New York City property owners owe $1.65 billion more in property taxes than they did last year, despite a pandemic that has hobbled real-estate values.
A Wall Street Journal analysis of the latest city assessment rolls found that the industry’s new tax bill will rise 5.7%. That is because the tax assessment date was Jan. 5, well before property values deteriorated in response to the March shelter-in-place orders that led numerous businesses to close and many tenants to withhold rent.
The increases were driven mainly by rising market values in recent years as well as the value of new construction and renovations.
Property taxes are of central importance to New York City’s budget. It is the biggest and most important source of tax revenue, helping to pay for everything from schools to hospitals, firefighters and police.
The tax bills are scheduled to go out on June 1, with initial payments due July 1, the start of the city’s fiscal year.
The New York real estate community made a plea in recent weeks to persuade the city and state to freeze property taxes at the current level. They cited hardship and delays in reviews of appeals by the New York City tax commission related to the stay-at-home orders.
“The continuing pandemic has caused a dramatic decrease in residential and commercial rent revenue,” said Joseph Strasburg, president of the Rent Stabilization Association, which represents 25,000 landlords and managers of rent-stabilized apartment buildings. “Yet all building operating costs, particularly property taxes, continue to rise with zero consideration from our elected leaders.”
Tax Bills Rise Despite CoronavirusWhile property values in New York City sag, June tax bills are up because ofvaluations set in January.Property taxes billed each JuneSource: WSJ analysis of NYC Department of Finance records.
A spokeswoman for Mayor Bill de Blasio said the city realizes the impact the virus has had on the real estate community but added that “we must balance the very real needs of the City, which relies on property taxes to fund essential city services like hospitals and our first responders.”
Because changes in assessments are phased in over many years, property taxes have continued to rise in good years and bad. The total New York City property tax levy has risen every year since 1997, even in the aftermath of the financial crisis in 2008, according to figures from the city’s office of management and budget.
Under the mayor’s proposed budget, for the fiscal year beginning July 1, other city taxes are due to fall by $5.3 billion, or about 15%, from current levels, including a $2 billion decline in the personal city income tax, while property tax collections are due to rise to $30.8 billion, according to the budget estimate. That works out to more than half of the total $60.2 billion in city tax collections expected.
Other real estate taxes, on property transfers and mortgage recordings, are projected to fall by $569 million because of a slowdown in real estate sales.
While some of the increase in taxes is due to new construction, most of it is due to rising market values during years of a real estate boom. For most properties, these increases are phased in each year over five years, assuring a rising stream of city revenue.
Owners of one- to three-family homes have a better deal. Increases in taxes because of rising market values are capped at 5% a year or 20% over five years, but these increases will continue to flow into the city over many years or even decades.
The coronavirus pandemic has delayed hearings before the city’s tax commission. Lawyers said they were required to scan and upload paperwork they had previously submitted so that hearing officers, working from home, could review them.
The commission delayed the start of hearings for the city’s high-value commercial buildings by a week, while other hearings that usually began around May 11 were delayed until June and beyond, a city official said, so that any reductions wouldn’t be reflected in the June bills.
Paul Korngold, a lawyer who specializes in tax appeals, said that the “tax status date” of Jan. 5 was usually sacrosanct. “If a house burned down on Jan. 6, the full taxes would still be due for the year,” he said.
Nevertheless, he said he was preparing information for the commission about the extreme hardships many building owners he represents are now facing, in the hopes that it will have some influence on the thinking of hearing officers.
There are some signs that hearing officers may be listening. This year’s review by the commission of appeals from large buildings led to a reduction of $86 million in taxes, twice the tax breaks during the same period last year.
Five large Midtown hotels, an office condominium in the Time Warner Center at Columbus Circle and the Staten Island Mall were among the biggest beneficiaries this year.
A city official familiar with the tax commission said that there were many factors in play, among them the notion that retail and hotel vacancies reported on Jan. 5 were unlikely to be filled for the foreseeable future.
Posted by The Wall Street Journal