2003-01-29 / Editorials

Fighting For Equity In Real Property Tax

by city councilmember helen sears

The City Council has recently made some very difficult decisions regarding the city budget modifications, specifically, to increase the real property tax. We felt the mayor’s proposed increase of 25 percent was too high, so we lowered it to 18.5 percent. Although we were apprehensive about any increase, the city’s budget crisis necessitated the measure.

When it came time to vote, I addressed Speaker Gifford Miller and my other colleagues in the council about my concerns with the gross inequities in the current real property tax law. One result of these inequities is that co-op and condo owners are taxed at a much higher rate than owners of one-, two- and three-family homes. I have proposed a city council resolution calling for a Committee hearing to address the disparity in the property tax, and to recommend a solution to the problem.

In 1981, the New York state government reformulated the state’s real property tax law. Residential properties were divided between two classes: Class One, consisting of one-, two- and three-family homes, and Class Two, consisting of rental apartment buildings and most co-ops and condos. The values of Class One properties are determined by sales prices, with caps on assessment increases of 6 percent each year and no more than 20 percent over five years. Class Two properties have no cap on assessment increases for any building over 10 units, and their market value is based on a building’s stream of income. In fact, Section 581 of the property tax law requires that co-ops and condos be valued based on the income of comparable rental buildings. Section 581 causes inequities in that prime co-op and condo areas in Manhattan and parts of Brooklyn are near rent-regulated buildings, which lower the estimated net income for those co-ops and condos. Consequently, they pay less in taxes than co-ops and condos in the outer boroughs, which are not next to rent-regulated buildings.

In 1994, the mayor and city council agreed to develop a plan to gradually eliminate the gap between Class One and Class Two properties. Legislation was passed in Fiscal Year 1997 to provide partial tax abatements to co-op and condo owners until the inequity is eliminated.

The abatement approach is still in effect but has flaws. According to a 1998 Independent Budget Office report, 75 percent of the abatement goes to Manhattan while the outer boroughs continue to foot the bill. Furthermore, the relief of any abatement is based on a fixed percentage, and, thus helps only to the extent to which the real estate market for co-ops and condos continues to experience rising sale prices.

I have asked the speaker and my council colleagues to join me in my effort to seek a permanent solution to these problems, and I am advocating that owner-occupied co-ops and condos be classified as Class One properties.

If you have any comments, please write to us at 37-32 75th St., Jackson Heights 11372.

Helen Sears represents the 25th City Council District, Jackson Heights.


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