Updated: Nov. 21, 2022, 2:03 p.m.| Published: Nov. 15, 2022, 6:27 p.m.
STATEN ISLAND, N.Y. — Property taxes on Staten Island — which many elected officials have said are “unfair” when compared to other boroughs — could be slashed by 30% if city and state lawmakers adopt a proposal by the New York City Property Tax Commission.
The commission’s final report, released in December 2021, suggested ways to alleviate inequities in the city’s property tax system, which greatly impacts Staten Island homeowners, who have historically paid a higher rate for less expensive homes when compared to other parts of the city.
An analysis by the New York City Independent Budget Office (IBO) revealed on Tuesday that the commission’s proposal would allow about 72% of Class One properties, which includes one- to three-unit residential properties, to receive a tax cut.
“Looking at particular areas, we see that virtually all homeowners in Staten Island would get a tax cut…,” said Acting Director George Sweeting at a City Council Committee on Finance hearing on Tuesday.
However, about 28% of the Class One properties citywide would get a tax increase.
The city Department of Finance concluded that the median property tax decrease would be 30%.
“This analysis by the IBO, which was also corroborated by the Department of Finance in their testimony today, validates almost every reason I have been fighting for property reform for so many years, why I fought to create a NYC Property Tax Reform Commission and why I endorsed the commission’s recommendations,” said City Council Minority Leader Joe Borelli (R-South Shore).
“These are exactly the type of changes that will bring fairness and transparency to our property tax system, and will finally provide some financial relief to middle and working-class homeowners on Staten Island, who have been shouldering an unfair property tax burden for far too long,” he continued.
Said Councilman David Carr (R-Mid-Island): “The testimony we heard today really underscores why we have been fighting for these reforms and just how over-taxed Staten Island homeowners have been. The changes the Property Tax Reform Commission have recommended could finally fix this longstanding inequity. The Administration and the Council must unite to ensure that Albany will make it happen.”
However, to make these changes a reality, lawmakers at the state and city level will need to reform a decades-old system and challenge a variety of special interests in the process.
“Our city’s property tax system is unfair and broken. …Staten Island homeowners have been carrying the weight of this system for too long, and this plan could affect real change for property owners citywide. I look forward to the city and state working together to get this done for all New Yorkers,” said Councilwoman Kamillah Hanks (D-North Shore).
The most significant recommendation would combine several types of properties — including co-ops and condos, 1-3 family houses, and small apartment buildings of 2 to 10 units — into a new single residential class.
Currently, condos and co-ops are taxed at a lower rate than homes despite often being more expensive. Property values in the new residential class would be based on sales-based market value instead of the current system that values co-ops and condos against comparable rental units.
This would eliminate “the confusing and counterintuitive requirement that co-ops and condos be valued using imputed capitalized net income as if they were rental properties,” said Sweeting.
“These changes would eliminate two of the most glaring problems in the current system. The present treatment of co-ops and condos is confusing and opaque, presents assessment challenges for the Department of Finance, and obscures how low co-op and condo effective tax rates (ETRs) actually are, particularly when taking into account the co-op condo abatement–which the Commission recommends eliminating,” said Sweeting in his testimony on Tuesday.
HOW PROPERTY TAXES ARE CURRENTLY CALCULATED
The New York City Department of Finance (DOF) determines property tax rates. There are four classes of properties, which are each valued and assessed differently under the law. Residential properties, classified as Class One, include one- to three-unit properties.
The Finance Department calculates property taxes using the following formula: [(assessed value – exemptions) x tax rate] – abatements = annual tax rate
The market value of properties is determined through statistical analysis that considers various factors, such as the recent selling price of similar properties in a neighborhood. The assessed value is a percentage of the market value, which by law cannot exceed 6%.
Exemptions for certain owners, such as veterans, clergy, people with disabilities, and senior citizens, are subtracted from the assessed value, determining the taxable value that is multiplied by the tax rate for Class One set by the Finance Department.
Some owners may qualify for additional breaks, called abatements, such as those who have green roofs or use solar power, which are subtracted from the property tax bill after all of the above calculations.
INEQUITIES AMONG EFFECTIVE TAX RATES
Inequity in property taxes, specifically the effective tax rate that residential property owners pay, stems from a state law that caps how quickly taxes can increase year-to-year.
The Property Tax Capstates that Class One property owners’ effective tax rates cannot increase more than 6% per year, or more than 20% over a five-year period. New York City Comptroller Brad Lander, who has been leading the charge for property tax reform across the city, explained that the law is meant to prevent people’s property taxes from exponentially increasing if the property’s value quickly appreciates over a short period.
In the past, Borelli has referenced a color-coded map that shows places like Staten Island and southeast Queens paying higher effective property tax rates than some of the city’s most affluent areas, like Park Slope and the Westside of Manhattan.
For example, a Richmond Valley home valued at about $1.3 million in a city Department of Finance’s 2021 report pays about $2,800 in quarterly property tax, while a Cobble Hill home valued at about $3.4 million pays about $2,400 quarterly.