Jacques Jiha, newly appointed to his position as Commissioner of the New York City Department of Finance by Mayor Bill de Blasio, has his sights set on property tax reform. Specifically, Jiha is looking to ensure that property taxes are assessed efficiently and equitably.
A Haitian-born Brooklynite who started out in New York as a parking lot attendant, Jiha appealed to the masses during his June 6 testimony before the New York City Council when he said, “New Yorkers and those who do business in our city should be able to understand the decisions we make. They should also have assistance available to them—if they need it. When people walk away from an interaction with us, they should feel that they were treated fairly and with compassion.”
Jiha noted that property taxes are the city’s largest source of revenue. Of the $32 billion the city generates in revenue each year, more than $20 billion comes from property taxes, according to the testimony, and the city administers more than $6 billion in property tax exemption and abatement programs.
Jiha also praised the council for pushing for a Property Tax Reform Commission to improve the city’s complicated tax system. In April, the council called the city’s property tax system “rife with inequalities,” with similar properties being taxed very differently, and “inordinately complex,” making it difficult for both the city to administer and taxpayers to understand. The commission would be responsible for evaluating the city’s property tax system, seeking input from the public and recommending changes to the mayor and council.
One way that the Finance Department is aiming to improve efficiency and fairness is by using standardized “statistical modeling” methodologies, Jiha said. In layman’s terms, this would help ensure that similar properties are valued similarly. Property assessors have also been trained to use the statistical data to make corrections early on in the process so that when the tax rolls are released and bills are sent out, they are more accurate.
Jiha also stressed the inefficiency of the property tax process to take into account decreased property values due to unexpected circumstances, like Hurricane Sandy. While he did not offer a solution during his testimony, Jiha stated, “The fact an abatement is needed highlights some of the inefficiencies in the property tax laws; the laws do not permit us to provide relief otherwise.” This criticism was timely—just a week earlier, the New York Assembly passed legislation authorizing New York City to provide a partial real property tax abatement for residential property damaged in the storm.
However, one notable area that Jiha did not directly discuss was the discrepancy between effective tax rates for commercial and residential property owners. As noted in Bloomberg BNA’s 2014 State Tax Outlook special report, New York City had the highest effective tax rate on commercial property compared to homestead property, according to a study by the Minnesota Taxpayers Association. This means that in New York City, the tax burden is placed heavily on businesses, more so than in any state. New York City’s ratio of 6.016—meaning the effective tax rate on commercial property was more than six times that of homestead property—was nearly double the next closest city, Honolulu, and more than triple that of Los Angeles, Chicago, Philadelphia or Atlanta.
Similarly, New York state received a grade of F in the Council on State Taxation’s most recent Property Tax Scorecard. While COST President and Executive Director Douglas Lindholm told Bloomberg BNA in January that the low grade was primarily a result of the state’s lack of standardized appeal procedures, the scorecard grading scale notes that for a fair tax system, property tax rates imposed on business and residential properties should not significantly differ. New York City falls behind every other city in the country on that scale.
While Jiha did not discuss commercial property taxation, he did stress that the Senior Citizen Rent Increase Exemption Program is a main concern for the Department this year, which plans to expand the program through a marketing campaign to reach all eligible taxpayers. Additionally, the program was expanded recently by increasing the income threshold to qualify from $29,000 to $50,000, effective July 1. Thus, it seems that New York City will continue to focus on providing relief to residential taxpayers.
Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should Commissioner Jiha place more emphasis on increasing equality between commercial and residential taxpayers, or is New York City right to provide greater relief to residential taxpayers?
Sign up for a free trial of the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state property taxes.
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