In 2018, Skaneateles town officials raised the property tax assessment on Destiny USA partner Bruce Kenan’s two lakefront mansions to $7 million.
Unhappy with that, Kenan went to court and argued that was too high, that they really should be valued at $2.7 million. They settled somewhere in the middle: $4.7 million.
Then, less than a year later, Kenan put the properties up for sale.
Kenan’s asking price? $8.4 million.
That’s three times the amount he argued in court they were worth.
The Kenans are like other wealthy landowners in New York who use their money and lawyers to negotiate more favorable tax bills, town Assessor Michael Maxwell said.
Maxwell said he sees it again and again in Skaneateles and in Lake George, a ritzy Adirondack town where he is also a part-time assessor.
“The whole thing to me is just a slap in everybody else’s face,” Maxwell said.
Kenan’s lawsuit paid off. The assessment reduction could save him and future owners tens of thousands of dollars a year in property taxes.
The town, county, village and school taxes on a $7 million property would cost about $161,000 a year. The taxes on a $5 million property would be $115,000.
Every million dollars that gets knocked off of a lakeside mansion assessment pushes $23,000 onto other taxpayers.
The town agreed to lower Kenan’s assessment at the same time neighboring properties were selling for millions of dollars over their assessed values.
John Mezzalingua, CEO of JMA Wireless, paid $11 million for the property two doors down from Kenan. Then, he built the county’s biggest house there — with a 19,070-square-foot residence with three kitchens, six bedrooms, a golf room, pool room, gameroom, gym, theater and a pool. The assessment on that property went up this year to $17 million.
David Muir, the most popular news anchor on television, bought the mansion next door to Kenan for $7 million and plans to renovate it. The property was assessed for $2.5 million. The assessment went up this year to $3.7 million before the renovations, records show.
Kenan’s properties are the priciest of only 17 Skaneateles properties whose assessments were reduced this year, records show. There are about 3,000 residential properties in the town.
Town Councilor Mark Tucker, a fourth-generation farmer, cast the only vote against the settlement even though he realized it would make him unpopular with the town Republican committee.
“If they were paying what their property is worth, that would lower everyone else’s taxes out in the community,” he said. “A lot of us don’t have the income that others have.”
Work of art
Bruce Kenan is Robert Congel’s partner in the Pyramid Companies, which owns Destiny USA, the largest mall in Upstate New York. The company and its lawyers have been experts at convincing officials at every level of government to subsidize their business real estate.
The same law firm – Costello, Cooney & Fearon – brought Kenan’s suit against the town.
When he wanted to fight the town, Kenan argued that the assessment was unfair because it was greater than the fair market value of the property.
When he wanted to sell his mansion, he made a different sales pitch.
The house is advertised on real estate websites as an “impeccable Skaneateles grande historic mansion located on a coveted tree line village street” with meandering lawns, waterfront and docks. The home has four bedrooms and 4.2 baths. There is also a carriage house with two bedrooms, full kitchen, great room, balcony and elevator connected by an underground tunnel to a three-car garage. Finally, there is a changing house on the water’s edge.
“Built in 1867, this home is like a piece of fine art,” the ad says.
The way Kenan sees it, assessments and sales prices are two different numbers that shouldn’t be directly related.
He said he took the town to court because the jump in his assessment in 2018 was “a kick in the pants” after increasing a few years earlier. He thought the value had increased at a faster rate than his neighbors. His property is the last one inside village boundaries and he thought he should be given a lower rate per acre than other village properties within walkable distance of amenities.
He made that argument before the town’s Board of Assessment Review and lost. So he took the issue to state Supreme Court. The lawyers worked out a settlement, which the town board approved 4-1 in April 2019.
The settlement required the amount to stay the same for six years. The settlement also ordered the town, county and school district to reimburse Kenan for taxes he overpaid in 2018, while the case remained unsettled.
The Skaneateles School District had to write Kenan a check for $32,266. The town refunded another $6,000, records show.
Kenan, who is chairman of the Skaneateles village planning board, said he remembers a time when assessments were rarely changed. Town assessors didn’t raise the value if a property didn’t change hands, he said.
“The problem is, and this affects many homeowners, he winds up paying taxes based on the profit he would realize on a sale that hasn’t happened,” he said. “I mean, we’re paying taxes based on if we sold the property and we haven’t.”
How it works
The reality is this: The town assessor’s job, under state law, is to attach a value to each property that keeps up with changes in market values, even if a home is not sold. If market values are high, assessments increase. If sales prices slump, assessments are supposed to decrease.
That ensures each property owner pays a fair share of taxes to schools, towns, villages and counties.
It’s a system as old as New York, when owning property was seen as a fair measure of wealth.
Towns tinker with the assessment amounts every year to keep the balance.
New York state law directs assessors to use sales trends to determine a fair market value for most residential housing. That’s easier when there are dozens of sales of similarly sized and aged homes under about $200,000. It gets trickier for old, lakefront mansions worth more than $1 million.
Kenan said it is unfair to base assessments on market comparisons when there are few equals.
‘Every property is unique’
The main house, known as “The Mingo Lodge,” is 150 years old and the most recent renovations were made about 15 years ago. The Kenans have owned that property for more than 40 years. They bought the house next door, a renovated 1900s horse barn they refer to as “The Boathouse,” in the 1980s. They added another strip of land in the 1990s.
Any market price an assessor might use is speculative, Kenan said, although he does acknowledge his own goal is to sell the properties for $8.4 million.
“When you start to get up where the sale price or the asking price is in the million dollars. It becomes a much rarer source to find comparable sales,” he said. “Then if you add some geographic differences, like the fact that you’re talking about lakefront property on Skaneateles Lake, you get down to the point where basically every property is unique.
“You can do your best to compare, but you can’t literally say here’s two similar things because there’s so many variables involved.”
Kenan wondered aloud whether there is another way to handle properties like his.
“That’s what the law is. I’m thinking that there’s got to be a better way. I don’t know,” he said. “Do you have a phantom assessment that follows the market trends and when you do have a sale, you have to catch up with the taxes you would have paid or something like that? But otherwise you don’t have to pay it until you do sell?”
Town’s hands are tied
Maxwell, the assessor, has fought other lawsuits in Skaneateles and in Lake George. Most New York property owners who don’t agree with their assessments make arguments once a year before a Board of Assessment Review. But wealthy homeowners are quick to take the issue to court.
Usually, Maxwell said, the towns and school districts cannot afford to fight the cases, which drag on for years and require expensive appraisals. So they settle on an amount somewhere in the middle.
“When you have that kind of money, that’s what happens,” Maxwell said. “I mean, I unfortunately see it way too much.”
He said Kenan’s move to sell at a higher price is unfair to the other residents.
Maxwell’s opinion is not far off from Kenan’s brainstorming: If the mansion sells for $8.4 million, the assessment should go back up and the seller should be made to pay the back taxes.
But that is not how the law works. And in this case, the town board signed a settlement with Kenan that keeps the lower assessment through 2023 unless it catches fire or suffers some other calamity.
“It’s ludicrous that he can do that and sell it, but the town’s hands are tied,” Maxwell said.
Tucker, the farmer and town board member who voted no, said he understands the stress high property taxes are putting on people who live along the lake and bought their properties decades ago for much less than they are worth now.
He’s also seen out-of-town buyers leave after buying a house and finding out the true assessment, and their taxes, were much higher than advertised.
“I know years ago, they didn’t really push the people that had been there for life, by raising their taxes,” he said. “But we’ve got to get that 100 percent assessment.”
Published by Syracuse.com