Report includes 10 initial recommendations to make City’s property tax system simpler, fairer and more transparent
The New York City Advisory Commission on Property Tax Reform today released its Preliminary Report with an analysis of the City’s property tax system and a set of ten initial recommendations for system reforms. The report marks the first review of the property tax system by a government-appointed commission since 1993. The report can be found here.
The Commission reviewed the system through the lens of fairness and transparency, with the goal of ensuring properties of similar value are taxed equitably, taxes are clearly administered, and steps are in place to prevent resident displacement. The report includes a brief history of New York City’s property tax system, the current methods that the Department of Finance uses to calculate property tax bills, the challenges with the existing property tax system and initial recommendations for reform.
The Commission reached consensus on 10 initial recommendations:
The Commission recommends moving coops, condominiums and rental buildings with up to 10 units into a new residential class along with 1-3 family homes. The property tax system would continue to consist of four classes of property: residential, large rentals, utilities, and commercial.
The Commission recommends using a sales-based methodology to value all properties in the residential class.
The Commission recommends assessing every property in the residential class at its full market value.
The Commission recommends that annual market value changes in the new residential class be phased in over five years at a rate of 20% per year, and that Assessed Value Growth Caps should be eliminated.
The Commission recommends creating a partial homestead exemption for primary resident owners with income below a certain threshold. The exemption would be available to all eligible primary resident owners in the residential class and would replace the current Coop-Condo Tax Abatement.
The Commission recommends creating a circuit breaker within the property tax system to lower the property tax burden on low-income primary resident owners, based on the ratio of property tax paid to income.
The Commission recommends replacing the current class share system with a system that prioritizes predictable and transparent tax rates for property owners. The new system would freeze the relationship of tax rates among the tax classes for five-year periods, after which time the City would conduct a mandated study to analyze if adjustments need to be made to maintain consistency in the share of taxes relative to fair market value borne by each tax class.
The Commission recommends that current valuation methods should be maintained for properties not in the new residential class (rental buildings with more than 10 units, utilities, and commercial).
The Commission recommends a gradual transition to the new system for current owners, with an immediate transition into the new system whenever a property in the new residential class is sold.
The Commission recommends instituting comprehensive reviews of the property tax system every 10 years.
Mayor Bill de Blasio and Council Speaker Corey Johnson announced the formation of the Commission in May of 2018. The Commission was charged with developing recommendations to reform the existing property tax system to make it simpler, clearer, and fairer, while ensuring that there is no reduction in revenue used to fund essential City services.
Since its creation, the Commission conducted public hearings across the City for members of the public to testify on their view of the challenges with the existing property tax system, as well as for experts to share insights on specific issues such as mechanisms to provide relief to homeowners. In total, the Commission sponsored 10 public events, including these hearings and two public meetings where overviews of the system were presented by expert staff at the Department of Finance and City Council Finance Division. The Commission will hold additional public hearings in each borough to solicit public input before issuing its final recommendations.
In addition to the next round of hearings and extensive stakeholder engagement, the Commission will work on addressing a number of outstanding issues to arrive at a set of final recommendations.
Commission members include Marc V. Shaw, Chair, Allen P. Cappelli, Carol O’Cleireacain, Kenneth J. Knuckles, James A. Parrott, Gary Rodney and Elizabeth Velez. The Commission also included non-voting ex-officio members including the Commissioner of Finance Jacques Jiha, Budget Director Melanie Hartzog, City Council Finance Division Director Latonia McKinney, and the Deputy Director and Chief Economist of the City Council Finance Division Raymond Majewski. Vicki Been was co-chair of the Commission prior to her appointment as Deputy Mayor for Housing and Economic Development.
“The property tax remains the City’s most important single revenue source, representing almost half of all the City’s annual tax revenues. The work undertaken by the Commission, first and foremost, reflects our collective desire to protect the City’s fisc, while at the same time making the system more fair, predictable and transparent,” said Commission Chair Marc V. Shaw.
“This blueprint for reform provides the opportunity to finally have equity in our real property tax system,” said Commission Member Allen P. Cappelli. “Unfairly treated communities, including much of Staten Island, should not only receive equal treatment, but also have a transparent and easily understood system!”
“The real property tax has been around a long time and engendered much animosity, particularly with respect to fairness. So, any reform commission should view its task with much humility. Within our mandate, we address here the sorest points. Clearly, there is a lot of work to be done to ensure a fair system for residents and one that makes sense for the City’s twenty-first century economy,” said Commission Member Carol O’Cleireacain.
“In order for any property tax system to be deemed credible, such system must be perceived as fair, transparent, and understandable. For most City residents, real property taxes impact their largest source of capital investment and wealth. Accordingly, there is a duty to ensure that the governing system is equitable. I think the Commission's 10 initial recommendations represent a significant step in that direction. I look forward to the additional feedback we will receive in public hearings across the City in the near future,” said Commission Member Kenneth J. Knuckles.
“This preliminary report presents a far-reaching set of recommendations to make the city’s property tax system more transparent, fair and equitable. There are no easy solutions to the problems rooted in state law that have festered for nearly 40 years. This report deserves careful consideration through the upcoming borough public hearings and other discussions that hopefully will result in a broad public consensus in support of these recommendations,” said Commission Member James A. Parrott.
“Everyone feels the impact of the inequities in our property tax system. The recommendations in this preliminary report attempt to address the challenges of our system by making it fairer for everyone regardless of their neighborhood. We look forward to working collaboratively with our partners at the city and state to make comprehensive reform of our property tax system a reality,” said Commission Member Gary Rodney.
“Property tax reform is of significant importance and should allow for a more understandable and equitable structure. This is especially relevant as it relates to its impact on New York City’s homeowners and the corresponding burden on renters within our communities,” said Commission Member Elizabeth Velez.