The state must take the measures proposed within the New York Metropolis Advisory Fee on Property Tax Reform report.
Christopher Sadowski
The New York Metropolis Advisory Fee on Property Tax Reform launched its last report final week, simply earlier than the de Blasio administration headed out the door. Whereas we’ve been vital of this course of for the greater than 5 years we’ve pushed reforms, we've to confess: We're impressed.
The panel, collectively created by the mayor and Metropolis Council, has proposed some sensible, substantive measures to make the system extra equitable and clear, together with safeguards and monetary reduction to make sure the adjustments don't trigger undue hurt.
The onerous half is over. Now comes the actually onerous half: making it occur.
We're able to do what it takes. However most of these essential adjustments should be made by the governor and Legislature.
Gov. Hochul’s just-proposed $1 billion statewide property-tax rebate, largely for low-income households and seniors, may be not less than an implicit acknowledgment that the issue should be addressed. However these rebate checks gained’t unravel the convoluted mess that's our property-tax system. Albany should make actual reform a precedence in 2022.
That is the fifth op-ed we’ve penned on this in three years, and the case for complete reform has solely gotten stronger. New York is reeling from a pandemic that’s wreaked havoc on our economic system and our lives. But as most tax income dropped precipitously throughout the current recession, property-tax payments continued to climb. In 2008, when revenue and property-transfer taxes hit a peak in Gotham, property taxes have been 35 % of metropolis tax revenues. Now they account for near half.
The issue is our metropolis’s property-tax system is essentially unfair and purposefully opaque. To find out the levy, the Division of Finance calculates the market worth of all metropolis actual property, takes a fraction of that quantity to determine the assessed worth, then multiplies that by a median tax fee. A state regulation capping the yearly improve at 2% doesn't apply to New York Metropolis, which is why, partially, our levy has elevated about 75% in a decade — greater than 4 instances the speed of inflation.
One other regulation requires that levy be divided proportionally among the many 4 property-tax lessons, that are every assessed and taxed at totally different charges, with varied exemptions. And the proportion — or “class share” — adjustments with annually’s finances, making subsequent yr’s taxes not possible to foretell.
Frequent sense dictates that properties with the identical market worth in the identical property class ought to have the identical property-tax invoice. That’s removed from the case. One large purpose is one other state regulation capping the quantity single property assessments can improve at 6% annually, or 20% over 5 years.
In concept, this could shield householders from quickly rising taxes. In follow, it has artificially decreased the tax payments of high-priced properties in sizzling actual property markets, whereas the tax payments for reasonably priced properties proceed to extend steadily. That's the reason our ex-mayor pays about $4,000 in property taxes on his Park Slope house valued at near $1.6 million whereas a house on Staten Island’s North Shore valued at $700,000 will get hit with $6,500 in property taxes.
One other explanation for inequity is yet one more state regulation requiring condos and co-ops to be assessed as income-producing properties, reasonably than based mostly on comparable gross sales. That is significantly problematic in Manhattan, the place the values of luxurious condos are sometimes decided by comps to rent-stabilized residences close by. This illogical methodology results in many properties being extraordinarily undervalued and explains why the median efficient tax fee — taxes paid per $100 of market worth — in Manhattan is barely $0.45, lower than half the ETR in Staten Island ($0.97) and The Bronx ($0.91).
And since the town levy is predicated on the complete market worth of actual property, householders in these working- and middle-class outer-borough neighborhoods are subsidizing the property taxes of wealthier ones.
A few of the fee’s suggestions may assist. Eliminating the evaluation cap would redistribute property-tax legal responsibility among the many posh Higher West Facet brownstones and modest properties in Tottenville and Bensonhurst. The fee additionally urges increasing Class 1 properties into a brand new “residential class” that would come with one- to three-family properties, co-ops, condos and four- to 10-unit rental buildings and utilizing a sales-based methodology — not rental revenue — to worth them.
The fee additionally suggests ending “fractional assessments” and as an alternative calculating property taxes by multiplying a brand new decrease tax fee by full market worth and fixing class shares reasonably than altering them yearly. This might make tax payments simple to grasp and extra predictable.
And to assist ease the transition, the fee proposes monetary safeguards like five-year phase-in of market-value adjustments, a homestead exemption for owner-occupied properties and “circuit breakers” to assist ease the burden of tax will increase for lower-income households and seniors.
None of those options is ideal, however let’s not let the proper be the enemy of the nice.
The New York Metropolis Advisory Fee on Property Tax Reform has completed its job. Now it’s time for the Legislature and governor to do theirs.
Joe Borelli is the minority chief of the New York Metropolis Council. Justin Brannan, a Democrat, represents Southern Brooklyn within the Metropolis Council.
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