Published: Spring 2018

TOWAR DS PROPERTY TAX FAIRNESS
Mayor DeBlasio and City Council Speaker Corey Johnson have taken the first step toward the challenging task of reforming New York City's property tax system, announcing on May 31st that they have formed an Advisory Commission to make recommendations for an overhaul of the City's property tax system to treat all New York City taxpayers fairly. CNYC looks forward to taking part in the hearings that this Commission will hold.

New York City's property tax system dates from 1981; it is now badly skewed, difficult to maintain, and unfair in many ways. Tax reform is long overdue. CNYC and the Action Committee for Reasonable Real Estate Taxes applaud this administration for taking this significant first step, and look forward to a restructured tax system, with fairness and transparency as twin goals.

Reform can't be tinkering or making small changes to one class or another. Property 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 should take the form of separate overlays, administered by City government independent of tax valuations.

HOW DID IT BEGIN?
In 1981 the New York State legislature passed S-7000-A over the governor's veto, cobbling together a system of four property tax classes for New York City in response to a lawsuit that successfully challenged the prior tax structure. By 1990, this system 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 rearrangements of each Class's 'share of the pie". Cooperatives and condominiums were included in the Multiple Dwelling class. Their number had grown exponentially during the 1980s.

CNYC had been formed in the early 1970s by buildings newly converted from rentals to cooperatives, to share experiences so as not to 'reinvent the wheel' continually; 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 forth 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
In 1993, Mayor Dinkins convened a blue ribbon commission 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. Without sufficient time to study this bill, lawmakers closed their legislative session without acting upon it, leaving the abatement program remained in limbo. Happily, 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 bill. 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. This structure was renewed in 2015.

PRIMARY RESIDENCY ISSUE
However, the new legislation also restricted the abatement to individual's primary residences (plus up to two additional units in the same cooperative or condominium as the primary residence.) The Department of Finance had the task of implementing the many changes in the abatement program. It has worked diligently to try to confirm all primary residences, but still some owners have lost abatements to which they are entitled. For fiscal 2016, DoF instituted a annual online form which all qualifying cooperatives and condominiums must update annually in order to continue to qualify for the abatement program.

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
The modified abatement program passed in January of 2013 was extended in 2015. CNYC and the Action Committee for Reasonable Real Estate Taxes dare to hope that by the time the present abatement program sunsets on June 30, 2019, a fair and equitable program of taxation shall have been created, vetted by interested parties, and prepared for introduction in the State legislature.