Another court showdown is on tap for the real estate industry’s lawsuit against New York City’s property-tax system.
The plaintiff, an industry-backed coalition called Tax Equity Now New York, alleges the system discriminates against landlords and minority homeowners by overvaluing homes in the city’s poorest neighborhoods and undervaluing those in wealthy ones.
The defendants — New York City and state — have been trying to get the suit dismissed for a year and, in a hearing scheduled for Wednesday afternoon, a New York Appellate Division court will field arguments from both sides.
If the court upholds a Supreme Court judge’s ruling that the case should proceed, it will move into discovery. If the ruling is overturned, Tax Equity, which also includes social-justice groups, is expected to appeal to the state’s highest court.
The hearing is the latest chapter in a drawn-out battle that began in spring 2017 when Tax Equity sued on constitutional grounds.
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Perhaps surprisingly, the existence of systemic disparities is not at issue. Mayor Bill de Blasio has admitted the system’s flaws but said elected officials should fix them. The New York City Law Department maintains that position, according to a statement. In 2018, the city set up an advisory commission to recommend reforms.
Tax Equity, on the other hand, argues its lawsuit is the only way to ensure lawmakers alter the system, which has been in place for decades despite politicians’ occasional pledges to change it.
“There’s always the political process, but that hasn’t been working so well,” Martha Stark, a tax lawyer and the policy director of Tax Equity, said wryly. Stark, a former city finance commissioner, noted that existing tax system itself stemmed from a lawsuit, way back in 1981.
Attorney Stuart Saft, the president of the Council of New York Cooperatives & Condominiums, agreed, even though property owners he represents arguably benefit from the system’s inequities.
“The tax system is unfair,” he said. “We’re not looking for a leg up.”
He suggested that the lawsuit might bring a resolution.
“We’ve been trying for 20 years to get the Legislature to pay attention,” said Saft. “Maybe it’s the fastest way to go.”
If Tax Equity’s case proceeds, Stark hopes the courts will ultimately rule on what practices are illegal or unconstitutional and order lawmakers to fix them.
Write to Erin Hudson at ekh@therealdeal.com