums.

Condo unit owners and cooperative apartment buildings that had not been aware that this could occur had to scramble to find the funds for full property tax payments. To make matters worse, where lenders held funds in escrow to pay property taxes for their mortgagees, when these lenders saw taxes increase, they demanded that borrowers supplement their escrow payments. Lenders were unmoved by explanations that legislation was being enacted to extend the abatement program, and that January tax bills would be adjusted to reflect the abatement.

The extender legislation was passed and signed into law during the summer of 1999, extending the abatement program for two years, and, indeed, January and April property tax bills restored the abatement in full. It likely took some time to convince lenders to make a corresponding downward adjustment in escrow payments.

A similar set of circumstances surrounded the passage of the second extender in 2001, when the abatement program was extended for three years.

TIMELY EXTENDERS
In 2004, CNYC and the Action Committee for Reasonable Real Estate Taxes were determined to avoid these problems. Commissioner 'Pete' Grannis, who now heads the State Department of Environmental Conservation, was a member of the Assembly in 2004. Mr. Grannis and Senator Padavan were able to shepherd the extender through the legislature with great speed and widespread support. It was signed into law on May 18, 2004, and for the first time, the abatement continued without interruption into fiscal year 2005. The 2004 legislation extended the abatement program for four years to June 30, 2008 and mandated that the City prepare a long term plan to treat all New York City taxpayers equitably.

With no plan forthcoming in the course of that four year extender, CNYC and the Action Committee considered requesting that the abatement program be made permanent, to end the uncertainty and stress of having repeatedly to work for extenders. However, this would truly not be the best solution for the City's property tax system, as will be explained below.

Instead, Speaker Silver and Senator Padavan introduced legislation extending the abatement for another four years with another mandate for the City to produce the long awaited long term plan. Happily, Speaker Silver and Senator Padavan amassed virtually unanimous support for A.10688/S7714, which Governor Paterson has now signed into law. The Department of Finance will factor the abatement into its bills for July 1, 2008 payment.

Please join CNYC in thanking Speaker Silver and Senator Padavan for their advocacy on helalf of all NYC home owners in cooperatives and condominiums. Speaker Silver can be reached at 932 Legislative Office Building, Albany, NY 12248 or 250 Broadway, Suite 2307, NYC 10007. ÊSenator Padavan is at 416 State Capitol Building, Albany, NY 12247 or 89-39 Gettysburg Street, Bellerose, NY 11426.

DRAWBACKS OF THE ABATEMENT PROGRAM
The abatement program dates from 1996, when, responding to the report of a blue ribbon committee that studied the City's property tax system and determined that cooperatives and condominiums paid far more than their fair share of taxes, the New York City Council proposed an abatement program for home owners in cooperatives and condominiums as a first step toward correcting tax inequity. The abatement program was to be a short term measure, while the City worked on a long term plan for eliminating the disparities in the tax treatment of home owners.

By its nature, then, the abatement program cannot deal with details; it paints with very broad brush strokes. It does not try to address disparities in assessments in different parts of the City, nor with the basic assessing premise, imposed in 1981 by Section 581 of the Real Property Tax Law, that cooperatives and condominiums must be assessed for tax purposes based on comparable rental buildings.

Compliance with this requirement is a challenge. As the years have gone by, more and more cooperatives have been created, and there are fewer 'comparable' buildings with which to compare them. As a result, the Department of Finance must impute rental values that project a statistical mix of rent regulated and open market values in conversion from older rental dwellings. It uses only market rate rental 'comparables' in new construction or buildings converted from commercial to residential use.

Finally, as discussed above, even the one way in which the abatement program does try to bring some additional balance with the $15,000 'slice' for cooperatives and condominiums where lower income New Yorkers make their homes, the years have rendered this cutoff almost meaningles

THE CRUSADE CONTINUES
Created in 1990, the Action Committee for Reasonable Real Estate Taxes has worked ever since for a fair and equitable property system for all New York city taxpayers. The Action Committee will continue this crusade. With the abatement program now in place for four more years, there should be time in the next year or two for a more realistic adjustment of the $15,000 demarcation, to speed help to New York home owners in the greatest need of consideration.

The extender also mandates that the City of New York prepare by February, 2011 a long term plan for a better and more equitable property tax system.

The Commissioner of Finance has promised a report on property taxes, which could well be the next step in our long journey to property tax fairness.

Next year, many of the seats in the City Council will be vacated by incumbents who are prevented by term limits from running again. This is an opportunity to elect law makers who are familiar with housing cooperatives and condominiums and supportive of our issues. Please think about property tax fairness when you talk with candidates. Please help CNYC and the Action Committee for Reasonable Real Estate Taxes continue to work for property tax fairness.

To add your name to the Action Committee mailing list, please call 212 496-7608 or send e-mail to Info@CNYC.coop, making this request.

 
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