School tax relief gets mixed reviews

Real Estate Weekly,  Jan 29, 1997  by Lois Weiss

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The School Tax Relief Program, or STAR, would grant homestead and lower-income exemptions for owner-occupied homes and condominiums. No commercial buildings, rental apartments, cooperative buildings or vacation homes would be eligible.

Since the state would make up the shortfall to school districts, the program will cost all taxpayers $110 million in Fiscal Year 98, $630 million in FY 1999, $1.175 billion in FY 2000 and $1.7 billion in FY 2001.

The STAR program is included in the Article VII bill that would implement the entire state budget, and is reliant on that several hundred page bill's passage.

Assembly Speaker Sheldon Silver scoffed at the plan to REW, saying, "There is no relief. You're talking about a five-year plan that won't be phased in 'til 2001."

New York City's Mayor Rudolph Giuliani knocked the Governor for spelling out less relief for city owners and offering no relief for renters and cooperators.

City Council Member Herbert Berman also criticized the plan for offering no cuts to owners of cooperatives in particular, most of whom are in New York City, although he noted no commercial or rental property would get a cut, either.

State officials say they don't have the data to implement co-op relief. But the New York City Dept. of Finance has been gathering such owner-occupied data for use with the city's own cooperative tax relief program. That plan allows shareholders to pay less in overall property taxes on up to three co-op units, and unit owners should begin to see credits beginning with the July 1997 tax bills.

When called to his attention that the data might be available, Governor Pataki told REW, "We'd be happy to look at it."

While condominium units each have a separate block and lot, and therefore, tax bill, making the Governor's provisions easy to implement, cooperatives buildings are handled by one tax lot, and the board or lender is provided one bill that is broken down for residents in their maintenance bills.

Unfortunately, NYC Finance and the various managing agents are having trouble obtaining some of the information - such as social security numbers - from some unit owners for the Mayor's tax cut. Nevertheless, these confidential records will soon be the most complete data bank available on cooperative ownership.

The Mayor is also concerned that New York City sends more money to Albany than it gets back and that residents pay more overall in taxes. But critics say the city's one- to three-family homeowners and small condominium owners have the lowest property taxes in the Downstate area, and are protected from steep rises by a law that the Mayor refuses to change.

According to James Dunne, director of tax research for the Bureau of Real Property Services (BRPS) in Albany, the Governor's property tax relief is designed to target only school taxes, and the communities would be reimbursed by the state for the exempted amounts.

Since New York City does not break out its bills with a separate line denoting school taxes, as do other communities, this exemption is targeted only towards that portion of the property taxes accounting for school taxes.

The City Council, however, does set a separate tax rate for the school portion when it adopts the yearly tax fixing resolution.

Under the Governor's plan, there would be a $30,000 owner-occupied exemption towards the assessment - based on full value and then equalized by the jurisdiction which would rise to $50,000 for senior citizens with household incomes of not more than $60,000. Currently, seniors get sliding breaks topping off with about half that income. It would be up to the local assessors to determine eligibility, Dunne said, just as they do now for any exemptions.

Since most communities do not have full value assessments, but instead are based on a fractional value, the $30,000 exemption would be adjusted accordingly. "Giving a $30,000 [break] when the average home is worth $300,000 is not going to be a lot, whereas $30,000 in Allegheny County means something," noted Dunne.

In New York City, where the tax rate itself on single-family homes is lower, the exemption will not be "worth" as much.

"New York has low taxes on residential property, and to that extent, they don't have the same kind of problem as everywhere else [with high taxes]," said Dunne.

The average portion of the school tax for the median homeowner in Queens is $580, and when fully implemented, the Budget Office expects the STAR program to kick in $160 of that for Class I one- to three-family homes and condominiums, and $260 on average for senior citizens.

The measure would also have a revaluation component, but would be implemented only for homes that sell. In that case, the local assessor would ensure the home is assessed within 10 percent of the equalization rate for the assessing unit.

If the equalization rate is 10 percent, and a $100,000 property sells for $100,000, "the assessment better be $10,000," said Dunne. "When a property sells, under this bill, the assessor just checks to see if [the assessment] is equitable and makes sure it's in line with the average."