2007 Legislative Report from the Assembly Committee on Real Property Taxation

2007 Legislative Report
from the Assembly Committee on
Real Property
Taxation

Sheldon Silver, Speaker • Sandra R. Galef, Chair • November 2007

A Message from the Chair. . .

My second year serving as Chair of the Assembly Real Property Tax Committee has been a whirlwind of public hearings, roundtables, Committee meetings and legislative activity related to three major areas of reform. This is in keeping with my philosophy of vigorous public discussion of legislation by the taxpaying public and public officials who administer the real property tax.

We have enthusiastically supported the creation of a Blue Ribbon Commission to study and make recommendations for the overhaul of our system of real property taxation, especially insofar as it is the primary source of funding for our public schools. Without treading into issues of school spending, there are many areas where the real property tax should be revised to make equalization rates fairer and more accurate. The real property tax system must be modified so as to create a system that is understandable and transparent to the taxpaying public and of course, designed to be fair among all of our homeowners and commercial property owners.

Secondly, we have explored a constitutional amendment to fundamentally improve the administration of the real property tax. Issues such as a multi-year assessing cycle, a single statewide standard of assessment and county assessing have been much discussed. We’ve even reviewed the make-up of the State Board of Real Property Services and its role in the assessment and taxation process.

Finally, we have openly debated the justification for the limited assessments given to cooperatives and condominiums and how we might generate greater equity between single family residential property owners without regard to the form of ownership.

As the Legislature continues to provide tax relief, the Committee has played a leadership role with respect to the continuation of the School Tax Relief (STAR) program and working with the Governor and the Senate in enacting the Middle Income STAR Rebate Program.

In this year’s newsletter, we feature an article on assessment caps contributed by Thomas Frey IAO, Executive Secretary of the New York State Assessors’ Association.

As always, my office staff and the staff of the Committee are available to respond to your questions and concerns.

Sincerely yours,
signature
Sandy Galef
Chair, Assembly Committee on
Real Property Taxation

Retention of Tax Certiorari Reserve Funds Clarified

At a forum of Westchester County school officials concerning problems associated with the use of the real property tax for school funding, one of the participants noted there was ambiguity in the law concerning how long tax certiorari reserve funds could be maintained by school districts. There appeared to be a requirement that reserve funds could only be retained for four years, but this amount of time was not long enough for final resolution of these cases. Therefore, when refunds were finally ordered to be paid, there were no reserves to offset them, and this placed an extraordinary burden on school budgets.

In response to this problem, Assemblywoman Galef introduced and passed legislation signed into law by Governor Spitzer on August 1, 2007. Chapter 445 of the Laws of 2007 clarifies that tax certiorari reserve funds could be maintained longer than four years “if the proceeding or claim has not been finally determined or otherwise terminated or disposed of after the exhaustion of all appeals.”

Law Helps Volunteer Firefighters and Ambulance WorkersChoose Tax Credit

Chapter 532 of the Laws of 2007 makes it possible for all active volunteer firefighters and ambulance workers to qualify for the personal income tax credit in calendar year 2007, even if such volunteer also received a real property tax exemption for his or her volunteer service.

As you may recall, in 2006 NYS adopted a law that provides volunteer firefighters and ambulance workers with a $200 personal income tax credit (the credit is $400 for taxpayers who file a joint return and who each qualify for the credit). This tax credit is available to a volunteer that is active and who is not also receiving a real property tax exemption for his or her volunteer service. Because this law was adopted after many volunteers had already applied for their local real property tax exemption, such volunteers would not be eligible for the personal income tax credit for the 2007 income tax year. Chapter 532 corrects this problem.

All volunteers should start to prepare for the 2007 tax year immediately by reviewing their real property tax bills or speaking with their local assessor to determine the amount of money they save from their real property tax exemption and comparing the amount of money saved from the real property tax exemption with the amount of the personal income tax credit.

If the volunteer wishes to continue to receive the real property tax exemption (and forego the personal income tax credit), then the volunteer must re-apply for the real property tax exemption by the deadline established in that particular locality. On the other hand, if the volunteer wishes to receive the personal income tax credit, then such volunteer must submit a letter to his or her local assessor prior to December 31, 2007 and include the following:

1. a statement that the volunteer no longer wishes to receive the real property tax exemption after December 31, 2007; and

2. a statement that the volunteer will not be re-applying for the real property tax exemption.

Submitting such a letter will ensure that the volunteer will receive the personal income tax credit for calendar year 2007, even if such volunteer also received a real property tax exemption in 2007 for his or her volunteer service.

		Sandy Galef, Chair of the Committee, asks a witness a question at the April public hearing as she and Committee members, Assemblyman James Brennan and Assemblywoman Nancy Calhoun, listen to the testimony.
Members of the Real Property Tax Committee listen to testimony at a public hearing held on April 17, 2007 in the Legislative Office Building in Albany. The hearing was held to obtain reaction to bills establishing a “Blue Ribbon Commission” on property tax reform, enacting a Constitutional amendment to improve assessment administration and revising the way new condominiums and cooperatives would be assessed.
		Chair Sandy Galef and members of the Real Property Tax Committee hold a working session as they consider bills to report from Committee at a regularly scheduled meeting.

REAL PROPERTY TAXATION LEGISLATIVE SURVEY

In my last recent Real Property Taxation newsletter, I asked county and local officials, assessors, tax receivers, and taxpayer groups questions regarding (1) the creation of a Blue Ribbon Commission, which would examine real property taxation, (2) a constitutional amendment which would create a single statewide standard of assessment, establish a uniform assessment cycle and provide for county assessment, and (3) the elimination of the provision that limits assessment valuations of cooperative or condominium residential building.

Following are charts that show the results of my questionnaire from 189 respondents:

1. Should a New York State Blue Ribbon Panel be established to seek out alternative methods of funding schools and to make legislative recommendations?

chart

2. Should there be a proposed constitutional amendment passed by two consecutive sessions of the Legislature and passed in a statewide referendum that would establish:

A. A single statewide standard of assessment?

chart

B. A uniform three-year assessment cycle?

chart

C. A system of county-wide assessment?

chart

3. Should the provision which limits assessment valuations of cooperative or condominium residential buildings to no more than the total rental value of individual units be eliminated?

chart

GUEST EDITORIAL: ASSESSMENT CAPS WOULDN’T SOLVE THE PROBLEM
By Thomas Frey, IAO, Executive Secretary, NYSAA

The real property tax has become one of the biggest hot button issues of the year in Albany and everyone has jumped on the bandwagon of reform. The New York State Assessors’ Association has long supported the premise of property tax reduction, especially for school taxes which have been escalating at unbearable amounts. This may be a somewhat selfish position, since every time taxes increase, so do the phone calls from irate taxpayers to the Assessor’s office, even though their assessment didn’t change.

Of course, that’s the point of this article. Assessments do not make your taxes go up; budget increases are the reason for higher taxes. Let’s look at a simple example; the vast majority of local governments in Westchester County have not had a re-assessment in 40 to 50 years. That means that unless there was some type of construction done to the property most of the assessments haven’t changed. Do you really think the taxes are the same as they were 40 to 50 years ago in these municipalities? No rationally thinking person is going to answer in the affirmative to that question, especially not if you live there. But still, here is a quote from a press release by an Assemblyman in upstate New York:

“The housing in our region is less expensive than other parts of the country, making the North Country an ideal place for people earning higher salaries in other regions to find a property for investment or speculation. To many of these out-of-towners, $200,000 is a bargain for a 3-bedroom home. As a result, our assessments rise and our property taxes increase.” (Emphasis added)

Taxpayers reading this from one of their elected State representatives make the assumption that the assessment is the sole reason for increases in taxes. That type of thinking is why some people support the capping of assessments as a form of property tax relief. I want to show you why that is the wrong approach.

In its simplest form, the taxes collected by a municipality are the direct result of the budget. That is the document that determines how much in property tax the municipality will collect. If the tax levy is higher this year than last year, the municipality will collect more money from all the property taxpayers. The assessment only determines what each property owner’s share of the total tax levy will be. So if the budget goes up and all the assessments stay the same, everyone’s taxes will increase. If the budget stays the same and everyone’s assessment goes up by the same percentage, everyone’s taxes will stay the same. In the real world, most budgets do go up and not all assessments are changed at the same percentage, so my little example is very hard to prove to a taxpayer. You also have the problem of local governments and schools masking increases in tax levies by stating they are not raising taxes because the tax rate is the same as the prior year, when they have been blessed with large increases in assessed value due to new construction or reassessments. When the taxable assessed value has increased, the tax rate should decrease unless there are more taxes to be raised in the budget.

So if we understand the mathematics of taxes, we can see that assessments do not drive the increase in your tax bill. That means that assessment caps will not provide tax relief as some are promising. Now I will attempt to show you why assessment caps can have a detrimental affect on the very taxpayers you are trying to help. In a number of municipalities, the cry for assessment relief is coming from the highest valued property owners, such as waterfront properties. Waterfront property values have been increasing at a far greater percentage than non-waterfront property, which means they should be picking up a greater share of the total taxes. Here’s what can happen if you cap assessments at say 3% per year. Waterfront properties have increased in market value by 10% in one year and all other properties in Town increased in market value by 5%. If all assessments are capped at 3%, the waterfront property will receive a 7% benefit and the rest of the town will receive a 2% benefit. That doesn’t sound very fair to me!

Let’s all look for ways to cut government spending (the real reason for tax increases), remove the educational cost from the real property tax and end State mandates without funding. If we can work on these areas of change, we wouldn’t have to try voodoo fixes to assessments that don’t help everyone the same.

Tom Frey, Executive Secretary of the NYS Assessors’ Association, makes a point while addressing Real Property Tax Committee members. Mr. Frey contributed the Guest Editorial on the issue of Assessment Caps.

Assemblywoman Sandra R. Galef, Chair

NYS Assembly Committee on
Real Property Taxation

Legislative Office Building
Room 641
Albany, New York 12248

518.455.5348
galefs@assembly.state.ny.us

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