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NYC Property Tax Overhaul Unlikely to Get Approval This Year

Jan. 31, 2020, 8:14 PM

The final version of a plan for the most sweeping overhaul of New York City’s property tax system in almost 40 years probably won’t be done in time for state lawmakers to act on it this year, after a city commission fell behind on its ambitious timetable.

Given the “complexity and history” of the issues, it’s very likely that there will be “an elongated process before action will be taken,” said Marc. V. Shaw, a former deputy mayor who’s chairman of the New York City Advisory Commission on Property Tax Reform. “The bottom line is that it’s an enormously complicated system. It’s so complex that very few people understand it.”

Realistically the goal is to put out the final report by the end of the calendar year, Shaw said. It took the Legislature six years to act on a 1970s court decision that led to the last set of major changes, he noted.

The city’s plan advanced Friday with the formal release of the commission’s recommendations, which require state legislative action. The independent commission, appointed in 2018 in the wake of a pending legal challenge, is looking to fix longstanding fairness and transparency problems in the city’s largest revenue source.

Winners, Losers?

In general, Shaw said, taxes would rise for property owners in areas with rapidly appreciating home values. Co-ops and condos in gentrified areas of Manhattan and Brooklyn would see higher taxes, while single-family houses in Queens and Staten Island would see lower taxes.

Park Slope, where Mayor Bill de Blasio (D) owns two houses, is one of those gentrified areas of Brooklyn with sharply appreciated prices, and Shaw confirmed that under the preliminary recommendations, the mayor would pay more. De Blasio’s real estate tax bill—just under $8,000 last year on properties assessed at about $3.7 million, according to the city Finance Department—is frequently cited by critics of the system.

“Home values are out of whack with the taxes collected on them, so that affluent homeowners in gentrifying neighborhoods are paying comparatively less while those whose homes have experienced static or gradual appreciation are paying more than they should,” said James Parrott, an economist who is one of the commission’s 11 members and director of economic and fiscal policies at the New School’s Center for New York City Affairs.

To ease the shock of any tax hikes, changes would be phased in over five years. Relief would also be available to taxpayers with income below a certain threshold who use the property as their primary residence. The mechanisms would be a partial “homestead exemption” and a circuit breaker feature designed to keep lower-income people and the elderly from being taxed out of their homes.

De Blasio, in a Friday statement, called the commission’s recommendations “the most significant reforms proposed in 40 years,” which “will bring a much needed level of fairness, transparency and simplicity to the entire system.” The commission, appointed by de Blasio and City Council Speaker Corey Johnson (D), was charged with finding ways to improve the system without costing the city revenue.

Remaining Questions

Johnson said there are unresolved questions such as “how to best address luxury housing” and protect renters. “This is a work in progress, and I’m eager to hear the public’s feedback on these recommendations,” he said.

The advisory panel will hold a new round of public hearings across the city’s five boroughs in the coming weeks to gather input on the plan.

Members of the state Senate’s Democratic majority look forward to reviewing the plan and ensuring it works toward the goal of “lowering the tax burden on the working men and women of New York,” spokesman Mike Murphy said.

Still to be answered are “critical questions” on specific rates for property tax, eligibility thresholds for relief, and controls to prevent “runaway budget growth,” said state Sen. Andrew Gounardes (D) in a statement.

State Sen. Brad Hoylman (D), who has proposed a “pied-a-terre” tax on absentee owners, continued to press for his plan Friday at a rally in front of the $80 million apartment of Amazon.com Inc. founder Jeff Bezos. A pied-a-terre tax, if enacted, could complicate the property tax debate by tapping the same pool of wealthy residential real estate owners that the preliminary commission plan would target for revenue.

The coalition of real estate interests and civil rights groups that sued the city to fix the system, Tax Equity Now New York (TENNY), still argues that a court order is the best route after the commission took 18 months to issue its preliminary findings.

The report and recommendations “expressly recognize that the current system is unfair, opaque, and arbitrary” and “vindicate many of the criticisms that led us to bring suit three years ago,” said Martha Stark, TENNY’s policy director and a former city tax commissioner. “But talk isn’t enough. Commissions have come and gone in the past with no action.”

—With assistance from Henry Goldman (Bloomberg) in New York and Keshia Clukey in Albany, N.Y.

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Bernie Kohn at bkohn@bloomberglaw.com

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