The Real Deal New York

Silver’s salve

While elected officials have offered tax relief to homeowners in Sandy’s wake, Assembly Speaker Sheldon Silver is taking it a step further

January 01, 2013
By Adam Pincus

Rockaway homes that were damaged in the storm

More than two months after Hurricane Sandy hit New York, thousands of outer-borough residents are still reeling from storm damage to their homes and businesses.

And while homeowners are no doubt tapping into their own bank accounts to deal with the aftermath of the storm, elected officials in New York City and State are using government levers in an attempt to relieve some of the financial burden for them.

Last month, Mayor Michael Bloomberg signed legislation extending property tax payment deadlines from Jan. 1 to April 1 for an estimated 3,000 impacted property owners. In another measure (this one requiring Albany approval), Bloomberg proposed property tax reimbursements for taxes already paid on severely damaged buildings in the current tax year. The reimbursements would be designed to more accurately reflect the current value of the properties and would average about $794 for each of the roughly 900 qualifying property owners, according to his office.

Assembly Speaker Sheldon Silver

Yet Assembly Speaker Sheldon Silver and 11 Democratic co-sponsors are pushing for more. This month, they plan to introduce a more costly and far-reaching plan aimed at sharply reducing assessments for heavily damaged properties, and cutting their future tax burdens until they either repair the damage or build something new on the property.

The speaker’s office did not respond to several requests for comment, but when it announced the measure in November, Silver said, “Homeowners and businesses should not expect to pay taxes based on property assessments made prior to the storm.”

Still, it’s unclear whether the measure, dubbed the Hurricane Sandy Assessment Relief Act, has enough support to make it out of Albany. So far, no Senate sponsors have come forward, and Governor Andrew Cuomo has not publicly taken a position. (His office did not respond to several requests for comment.)

In addition, the proposal is being met with mixed reviews. While some think it’s a good idea that would provide badly needed relief to already struggling homeowners, others say it is a Band-Aid-type quick fix that needs to be more carefully thought out.

Indeed, some insiders believe the legislation is unnecessary because homeowners who suffered severe damage will end up getting a break on their property taxes anyhow through appealing their property tax bill.

In what might be the most controversial part of the legislation, the bill proposes reducing the assessed value of severely damaged properties to zero, which insiders say is a highly unusual move that they could not recall ever being tested. If the proposal were implemented, the property owner could hold onto the land completely tax-free until the assessments returned to normal levels.

While Silver has not yet spelled out all the details of the proposal, insiders say that the assessment would undoubtedly go back up if a new building were constructed on the land.

A little background: The annual assessment process begins with the city’s Department of Finance determining the market value for each property. That value is based on similar sales, the estimated cost to replace the property or, if it’s a commercial building, the income. The property’s market value is then multiplied by a factor — currently 6 percent for single-family homes and 45 percent for commercial properties — to determine the property’s taxable value. Once that number is determined, it is multiplied by the tax rate to figure out the annual payment.

Typically after a destructive event like a fire or storm, the property owner will file an appeal with the city’s Tax Commission, an independent body that reviews assessments, and receive a new, discounted tax bill based on the property’s reduced value.

William Block — a former deputy commissioner for real property assessments for the Department of Finance who is now in private practice — said those who suffered serious storm damage to their homes would not be on the hook for their standard property tax bill this year anyway because they would undoubtedly appeal their assessment.

“State law would generally [result in] a significant reduction in the value of assessment whether there was legislation or not,” he said.

He said that after Sept. 11, 2001, some vacant parcels used for parking next to Ground Zero, which had been assessed at about $2.3 million before the attacks, had their assessments cut to $900, but that he could not recall, even then, seeing an assessment slashed to zero.

“I have never seen the legislature bring unilateral action to bring an assessment down that low — to zero,” Block said. “But on the other side, this is an extraordinary event and might require extraordinary action.”

126 Beach 135th Street in Rockaway Park, which was damaged in the storm

It is not clear exactly how many homeowners the law would impact. However, there were as many as 3,000 one- and two-family homes and larger residential buildings that were heavily damaged or destroyed in the storm, according to figures from the Bloomberg administration.

Silver’s legislation would only cover properties in New York City.

The proposal requires property owners to notify the city’s Department of Finance of the damage at their buildings within 90 days of the law’s passage and supply documentation of the damage.

The city, which would need to approve the legislation by a resolution, did not respond to several requests for comment and it is not clear how much the bill would cost in lost taxes.

Duncan MacKenzie, CEO of the New York State Association of REALTORS, said he thinks it’s a good idea to accelerate the resolution of property taxes for those who have suffered damage.

But he said there needs to be a clear outline of how the lost revenue to the city would be made up.

“What is it going to cost and how are you going to pay for it?” said MacKenzie, whose group has not yet taken a position on the legislation.

In addition, some say that the bill could spark confusion, if passed.

Under typical assessment standards, a completely destroyed property still retains value because of the land that it’s on. That land generally accounts for a third — or even more — of the parcel’s total assessed value, a review of city tax records showed.

For example, according to data provider PropertyShark, a heavily damaged single-family home located at 126 Beach 135th Street in Rockaway Park had an annual tax bill of about $13,449, based on a total assessed value of $73,876, which included $50,626 for the land. The city estimated the market value for the property one year ago at $1.9 million, city records revealed.

Robert Marino, a Manhattan-based independent real estate consultant, said that, if passed, the proposal could be a boon for tax attorneys who would be hired to help individuals navigate the new law. Law firms typically take a 20 percent, or more, cut of any tax reduction that they achieve.

Others say the legislation could be a helpful means of streamlining a bureaucratic tax assessment system for those who are suffering post-storm.

“Since the assessment should reflect property values, and we are currently in an interim period where many of these properties are not marketable or functional, it appears to be a reasonable alternative,” said Jonathan Miller, CEO of real estate appraisal firm Miller Samuel.

In the proposed legislation, the homeowners would proactively petition the city with evidence of the reduced value rather than appeal their tax bill after it arrived.

“This sounds like a well-meaning short-cut to get assessments lowered for people very quickly,” Marino said. “But it’s sloppy.”

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