City lowers values 'too little too late'

Real Estate Weekly, Jan 20, 1993 by Lois Weiss

As expected by real estate experts, the Department of Finance announced last Friday that the billable assessment roll had gone down. 2.4 percent from $79.2 billion last year to $77.3 billion. This is still, however, higher than $76.2 billable roll of fiscal year 1991.

Commissioner of Finance Carol O'Cleireacain said "None of this should take anyone ... by surprise."

While the decline was expected, no one in the real estate industry believes it has gone far enough to prop up the decline in rents and income.

What it will do, however, is make it harder for the city to cope with its current projected deficit of $1.7 billion since the average tax rate has been frozen for three more years, subject to small shifts in equalization rates.

"This will mean less revenue to the city," O'Cleireacain said, 'but it will also mean lower taxes to New York City property owners."

She admired that some individual commercial properties and apartment buildings will still receive assessment increases while the average homeowner will see virtually no change with a projected increase of $15 per year.

About 292 taxpayers whose properties were hurt by the December storm had assessments reduced.

'It's too little, too late," shrugged Jack Weprin, a tax certiorari partner with Goldberg Weprin & Ustin, echoing a sentiment heard again and again in later interviews. "We've been begging the Tax Commission for several years to reduce the taxes. The clients have been losing their buildings. People are desperate.'

In fact, Weprin confessed, he has lost two properties himself where the rents could not support the taxes, operating expenses and debt service.

If the tentative property tax assessment is too high, owners have an opportunity to write the Department of Finance and request a change by notice. Attorneys say for most multi-family residential buildings and commercial properties an application should be filed with the Tax Commission by March 1. Class I properties comprised of one- to three-family homes, have until March 15 to file a Tax Commission application.

Steven Spinola, president of the Real Estate Board of New York, said after talks with the administration, they are beginning to reflect the downward trend. "I think the values are lower but better than last year," he added.

The Manhattan secondary offices dropped 13 percent in value, he observed, while Manhattan offices overall are down 8.09 percent. The billable assessments for Manhattan commercial properties declined by 6.38 percent

The billable assessments for Class II residential properties, which include co-ops, condos and apartment buildings, declined by 1.59 percent in Manhattan; and a whopping 4.30 percent in Queens. These went up slightly in the Bronx and Brooklyn and down in Staten Island for an overall decline citywide of 1.24 percent.

Dan Margulies, executive director of the Community Housing Improvement Program noted with increases in the Bronx and Brooklyn it is tragic how our tax policy is hurting affordable housing. "Clearly, buildings in these boroughs are hurting and income is down overall," he said.

Tentative billable assessments for utilities rose 4.19 percent in the five boroughs with the largest increase in Staten Island of 9.15 percent.

Class I properties declined in tentative billables citywide by .75 percent going up only in Queens by .25 percent.

Nowhere was the contrast in values more visible than in the differences between the tentative market values of Class I and its tentative billable assessments. Class I has a market value of $126.9 billion or 42 percent of city real estate while it pays out only $8.6 billion or 11 percent.

Class Ii residential properties, have a market value of $66.9 billion or 22 percent but pay out $24.2 billion to the cities coffers equaling some 31 percent.

Commercial properties, meanwhile, pay $40 billion in taxes or 52 percent of the total take, while it makes up 31 percent of the value or $94.7 billion.

Herbert S. Podell, a tax certiorari expert with Podell Rothman Schechter & Banfield, noted the city had dropped the actual assessments some $2.5 billion but complained that the Class I properties are still being subsidized by everyone else.

O'Cleireacain agreed saying, "The law forces a cooperative or condominium owner to pay twice what a traditional house owner pays for a home with the same market value."

She believes it may also put the city's commercial owners at a competitive disadvantage.

O'Cleireacain and City Council Speaker Peter Vallone are working on the details of a commission that will prepare a legislative package to address all of the inequities, rather than chipping away at some of the more blatant problems one at a time.

Lawrence H. McGaughey, a Brooklyn attorney, was instrumental in obtaining a retroactive tax class change this year for condos and co-ops of two to 10 units with O'Cleireacain's blessing. This protected Class IIc will have its assessment rises limited, as does Class I. McGaughey said, looking over the new roll, he has seen that these buildings will be paying anywhere from $10,000 to $2,000 less in taxes in July. He also observed a few buildings where the assessments increased.