Andrew Klappholz and Cathey O’Donnell have a must read piece in the Journal News: Local tax bases erode as appeals companies drive surge in assessment challenges.
A Journal News analysis found that 14 Lower Hudson Valley communities alone have lost nearly $10 million from their tax base because of successful property assessment challenges since the economy stalled in 2007. The trend is largely due to the growing professional tax-appeal industry, fueled by a faltering economy and homeowners’ anger over their tax bills, which are among the highest in the nation. It’s an industry without regulation, and many officials say other residents of their communities pay the price.
The article notes that between 2007 and 2010, New Rochelle spent $305,000 on legal costs related to fighting appeals. During that period, the number of appeals rose 42%.
Westchester County Clerk Tim Idoni is quoted in the article saying “As assessment rolls continue to drop, it transfers the hurt to other residents and ultimately the level of services. I actually believe it’ll continue until the economy picks up.
I would be interested in readers’ take on this article. While the decline in assessed value of properties in our area, especially in New Rochelle, is certainly very real and very pronounced, it strikes me as odd to blame people who are paid to help taxpayers grieve their taxes for being successful in doing that. Is the problem really that these companies are deceitful or sloppy or is that property values have dropped dramatically since 2007, after years of steady increase, and now the valuations on file with the tax assessors or out of whack.
Anyone get the sense the real purpose of this article is to lay the predicate for regulating (i.e., controlling) companies that successfully grieve taxes so as to discourage future successful appeals?
UPDATE: The Journal News “helpfully” published some suggestions on how to combat the scourge of property owners successfully grieving high property taxes: Proposed reforms for tax assessment, appeals.
Only in New York, only with a paper like the Journal News.
The reforms are primarily various ways to make it more difficult to bring tax assessment appeals, raise the cost of doing so or make it more difficult to win an appeal. The vast majority of the “reforms” identified in the follow up piece are ways to keep more money in the hands of the government.
The 15 percent rule – you can only win a grievance if the differential in a reduction is greater than 15%.
Statewide revaluation – a third of the homes’ assessments go up, a third go down and a third stay the same.
Increase appeal fees – raise the cost to grieve so as to discourage grievances.
Standardize the grievance process – require more information on the actual grievance, impose fines for failing to provide complete information.
Allow right of access – give assessors the write to enter a home if a grievance is filed.
Require appeals “pros” to be licensed – the reasons given are specious. More on that in a moment.
Increase court staffing – discourage settlements at the local level.
When you read this list it becomes clear whose side the Journal News is on — the same people who pay them large sums of money to serve as the paper of record and pay for all those ads that keep the paper in business.
The “reform” to “require appeals “pros” to be licensed” reveals a great deal about the mindset at the Journal News.
Why exactly is it a problem in need of reform that “anyone” can challenge an assessment on behalf of anyone else. These “anyones” seem to be winning the appeals. That is sort of the whole point of the series, right? That these “anyones” are winning with regularity. A nonsensical comparison is made to “lawyers, auditors or stockbrokers” as if there is some “risk” to hiring a person to help grieve property taxes when the person only gets paid if they win. Worse, “many have no formal training”. Gasp! This would be terrible if they were losing most of their cases but, again, the problem the paper is writing about is that these people keep winning, not losing, so who exactly is harmed by the supposed lack of training? Licensing we are told will help establish “credibility” within the industry. Again, these people are winning cases for their clients, right? So, isn’t that the only “credibility” that matters to a taxpayer?
All of these “reforms” to hinder successful appeals by taxpayers are a way to avoid the reality in the second point that “revaluation means that a third of the homes’ assessments go up, a third go down and a third stay the same. In other two-thirds of taxpayers are neutral or harmed, not a winning election strategy.
Updated this story
As I expected…
The Journal News has published a set of “reforms” to solve the “problem” that taxpayers are successfully grieving their taxes. I have added an update with a link, a summary of their “reform” ideas and my own thoughts.
Sure sounds like what I thought — the Journal News laying the predicate for making it as difficult as possible to grieve property taxes so that their friends in government have more taxpayer money to spend.
The lowering of real estate values is the problem
When people have to sell their houses for less than expected, and in some cases less than they paid, why is the procedure for the reduction of taxes considered a problem? The problem is nationwide. Blaming those that aid homeonwers in getting tax reductions is counterproductive. It is doubtful real estate will rise to previous levels for a long time. Everyone must be realistic.
It’s a grossly unfair system
It’s a grossly unfair system because if you never appeal your assessment, then your probably assessed to high and that isn’t right. Why should a Senior Citizen have to worry about this stuff? Also properties transfer all the time, yet New Rochelle never reviews this information to verify that current assessments are even remotely close to being accurate.
CT has the right system were they re-assess all properties every 10 years and in the interim, all assessors across CT collect data every year from the commercial properties. Neither NY nor New Rochelle has no such system in place so if there’s a full re-assessment what (besides recent transfers) data would anyone use to determine values? If there is a re-assessment, there should be caps on how much a tax bill could change due to re-assessment that might alleviate some fears.
I believe there’s a certain mistrust of city hall and a notion of corruption within city hall that prevents New Rochelle from re-assessing. The Journal News used to report the average home in New Rochelle was assessed at 19,000 in the late 90s, then it dropped to 18,000 in the early 2000. Now they don’t report that number anymore, but it must be down around 15,000 to 16,000.
This phenomenon is nothing new; the total assessments in New Rochelle haven’t increased in years but instead have seen a steady decline over the last 15-20 years that I’ve lived here. With all the development the mayor likes toot his horn about, one would like to think the assessment roll would start to increase at some point time, but it hasn’t happened yet nor do I have any reason to think it’ll happen.
It always amazes me that the school district doesn’t use the fixed assessment roll of the previous year, but instead relies on a guesstimation of the current year’s reduction in the assessments. The guesstimation is usually understated and has the effect of increasing your taxes, often by several percentage points. The school board says its hands are tied, but that’s just BS as they could easily use a fixed assessment number.
Why government or even the Journal News would want to regulate this industry is beyond me as the cities towns & villages all have the ability to adjust their equalization rates to bring the assessments into the reality of the current real estate market, but I know New Rochelle left its equalization rate unchanged for a year or two at a time when values were being reduced. This means NR valued the properties more than they were worth and gave many an opportunity to reduce their assessments. That person should have been let go already, but probably got promoted.
Journal News Article
It was fascinating reading only marred by a failure to differentiate among communities that annual or by schedule, reassess, and those, like New Rochelle who do not reassess but, sadly, seem to rely on Certiorari as an a’posteriori (after the fact) form of reassessment. If you are part of a queque waiting for resolution of a Certiorari claim, you have waited a long time and will probably wait until well into 2012 for some resolution. Many of these are cooperative or condominium shareholders or owners and what they can expect in the absence of a resolution is a further damaging increase in maintenance and tax payments.
New Rochelle has avoided formalizing formal reassessment and there are very mixed feelings in the community on this topic. I support it based on simple fairness…. it is a non-political stance that will settle the issue once and for all and slow down on the avalanche of claims forwarded to the Assessors office.
People file routinely every two years based on our system. I would have liked to see a follow-up promise from the Journal News to talk about large claim communities who have no formal reassessment programs and those who have. It would help the voter enormously.
we have an unhealthy habit in New Rochelle of politicizing issues of great community concern. We are not a small business friendly community; our regulations, red tape and enforcement strategies are destructive to new business growth and maintaining existing businesses. Word is out in the outside world that this community is less than friendly or efficient and coupled with the spurious assumption that the city administration should take a hands off policy with the school district as well as a lack of aggressive support for building and sustaining a viable downtown business district, flies in the face of any and all urban planning logic. Surely Michael Freimuth, who by all accounts, including mine is a gifted man, must question the way we promote New Rochelle compared to his experience under Dan Malloy in Stamford.
I really believe that the City Council must take the bull by the horns and understand its role and responsibility in New Rochelle to build upon meaningful short term growth and sustaining goals. This means a healthy independence where called for.
In case the administration has not noticed, the world is literally changing before our eyes. I have confidence in a number of council members and in the mayor to understand this, manage the city as a total entity, understand the interplay of its major components, and challenge conventional thinking on budget management — Chuck you are likely correct that there is no fat in the budget, but that is more than horizontal or vertical number counting. An ex colleague, Dr Jennings would describe this sort of thinking as “maze dull.” This means that, like in a school district, the success depends on the front line teacher, the failure by the administration and oversight components. In the city governance, the success is the police, fire, sanitatition, and the failure is in not addressing budget reductions in less traditional ways… reducing exempt non critical management staff, pare salaries as needed, council needs to set a salary giveback example, and other matters concretized in the other operating expense budget. It is there — Council should demand alternatives to traditional bean counting.
The City suffers in some quarters from sound business critical thinking even though there are some people of unquestioned brilliance in key roles. Turn to the people with solid credentials in profit and loss management, the urban development people, etal and let them have some rope.
what we don’t need is another IDA Audit fiasco where the simplest most basic business process matters, such as control and monitoring, were largely ignored. It wasn’t because those who did this were bad people; on the contrary, they were largely people of high quality. But, they had no experience in the area.
Lets commit to doing the right thing beginning by supporting the first provider through viable alternatives and by getting the inspectiors, ticket agents, and others back in 515 on the ball. You do not destroy or weaken the few existing revenue sources you have, you do not allow this to get nto the public domain and discourage other new businesses, you do not run a business on fee revenue and grants. You support, period, support, incentivize, let the internal professionals like Freimuth step up, and demand the Council exercise the oft forgotten or ignored City Code to control and monitor and demand performance and compliance.
Council, the Army has 10 general orders… the first is very appropriate to performance. It goes or used to go “take charge of this post and all public property in view.” Do so and do so independently with the community foremost in mind.
he’s 100% right
Warren Gross said “We are not a small business friendly community; our regulations, red tape and enforcement strategies are destructive to new business growth and maintaining existing businesses.”
I say he’s 100% right
Bob and Fifth Avenue Guy Have it Right
bob, your initial instincts seem correct. The Journal News provides little in the way of remedial action. We can be greatful for the data drop, but not for the drift toward changing who might represent who in the filing for Certiorari. This is hardly the issue. New Rochelle has a issue of long standing and I do not think it will be resolved soon given the clear political unwillingness to evoke the only solution that likely works; a full reassessment citywide of residental and commercial properties as well as a clear understanding that these must be updated periodically (every two or so years). Fifth Avenue Guy correctly points out some of the internal consistencies and wrongheaded assumptions of the past used by the school district and frankly, it is difficult to imagine what led to their lazy and invalidate determinations of assessed values.
What is clear are (1) the City has avoided the issue for years, (2) an examination of the Journal News data likely, without highlighting it, points out those communities that do periodic reassessment, (3) our politicians, with some justification will avoid this topic like the plague, (4) we will not grow a commercial or for that matter, an additional revenue base given the unfriendly way the City does business, (5) the economy has put a damper on housing and thus, market value but we cannot use this as a rationale for not positioning New Rochelle for doing better in attracting new business and residences, (6) we cannot either use Certiorari as a surrogate reassessment tool as we now do or (7) borrow every few years to pay off “old certiorari” claims given the relatively slow pace of settlement (see Journal News) as well as the certainty of new filings, and (8) thanks to Bob Cox and Fifth Avenue Guy to mention two, the reader has a much better understanding of the issue, political likelihood, conditional consequences of poor or illogical city management practices.
I also think it might serve the reader well to understand this entire Assessment process so let me bring you some useful information available on Home-Plans-Advisor.Com.
First, some simple definitions: (1) Property Assessment is the process of placing or valuating your residence or business for the purpose of taxation, (2) Percentage of Market Value is used to calculate how much an owner will have to pay in property tax. A Rule of Thumb — changes in market value will change during years of instability in economy more than in years of stability. Sounds simple minded, but it is often overlooked or manipulated. (3) Market Value is the money someone would receive if the property was sold during a reasonable period of time as well as the prices received for similar properties in the general area. These can be articulated as Fair Market Value and these are also based on location, condition, size of property, changes made to upgrade and, of course, zoning types (residential or commercial, etc)
Mortgage lenders are more influenced by Market Value than Assessed Value, but the latter is part of the overall calculation. Lets look at this closely.
1. Market value of a house is usually the highest price a home would bring after a reasonable length of time on the market.
2. Assessed value is the value of the property as of a certain date )often 01.01.xxxx). This is governed by an assessment ratio which is a percentage of market value.
Example (hypothetical).
You own a house with a market value of $100,000 effective 01.01.2011. The assessment ratio in your state of residence is 60%. Your assessed value at this point is $60,000 — $100,000 x 60% = $60,000
Your residence is in a state with a $100 competing rate (note it is either that or $1,000). It essentially is the state’s rate prior to the local rate being applied which in this example is the county rate. So..
$60,000/$100=$600.
Now we can bring it close to home and we will use the County Rate. Let’s say this rate is $1.23. So..
$100,000(market value)x60%(assessment ratio)=$60,000(assessment value)/$100(State Mill rate)=$600x$1.23(County Rate)= $738(Annual Property Tax per year).
This schematic can serve as a baseline for city property tax as well if different from a county assessment.
You can see the issue of years of failing to come up with a defensible system. As it goes further into disrepair, it makes it almost a political nightmare to straighten out. Yet, the only real solution is, as I think Fifth Avenue Guy alluded to, is reassessment. Failing that we cannot afford any other failures that affect the tax base. We must attract new commercial and residential tax payers. We must remove hurdles and obstacles from existing businesses and residences especially in the business district. We must be relentless in removing red tape, bureaucratic entanglements, and business unfriendly tactics. We must insist the City Council use their City Code vested powers in oversight and investigation concerning any practices that negatively impact business development and retention. We must disband BID, rezone, clean up the non-profit situation, stop with the harassment from the licensing people and the traffic ticketers. We have to become seen by investors as busy friendly.
And, although few if any people like to acknowledge this around these parts… It is well past time to manage the City in accordance with the City Code period or change the damn thing. It is well past time to rein in the School District.
I am tapped out on writing about these things and I appreciate the energy and stamina of Bob, Fifth Avenue Guy, John Imburgia, John D. and the courage of the occasional democratic poster. You know who you are and keep posting.
Look, if someone with my temperment and non-ideological leanings (a lower case fiscal conservative with progressive community overtones) can feel welcome here, so can and should you.
Lots of very smart and decent people on this site and I thank them for good dialogue, encourage the good Mr. Sussman to add his voice, and ask all of you fervently to go to the basic issues of what it takes to bring this great city back to where it belongs and keep after your council member and if needed, take the path that the Tea and Zucconi people took. You are smarter, more stable, and seek to work, raise families, have safe and secure neighborhoods and schools, fair taxation….. need I say more.
Nothing Fair About Reassessment
Warren, there is nothing fair about reassessment. As stated 1/3 go up, 1/3 go down and 1/3 remain the same. The 1/3 that get their taxes reduced are the newer homes owned by people with disposable income, that’s why they own newer more expensive homes. Once the taxes are reduced the sale price of the home is increased above the new assessment due to the reduced taxes. The 1/3 that get their taxes increased are the older homes, many of which are owned by seniors on fixed incomes who can least afford the higher taxes. Once their taxes are raised they are stuck in a catch 22 situation as they can no longer sell their house because of the increased taxes and they can’t afford to remain in their house and pay the increased taxes. And finally the 1/3 who remain the same is the middle class who is the backbone of this country but never seems to get a break.
If that’s fair I’m Jennifer Lopez.
Fairness Not the Best Word
Yes Tim, you are correct. That is how it would play out. I have been wrestling with this thing for a while and I subsequently posted a second post on how this all works. I tried to avoid the conclusion that we continue on the same path of reassessment by certiorari and hoped that the variables of location, age of residence, neighborhood, comparable values, etc. might be enough to outweigh the increase that would come to the older, established residences. I am not sure it would on the classic 1/3, 1/3, 1/3 scheme that prevails.
My problem is compounded by the fact that had the City worked it differently years earlier, it would have worked better now. It is more compounded by the fact that leaving things as they are, especially with no decent plans to grow a new revenue stream, commercial and residential, would make the existing problems even worse.
I don’t know exactly what to do except bite the bullet or, were it possible, work with the State on the problem which must be similar in many communities. Working it would likely mean some formula that accepted the “unfairness within the fairness” meaning perhaps some way of reallocating the 1/3 1/3 1/3 formula to recognize the issue that you correctly point out. That could mean some tax credits for a period of time as an option.
Tim, it seems it comes down to a question of what is most unfair. The State if they decide to solve it, will by resorting to the existing system and obliging New Rochelle and others to conform. It will come to that some day soon.
So, perhaps you, I and others can help by coming up with some ideas to lessen the pain. I think it would come to play by some formula that takes the market value of old neighborhood and homes and configuring them to ease some of the likelihood of being disadvantaged by a mandated reassessment program. It might mean some adjusted for “older communities” in the State mill rate. Frankly, I don’t know for sure.
Great, learning post for people Tim. Appreciated it
One missimg piece of the assessment equation
Tim has hit the nail on the head and I am against reassessment for every reason Tim stated. The one missing piece of the puzzle is the fact that reassessment does not raise one extra penny in property taxes. The pot remains the same the only difference is who pays what. Whether or not it is 1/3, 1/3, 1/3 is irrelevent since there is no dissiputing the people who can least afford an increase in taxes, the older sections of the city will be most impacted while the wealthier sections who have a better opportunity to bare the burden will be decreased. Then there is the cost of reassessment which Commissioner Ratner has stated would be $2 million. So, when the smoke clears, seniors in older homes on fixed incomes will get their taxes raised while the wealthier residents in newer more expensive homes get their taxes reduced, the middle, working class still gets hosed and all have to suck up the $2 million cost.
Again we have very very very poor planning in NR.
I’m not sure why you think the older sections of NR would see increases v. the newer sections, but the minimum that our assessor should be doing to reviewing the property transfers and adjusting those assessments on an annual or some other regularly schedule basis. What does our assessor do if he/she can’t reassess our properties without a $2 million infusion? Sounds the assessor doesn’t do much now.
Its amazing that in CT reassessments are a part of life and are paid for on an ongoing basis that don’t seem to disrupt their budgets like a $2 million expense would hit NR.
Again we have very very very poor planning in NR. Noam needs to look past the next 30 days (& not at Lowey’s Congressional seat) to get our financial house in order but that hasn’t happened in the 14 years that I’ve been here so I don’t expect it now, but everyone should be aware that Bramson’s not really qualified to handle our money. I’m tired of the 1 shot gimmicks, lost opportunities to reduce the size of NR’s government and the finger pointing blame game that goes on every year.
There’s nothing stated in
There’s nothing stated in writing that 1/3 will go up, 1/3 will stay the same & 1/3 will go down. Where did you get that notion? Those are only estimates and all could stay the same but someone really needs to look at the data first.
If a house sells for $750k then its assessment (as equalized) should be around $750k and not $650k or $850k. If you’ve lived in your home for 40 years, I would think the assessment would be lower as perhaps your mechanicals ect are older and there are no sales. The problems arise when you’ve lived in that same house for 40 years and your property is worth $400k but your assessment is at $600k but you have no idea.
There’s data all around us, it just has to be used. There’s also missing data (such as income & expense reports) that the city should start collecting.