December 12, 2018
Homeowners in Staten Island and the Bronx would benefit—at the expense of those in Manhattan and Brooklyn—if the city were to follow recommendations under consideration by an advisory panel charged with looking at ways to overhaul the property tax system, a city budget monitor said.
The fiscal brief by the city Independent Budget Office helped set the table for a Dec. 13 hearing of the advisory panel. The IBO is among the groups expected to present expert testimony to help the advisory panel craft preliminary recommendations to the city for the first system reforms in more than 20 years.
Many aspects of the city system would require state legislation to fix, but the city does have direct control over the assessment ratio, or the percentage of a property’s market value that is subject to the property tax, the Dec. 12 IBO analysis said, calling the ratio “one of the few significant levers” available to the city acting alone.
Some witnesses at earlier hearings and other critics challenging the system in court suggest that lowering the assessment ratio for one-, two-, and three-family homes, grouped in the system’s Class 1, could ease the wide disparities in tax burdens among homeowners. The effective tax rate—or taxes per $100 of a property’s value—can be up to five times higher for one home than for another.
But lowering the city’s target assessment ratio from the current 6 percent to 5 percent, the IBO said, would give roughly one-quarter of Class 1 owners reductions averaging $499 while increasing the tax bills of the other 75 percent by an average of $152. Larger decreases in the ratio would add to the number of “winners,” but just shift the burden more to the “losers,” the budget monitor said.
The findings appeared consistent with other research indicating that the current system favors taxpayers with fast-rising property values.
A shift to a 1 percent target ratio would make winners out of the vast majority of homeowners on Staten Island (90 percent) and in the Bronx (80 percent), but the bulk of the losers would be homeowners in Manhattan (90 percent) and Brooklyn (70 percent), the IBO found. The losers would face an average annual tax hike of $3,183.
Much of the variation in tax burdens among Class 1 properties is due to state law caps, which don’t allow assessed values to keep pace with market values in fast-appreciating neighborhoods, the IBO said, adding: “Lowering the target assessment ratio does little to compensate for this.”
The city’s 2009 reduction of the Class 1 target ratio from 8 percent to 6 percent only briefly narrowed the system’s disparities, the budget monitor said.
The task of the city Advisory Commission on Property Tax Reform, formed in May by Mayor Bill de Blasio (D) and City Council Speaker Corey Johnson (D), is complicated by its charge to keep the reform proposals revenue-neutral. That means that reductions for some taxpayers would have to equal increases for others.
The panel is expected to make recommendations to the city in 2019 that would lead to a formal city proposal, which in turn would require action by City Council and the newly elected state Legislature.