Bear with me…this one is complicated, but doubtless there are many homeowners in New York who are hearing about certiorari appeals and how it is impacting their property taxes. I thought that it might be nice to explain in simple English what all the fuss is about and why your $#%*ing property taxes keep going up in ever larger increments. Call it my good deed of the day. If this isn’t easy reading – rest assured it was equally challenging to write.
The short story:
The short story is that successful certiorari appeals – the state-wide legal process by which commercial property owners can appeal their property assessments (to have them lowered) have been increasing in number and show no signs of stopping. When commercial property assessments go down – and their taxes go down, the tax rate per assessed value must increase or municipalities and schools would rapidly run out of funds.
But that’s only the first whammy – it’s really a case of a double whammy. The double whammy is that commercial property owners can also apply for RETROACTIVE refunds. The second whammy has involved borrowing the necessary revenue to pay off the retroactive certiorari settlements.
How serious is the problem?
How does this affect the bottom line? In Tarrytown total taxable assessments have gone down 20% since the 1990s.* White Plains has a similar situation where the school budget recently had to include $3 million in new certiorari refunds. It also included $4.6 million in Tax certiorari bonds. That was 45% of the entire projected budget increase. Later, in the final budget, the school system left out the expected $3 million increase in certiorari’s from the budget, postponing the day of reckoning by planning to bond them. (Click HERE for the full story)In addition, White Plains is facing another $16 million in assessment losses over the next 24 months. (Click HERE for the full story) That’s NOT chump change folks. It amounts to huge headache for public officials and helps explain why your $#%*ing property taxes keep going up.
How did all this get started? (the long story):
The current situation has its roots in a court decision filed by a law professor and lawyer Jerome Hellerstein. Hellerstein’s wife had a small home on Fire Island which happened to be assessed at a fraction of its true value. Being the honest soul that he was, Hellerstein pursued a case that would result in raising the taxes on said home significantly. It took him seven long years to get his taxes significantly increased. To the great misfortune of every publicly elected official that has held office since that time – he won. Since that time I’m sure that many almost all elected officials across New York have created voodoo dolls with Hellerstein’s image and burned them effigy.
Why was this such a big deal? Well, the Hellerstein decision wound its way through the court system and eventually found its way to the New York State’s Court of Appeals – which ruled in favor of our tax-paying hero Hellerstein –raising his taxes significantly. But it did far more than that. The decision invalidated the entire method of fractional taxation that had been in effect for more than a century, reinstating a 200 year old law that required all properties to be assessed at full market value.
One might ask what is wrong with such a concept? Plenty. At the time property taxes in NYC were based on fractional assessments in which homeowners paid taxes based on a smaller percentage of their home’s value than did commercial property. The resulting shift in tax burden would probably raise taxes for homeowners in the city as much as 139%. Similar alarming numbers trickled in throughout the state. Many felt that this could lead to a New York version of the California Proposition 13. Homeowners rightly claim that they have no real way to pass along the costs of such large tax increases and that commercial properties should be assessed at a higher rate. The argument my late mother made was that “You can’t eat your home” and “appreciation is a paper increase which isn’t realized until the home is sold.” Whatever the logic, the law as it stands now – tilted in favor of tax relief for commercial property owners getting relief at the expense of homeowners.
The decision which was made in 1975 and since that time, it has resulted in thousands of successful commercial certiorari appeals.This has resulted in millions upon millions in tax refunds and a SHRINKING TAX BASE with which to collect revenue. They have also received retroactive tax relief which municipalities and school districts have been forced to bond. But the problem doesn’t end with the initial equalization. It gets even more sticky when property values change. When residential values increased wildly, during the housing boom, commercial properties got left behind. The additional disequilibrium created a slew of new certiorari claims and retroactive refunds.
Who is Impacted?
The end result has been a major shift in the tax burden from commercial property owners to home owners – and home owners are rapidly getting up in arms and saying “enough is enough!” It is no surprise then why I am seeing signs out to vote against the latest school budget and demands for reform. With each increase, more and more long-time resident’s are being forced OUT and more and more pressure is building to bring the tax burden of the home owner under some kind of control.
Hence the voodoo dolls and effigy burning.
The problem is particularly acute for owners of single family homes. Rentals, condos and coops are taxed as commercial property. One might ask how condo and coops can request certiorari relief when their market value has been soaring as much, if not more than single family homes in the recent boom? The answer is that assessments for all of these units are based on rental rates – rather than on their market value. This has created a very uneven playing field for the traditional homeowner.
Solutions?
Perhaps one solution would be to gradually raise the assessments of condos and coops to the level of single family homes. This would spread the impact among those who have benefited from the housing boom. And perhaps, New York State should revisit the 200 year old law that created this mess. Should homeowners really be assessed at the same level as commercial property? My gut reaction says “no.” My late mother was probably correct in that gains in home values are not realized until title is passed to a new owner. What we are being taxed on is “potential gain” and we have no customers or tenants to pass along the expense to.
So that's why your $#%*ing property taxes keep going up in ever larger increments.
• “Tax Crunch Results in Heavy Burden for School Districts – Condo and Coop Owners Enjoy Beneficial Rates” by Robert Kimmel, The Hudson Independent, March 2008 . www.thehudsonindependent.com
• “Clarification of the history of the Hellerstein Decision came from: Twenty-Five Years After S7000A: How Property Tax Burdens Have Shifted in New York City” Independent Budget Office (IBO) New York, NY. http://www.ibo.nyc.ny.us
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