By Anthony Bottan
These lawsuits, known as tax certiorari cases, are being filed at an alarming rate in Valley Stream and throughout Nassau County. At the last village board meeting, trustees voted to settle 10 separate cases. Owners who feel their property was assessed too high and are paying too much in property taxes, file these lawsuits to have their property reassessed. If the property is reassessed at a lower value than the original assessment, the property owners negotiate a refund for the money overspent on taxes.
Property assessments are based on 1938 construction costs, along with any improvements made to the property. Any sale of the property also factors into determining the fair market value. If the property was assessed too high, a negotiated refund is reached between the village, county and the owner. To determine the refund, assessors calculate the difference between the original and new property values, then multiply that number by the equalization rate of the village or county.
The equalization rate, at its simplest, is the state¹s measure of a municipality¹s level of assessment. This is the ratio of total assessed value to the municipality¹s total market value. The municipality determines the total assessed value; the total market value is estimated by the state. According to the New York State Office of Real Property Services, they are obligated to administer an equalization program in order to assure equitable property tax allocation among nearly 4,000 tax jurisdictions in New York State, and to insure the proper allocation of State Aid to education funds. Valley Stream¹s equalization rate is 1.78.
There has been 965 tax certiorari filings this year by residential and commercial property owners combined, though many are not active cases. Actually, a majority of the cases filed, according to the village assessor Stephanie Price, have been through the process twice before. Price also said there is a lot of duplicates and overlapping of cases. The reason for this is that property owners are allowed to file every year if a negotiated refund with the county and village is not reached.
If a property owner files a tax certiorari, the county must settle first before the village can take any action. Since the county has more tax certiorari cases than the village, the county can settle a case with more than one property involved with a bulk or individual refund. This puts the village at the mercy of the county because once the property owner comes to terms on a refund with the county, whether it be in bulk or individually, the owner can use the negotiated refund granted by the county as a base for the village¹s refund. The village refund is a percentage of the county refund because the assessed values for the village and county are different due to different equalization rates, which change ever year.
The property owner then uses a tax rate conversion chart to come up with a value for the village refund. The village can challenge the value of the refund by looking at the income approach to the commercial property as well as if there were any sales on the property. If an agreement is reached, the village will lower the assessment on the property, and the new lowered assessment is signed off on by the courts.
What this means is when the village pays the negotiated refunds and the properties are assessed at a lower value, the village collects less property taxes. Hypothetically, if the village budget is $30 million, it costs that much to run the village. When the village refunds property taxes on the tax certiorari filings, there is less money to operate the village, so the village must somehow make that revenue back to fulfill the budget. According to Village Clerk Vinny Ang, the way to do that is either by raising taxes or cutting operating costs.
Ang said the village can try to bring in other revenue sources such as the new cell tower to make up for the loss revenue. ³There comes a point where the village has to deplete services, but you don¹t want to cut staff,² Ang said.
If the village does not find alternative means to fulfill the budget, Ang said the village and county can raise assessment values, which will subsequently have residents paying more in property taxes, though taxes were not directly raised.
Tax certiorari refunds are also affecting the county as well. According to Ang, 60 percent of the total taxes paid go directly to schools, while the other 40 percent is split between the village and county. If the county settles on a negotiated refund, the refund will include taxes allocated for the schools, which the county never sees. This puts the county in trouble to pay back school taxes it never received and one village official referred to this problem as ³trying to pay a mortgage with a credit card.²
County Attorney Ann Margaret said the county¹s goal is to keep filings down and reduce the filings every year. According to Margaret, successful tax certiorari challenges for commercial and residential filings are down 12 percent over the last year.
³Our goal is to bring down the success rate,² Margaret said.
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