NYC tax delinquencies highest since 1970's - New York City; New York, New York

Real Estate Weekly, Oct 14, 1992 by Lois Weiss

New York City is facing a 12.5 percent delinquency rate - the highest since the 70's - in tax payments due from more properties than ever before.

Owners of large office buildings, however, are catching up with their property taxes and many that have been delinquent for a long time have dropped down or off the city's hit list. None of the top 10 properties were among the top 50 during the last payment cycle in January, and indeed many properties on the list supplied by the Department of Finance to Real Estate Weekly had their check lost, paid early or are owed refunds that have not yet been credited.

So far, for Fiscal 1993, the total amount of money outstanding to the city is $366.7 million. Subtracting nine parcels that Real Estate Weekly could confirm either paid the city or are owed credits, the total comes to $346.7 million. That is a 14 percent increase over last year. The total number of parcels that are delinquent is 117,013 [117,004] or 12.5 percent of the roll. Approximately 900,000 parcels pay property taxes.

In Manhattan, the outstanding Class 4 balance is $136.4 million while Class 2 in all five boroughs but excluding co-ops, condos and mixed-use properties, is $86.4 million.

"I think the numbers are shocking," said John J. Gilbert III, president of the Rent Stabilization Association. "If the city and the state don't get the message that property owners need help with taxes, water and sewer rates, water meters, lead paint, rent regulation and housing court after seeing these numbers, then they never will."

Gilbert characterizes the figures a "double whammy" because at the same time the city is losing tax- paying clients, they are becoming a liability since the city must pay for the operations of the building once it is seized for non payment.

As of Aug. 31, 1991, outstanding arrearages totaled $306.9 million on 113,846 parcels and 12.19 percent of the roll was delinquent. $105.8 million was due at that time on Manhattan commercial property while Class 2, excluding co-ops, condominiums and mixed use parcels owed $70.2 millon.

Steven Spinola, president of the Real Estate Board of New York said, "The owners are attempting to be as current as they can be in this difficult market and this may be another sign that we are about to bottom out and we may see things begin to turnaround."

Commenting on the greater number of properties that owe smaller amounts of money, Spinola observed that when water bills are added in, a lot of the smaller and individual owners are having greater difficulty staying current."

This is the highest delinquency level since the years 1979 to 1981. In the late 70's, when owners were abandoning the Bronx in droves, the delinquency rate was at 7.5 percent.

Data Error

Some of the properties the city is calling delinquent actually are owed credits for their property taxes that have not yet administratively been put into their records. The Grace Building, the Marriott Financial Center at 80 West Street, Five Hanover Square (aka 66 Beaver Street) and 107 North Moore Street are on the list because the city owes these buildings the money in certiorari settlements and the debits and credits have not yet cancelled each other out.

Attorney Donald Liebman, an attorney with Stroock, Stroock & Lavan who represents several of the properties, said they made an agreement to use the pending property tax refund as an offset against monies owed.

"The city doesn't take the balances due off their list until the refund is received and credited administratively," he explained. "You could have a concurrent running credit on one side and a debit on the other." Assistant Commissioner of Finance Jon Lukomnik added: "At some point they will equal zero and cancel each other out."

Liebman said they were aware the agreements - that can be made for large institutional clients - would createsomecitybookkeepingproblems. "The bottom line is these are not delinquent," he said.

Citibank, also on the list supplied by the Department of Finance for two of its properties at 399 Park Avenue and 844 Third Avenue, made its own agreement with the city, said a spokesperson, and is actually owed a credit for the approximately $1 million.

Jeffrey Golkin, a partner with Herzfeld & Rubin, warned, "Unless there is a specific arrangement or agreement made between the City of New York and a particular taxpayer to offset a current obligation with previous general policy, a taxpayer should be advised to pay on their current obligation, notwithstanding any refunds they may be due."

For the most part, the taxes on 639 Third Avenue were pre-paid by the Durst Organization back in December of 1991 with a small payment for the new rate differential made in July. Douglas Durst and his comptroller were mystified as to the $1 million plus amount said to be still due. "How can this happen?" they asked.

Unfortunately, at the keypunch level, a $1 million plus error can be made just as easily as a hundred dollar one. Somewhere, perhaps in another borough, a property now has a $1 million plus credit. The problem probably occurred because they paid their taxes early.