Facing a growing tax revolt over reassessments triggering automatic property tax hikes for many next year of as much as $10,000 or more, Greenburgh officials appear to have abandoned the idea of easing their pain by phasing in the new assessments over a five-year period.
The Town Board Tuesday introduced a law that calls for the five year phase-in, which is authorized under Section 1904 of the New York State Real Property Tax Law, and scheduled a public hearing on the measure for April 13.
But that was apparently just an empty gesture because town officials made clear Tuesday they really have no intention of adopting the measure because, they said, even with the five-year phase-in, 90% of the phase-in would be implemented in the first year.
However, ECC president Bob Bernstein, and the lawyer who first suggested using Section 1904, said that was “flat out wrong.” He informed town officials Tuesday, and in writing today, that the words in the statute, when read together with the regulations adopted by the State Department of Finance and Taxation, do not in any way result in 90% of the phase-in being implemented in the first year.
Section 1904 has a set of provisions for what happens when an assessment goes up or down after revaluation and explains how those new assessments, up or down, can be “transitioned” over a five-year period.
Specifically, in the first year of the transition, if an assessment went up, you take the difference between the old assessment (adjusted to today’s dollars by dividing by 3.09%) and the new assessment, and divide that number by 5; you then add that number to the old “adjusted” assessment and that’s the new transitional assessment for year 1.
Taking 20% of the difference between the old assessment (as adjusted) and the new assessment and adding that 20% difference to the old assessment (as adjusted) in no way results in 90% of the increase being implemented in year 1.
“Section 1904 is not the cure for Greenburgh’s problems by any means,” Mr. Bernstein said, “but it would at least ease the pain for thousands of taxpayers facing huge increases in their assessments who might otherwise have to lose their homes, while giving the Town time to correct the many problems people have been reporting with the new Tyler assessment.”
Mr. Bernstein said it would be a real shame if the Town’s elected officials did not take the time to read and understand Section 1904 and the state regulations that go with it, and thereby gain an understanding of what Section 1904 really requires.
But rather than use remedies the state has already given the Town to address these problems, Mr. Feiner is instead calling upon state officials in Albany to come up with a “legislative initiative” to solve Greenburgh’s problem.
Mr. Bernstein said that all Mr. Feiner was doing there was shifting responsibility from himself to state officials, when he knows Albany will not address the Town’s problems if the Town has not exhausted the remedies state law already gives the Town to exercise.
“The Town really has three choices,” Mr. Bernstein said. “It can either (1) adopt Section 1904, ease the pain, and work over the next year to fix the Tyler mess, or (2) it can put off adopting the new assessments altogether for a year, work out the kinks, and carefully reconsider all potential mitigation measures, including Homestead, or (3) it can adopt the new assessments, wait to see if it gets sued by angry residents, and then watch as residents who can’t pay the new tax hikes are forced to sell their homes, while school budgets go down to defeat.”
“Mr. Feiner is pursuing choice number 3, which is the wrong choice,” he added.
In an email today to Mr. Feiner, Mr. Bernstein responded to the legal opinion on Section 1904 as follows:
“With respect to the opinion regarding Section 1904, I have the following comments:
First, the opinion makes clear that interpretation of the statute is left largely to the Town. Thus, the opinion states in pertinent part:
“Transition assessments are not only a local option, but are also entirely administered at the local level. If an assessing unit chooses to avail itself of the provisions of this complex statute, it is also implicitly choosing to accept responsibility for interpreting the law it is choosing to administer. There is nothing in the statute that empowers us to assume that responsibility.”
Second, the New York State Office of Taxation and Finance plays only a very limited role here. Specifically, the opinion states:
“To the extent our agency has a formal role under this statute, it is limited to prescribing the form of the assessment roll so that it accommodates transition assessments (which we have done; see 20 NYCRR 8190-1.2(b)(12)(ii) and 8190-1.5(d)), and taking transition assessments into account when determining State equalization rates. ”
Those regulations make clear that where transition assessments in approved assessing units (like the Town) are computed in accordance with the provisions of section 1904 of the Real Property Tax Law, there shall be separate columns established on the assessment roll in which the assessor shall enter for each parcel or part thereof appearing thereon:
(1) The adjusted prior assessment or the prior assessment; (emphasis added).
(2) The revaluation assessment; and
(3) The transition assessment.
I interpret the words “adjusted prior assessment” to mean the fractionalized prior assessment adjusted to today’s dollars using the equalization rate. Specifically, if according to the 2015 equalization rate, Greenburgh expressed its assessment role at 3.09% of market value, then the “adjusted” prior assessment would be the prior assessment divided by 3.09%. For example, if a house is assessed on the 2015 roll at $30,000, the adjusted prior assessment would be $970,873. The reason the regulation uses both “adjusted prior assessment” and “prior assessment” is that when determining new transition assessments, every assessment change after the first one is based not on the adjusted prior assessment, but just on the prior assessment because, as will be illustrated below, that prior assessment number in years 2 through 4 will have already been “adjusted.”
The revaluation assessment is the new assessment for 2016, as of July 1, 2015, as determined by Tyler and confirmed by the Town on its tentative assessment roll. Let’s say that assessment was increased to $1,200,000, which represents at 23.6% increase.
The “transition assessment” is the assessed value calculated according to Section 1904. Section 1904(2) sets forth how you calculate the “transition” assessment for each of the next three succeeding years when “the revaluation assessment is greater than the assessment for the same parcel on the immediately preceding assessment roll.”
Section (a) states that in the first year, you subtract the prior assessment from the revaluation assessment, divide the difference by five and add the result to such prior assessment.
The Legal Department of the New York State Department of Taxation and Finance has just told you that, based on the Department’s regulations for Section 1904, the prior assessment is the “adjusted prior assessment.” That means that in the example I just provided, the “adjusted prior assessment” of a house assessed at $31,000 in 2015, with an equalization rate of 3.09%, is $970,983. So, according to Section (a), in that first year, you subtract the prior “adjusted” assessment, which is $970,983, from the revaluation assessment, which is $1,200,000, and you get $229,017.
The next step, according to section (a) is you divide the difference by five. Dividing the difference here, which is $229,017 by five, give you $45,803. Section (a) then tell you to “add the result to such prior assessment.” To do that, you add $45,803 to $970,983, which results in a transitional assessment for that first year of $1,016,786.
A transitional assessment of $1,016,876 is a lessening of the pain of an automatic increase in the assessment to $1,200,000.
I can walk you through the next part of the exercise if you like, just to make sure you understand how this then works.
Subsection (b) says in the second year, you subtract the prior assessment from the revaluation assessment, divide the difference by four and add the result to such prior assessment.
To do that, you you subtract the prior assessment, which in year 2 is $1,016,876 from the revaluation assessment, which is $1,200,000, and divide the difference by four. Here, the difference is $183,124, and that number divided by four is $45,781. You then add $45,781 to $1,016,876, and your new transitional assessment in year 2 is $1,062,657.
You do the same thing in year 3, only when you take the difference between the transitional assessment in year 2 and the revaluation assessment, you divide by 3. If you do that, you get $45,781; that gets added to the year 2 assessment of $1,062,657 to get the transitional assessment for year 3, which is $1,108,438.
In year four, you do the same thing, only when you take the difference between the transitional assessment in year 3 and the revaluation assessment, this time you divide by 2. This time you get $45,781. That gives you a transitional assessment for year 4 of $1,154,219.
And in year five and thereafter, the revaluation assessment of $1,200,000 “shall be the assessment.”
None of this is hard at all. It is simple math.
Subsection (3) of Section 1904 sets forth what you do when “the revaluation assessment is less than the assessment for the same parcel on the immediately preceding assessment roll.” Okay, so let’s assume someone with a $30,000 assessment in 2015 has received a Tyler assessment of $700,000. Using the 3.09% equalization rate, that $30,000 becomes $970,873, same as before. Only this time, you subtract the revaluation assessment of $700,000 from the adjusted prior assessment of $970,873, and in year one, you take that difference and divide it by five and “subtract the result from such prior assessment.” That results in $54,174. You then “subtract the result from such prior assessment.” So, the new transition assessment on that property is $970,873 minus $54,174, and the new transition assessment in year 1 is $916,699.
You follow the same formula as before, only this time instead of adding, you subtract, In year five the new assessment is $700,000.
Finally, let me comment on the past portion of the associate counsel’s letter, where he states as follows:
“Section 1904 is largely ineffective, because it phases in assessment changes, not tax impact changes. As a result, the lion’s share of the tax shifts occur in the first year. It might not be obvious why this is so, but it is basically a result of the fact that all parcels are seeing large assessment increases implemented at the same pace. A mathematical simulation should make this phenomenon more apparent.”
First of all, based on the calculations I just performed for you, which are relatively simple and straightforward, I don’t find Section 1904 to be “largely ineffective” at all, and nothing in the opinion shows why that would be so. He explains that the reason it is largely ineffective is that it “phases in assessment changes, not tax impact changes.” I couldn’t agree more; that’s exactly what Section 1904 does, and that’s exactly what the arithmetic exercise I just went through shows.
He then states, “as a result, the lion’s share of the tax shifts occur in the first year.” I’m sorry, but I don’t see that at all. All Section 1904 does is implement the changes in assessment over a five-year period. It doesn’t say or do anything about tax shifts; the tax implications of the five-year phase in are reflected in the taxes that would be assessed on the basis of the tax levy to be charged in each of the five years — all based on the mil rate multiplied by the new assessment.
He states that, “it might not be obvious why this is so, but it is basically a results of the fact that all parcels are seeing large assessment increases implemented at the same pace.” That is not so. In Greenburgh, 24% of the parcels are seeing large assessment increases, to be sure, but 42% are seeing assessment decreases. I can’t be sure, but I think his opinion fails to take into account that in his department’s own regulations, you don’t use the “prior assessment” in year one of the transition — you use instead the “adjusted prior assessment” — and you do that because you’re comparing 100% assessed value in 2015 with 100% assessed value in 2016; otherwise, you’d be comparing 3.09% assessed value in 2015 with 100% assessed value in 2016, which not only makes no sense, as it’s not an apples to applies comparison, but that reading would render meaningless all of Subsection 3 of the Section 1904, and I can’t imagine that anyone would have ever intended that.
So, my bottom line here is that there is nothing in the associate counsel’s letter which undermines the rationale for implementing Section 1904. In fact, his reference to the Department’s regulations are incredibly helpful because those regulations eliminate the one possible ambiguity in the way the statute was written.”
Mr. Feiner did not even acknowledge receiving the mail.