FIVE-YEAR PHASE IN OF REVALUATION DOES NOT REQUIRE GREENBURGH TO FRONTLOAD THE TAX BURDEN IN YEAR ONE

Greenburgh’s elected and appointed officials this week warned those homeowners facing increases in their assessments next year of 50% or more – triggering automatic property tax hikes of at least $10,000 or more – that the proposed five-year phase in of those assessments would not help them much because 90% of the increased tax burden would be imposed in the first year alone.

Those supporting the five-year phase in, which town leaders oppose and must be adopted no later than May 2, 2016, say no frontloading is required at all – that the statute plainly calls for phasing in the new assessments in even 20% increments each year.

So who is right?

The answer is that if the Town’s tax assessor wants to frontload 90% of the burden in year 1, she can probably do so, but there is no requirement that she must do so.

The issue turns on the meaning of the word “assessment” as used in the statute, which is Section 1904 of the Real Property Tax Law.

Section 2 of the statute says that the assessor shall, in the first year in which revaluation assessments are to be entered on the assessment roll, and for each of the next three succeeding years, determine for each parcel for which the revaluation assessment is greater than the assessment for the same parcel on the immediately preceding assessment roll, a transition assessment as follows “in the first year subtract the prior assessment from the revaluation assessment, divide the difference by five and add the result to such prior assessment.”

The Town says the “prior assessment” can only mean the assessment value on last year’s assessment roll, even if that number is only 3.09% of full market value. The Town also says that even though state regulations allow for use of an “adjusted” prior assessment for purposes of the calculation, that adjustment does not permit changing the prior assessment from 3.09% of full market value to 100% of full market value – even though both numbers actually appear on last year’s tentative tax assessment roll.

Thus, for example, if your assessment last year was $30,000, which was 3.09% of full market value, the assessment roll included the $30,000 figure as well as $970,000, which was the “full market value” figure.

Because the Town interprets “prior assessment” to mean last year’s assessment value based on 3.09% of full market value, as opposed to the number based on “full market value,” which also appears on the assessment roll, Ms. McCarthy says she would be required to subtract the 3.09% value from the revaluation assessment Tyler came up with at 100% of “full market value,” divides the difference by five, and adds that prior to such prior assessment at 3.09%.

By using the 3.09% number instead of the full market value number, Ms. McCarthy is able to frontload the tax increase in year 1.

ECC president Bob Bernstein and the Irvington Village Board says that’s not the way to do it at all.

They say that what’s required for Section 1904 is an “apples to apples” comparison in which the prior assessment is the not the 3.09% value on last year’s roll, but the “full market value” that also appears on last year’s roll. It’s that number, they say, that must be subtracted from the higher reassessment value, also expressed at “full market value,” and it’s that difference that gets divided by five, and added to the prior year’s “full market value” to get the new “transition assessment” for year 1.

They also say that if the Town were to use the 3.09% value on last year’s roll, it would be interpreting the statute so as to render meaningless Section 3 of the statute, which recognizes that, as in all revaluations, some assessments will decrease, and it calls for those assessment decreases to be phased-in as well.  Using the 3.09% value means that all assessments will increase arithmetically in a comparison with 100% of value — even those that were substantially decreased.

Who then is right?

New York courts have held that the term “assessment” as used in laws governing transition assessments is defined by law in Section 102 of the Real Property Tax Law to mean a “determination made by assessors” of “the valuation of real property.”  However, the statute nowhere defines the term “valuation.”

New York courts also say if the legislature had intended the assessor to do an “apples to apples” comparison by comparing full market value in both cases, it would have said so.

That can only mean that the assessor in each municipality charged with implementing a revaluation gets to choose which “determination” of real property value, i.e., “valuation,” the assessor wishes to use for purposes of implementing a transition assessment.  If she wants to use an apples-to-apples comparison, she may; but she doesn’t have to. All that’s required is that the numbers reflect a determination of value as determined by the assessor on an assessment roll.

Thus, in landmark 2007 ruling, the New York Court of Appeals upheld the use by a tax assessor of an “apples to oranges” comparison because in that case, the tax assessor’s decision to use “apples to oranges” was prompted by unique circumstances requiring that such a comparison be made.

That case involved a challenge to implementation of a transition assessment involving Nassau County, which was subject to a law similar to Section 1904, but which, unlike Section 1904, actually imposed a 6% cap each year on the amount of any increase in assessments – and no more than 20% in five years — following a county-wide revaluation.

If the assessor in Nassau County had performed an apples to apples comparison, she would have been in violation of the 6% cap because, like Greenburgh, many assessments increased by 50% or more. So, instead of comparing “full market value” to “full market value,” the assessor there took Nassau’s prior assessment, which was 2% of full market value, and instead of comparing it to the revaluation’s “full market value,” she instead reduced the revaluation figure to 1% of full market value.

By doing that, all the huge increases in assessment were technically extinguished — a $10,000 home at 2% valuation (or $500,000) might have seen its assessment double to $1 million, but when that $1 million was expressed as a 1% valuation, the assessment value remained at $10,000.

But the tax hikes on that $10,000 assessment doubled, and the Court of Appeals said the assessor was within her rights to adjust the assessments to allow for that.

But Section 1904, which is the statute Greenburgh is relying on, does not have any such cap on assessment increases. The Court of Appeals went on to hold that transitions assessments can be used following a town or county-wide revaluation as long as the all property owners are required within a reasonable time to pay their fair share.

As one memorandum in support of Section 1904 (and other laws intended to mitigate the effects of revaluation) put it, “The purpose of this bill is to the attainment of equitable administration of the real property tax value by the establishment of a policy of real property assessment and taxation which provides stability and protection against economic dislocation for homeowners.”  (emphasis added).

Here, by using last year’s “full market value” as that number appeared on the assessment roll as the “prior assessment,” and subtracting that value from the “full market value” that Tyler came up with, all under-assessed taxpayers will be paying their full fair share within five years, while at the same time providing stability and protection against economic dislocation for homeowners.”

That means that not only is Ms. McCarthy not required to frontload the tax burden in year 1 of any transition, because there is no state-mandated cap on the amount of any increase in assessments, as there was in Nassau County, she is free to apply an “apples to apples” comparison – just as Mr. Bernstein and the Village Board of Irvington said she should. Indeed, if she were to do anything other than that, they say, she would not only be interpreting the statute so as to render entire portions of it meaningless — she would be exposing the Town to a legal challenge on the ground that such an interpretation is plainly contrary to the legislative intent.

So why won’t she do it – and why won’t Town of Greenburgh officials insist that she do so as part of any implementation of the five-year phase-in under Section 1904?

The Town claims that because a lawyer at the state’s Office of Real Property Tax Services has interpreted Section 1904 to require frontloading, Ms. McCarthy is duty-bound to interpret the statute just as he had.

But the lawyer has also pointed out in the same opinion that the Town is free to apply the statute as it sees fit. The same lawyer also made no mention of any of the cases in New York that have dealt with this very issue – how transition assessments are to be calculated.

So, when the Town of Greenburgh rejects transition assessments – which is the last means of mitigation under state law available to taxpayers following a revaluation – it will be because the Town’s elected and appointed officials either (1) do not want to help for political reasons those taxpayers who are hit hardest by the sudden increases in their assessments, or (2) they do not understand the very authority the state has given them., or (3) they naively think that by claiming falsely that the authority they have under Section 1904 to help taxpayers is “large ineffective,” officials in Albany will come to the Town’s rescue.

However, Albany will generally not come to the aid of a municipality that has failed to exercise any of the mitigation remedies that the state legislature has already provided. That failure is not on Albany, state officials will say, it’s on the local officials who failed to act when they should have — and the voters there who continually elect them when they should not.