Property taxes now bring in $28 billion to city coffers, but have averaged a 6 percent uptick each year over the past decade, providing Gotham 31 percent of all its revenue.
But the rising tide has everyone screaming they are paying too much.
Because property taxes have become overly complicated by using fractional assessments, former NYC Finance Commissioner Martha Stark, a Park Slope co-op owner, said most people complain about their high taxes but don’t understand that they may be paying less than others whose homes or office buildings are worth the same amount.
Discussing property taxes during a panel discussion at the Rudin Family Forum for Civic Dialog at NYU Wagner School on Sept. 13, Stark continued, “Even those who are benefiting [and paying less] don’t know it.”
Stark also pointed to some of the co-ops that are being sold for $10 million to $50 million but pay on average $2,000 in taxes per million dollars of sales value. At the same time, homeowners in places near Canarsie and the Bronx may be paying $12,000 to $13,000 per million dollars of value.
Stark, who is suing the city over disparities in the property tax system, noted that apartment building taxes are also “inextricably linked to regulation.”
While renters may blame the building owner for high rents, the city takes a major cut. Because of the rent-regulated environment, Stark said, the apartment building owner could be paying the city $800 per apartment per month in taxes. At the same time, some of the apartments may rent for the same $800 per month — which doesn’t cover all the expenses. “Renters you do pay the property taxes,” she said.
In the late 1980s, commercial buildings were valued by the city based on their sales price. In a time of a rising market and leaping interest rates, that system caused a crisis when many buildings were foreclosed on by lenders.
That was because the income from the office tenants under long-term leases simply did not cover the high mortgage interest, higher valuation and higher taxes.
With the real estate industry in crisis, the city began using the building’s actual income and expenses to come up with a fair market value. It also set the equalization rate at 45 percent — a system that is still used today.
But Stark is still a believer of going to 100 percent of value. “One hundred percent is not as scary because then the [tax rate] comes down,” she explained.
Under such a scheme, however, owners with more valuable homes in Park Slope would be the biggest losers in a property tax shift based on real sales values, with 98 percent of those paying a whopping $11,000 more.
In such a shift, owners of Staten Island’s less-valuable homes would come out the winners, with 97 percent of them paying less.
Another Park Slope resident, George Sweeting of the NYC Independent Budget Office, explained that “equalizing” assessments on Class One homeowners would redistribute $600 million in property taxes — equal to 15 percent of the $3 billion paid by all city homeowners.
Under this proposal, 70 percent of the homeowners would pay less, he said, with the median reduction of $1,100 creating “Class One winners.”
No such plan is now in the works, but these possibilities are some of the calculations and statistics that will provide insight for the NYC Advisory Commission on Property Tax Reform, which is now meeting to come up with a road map for property tax reform.
