Unsolved Mystery: The Case of the Denied Tax Abatements

Jim Goldstick was perplexed. In 2019, the July 1 property tax bills for 17 co-ops he manages had notices of “unpaid” charges totalling $93,000. Normally, unexplained charges would not be paid, but in this case, failure to pay would be consequential.

“If we didn’t pay it,” recalls Fred Warshaw, board treasurer of the northeast Queens co-op Bay Country, one of the properties charged with the mysterious tax, “they were going to assess interest at 18% a year. So as a board we decided, ‘Let’s pay it, and then we’ll get it corrected.’”

A Sense of Déjà Vu

In 2015, Goldstick, vice president of Charles H. Greenthal, had a similar situation when Bay Country, along with two other Queens co-ops, Bay Terrace and 23-45 Bell Owners, got hit with $75,000 in additional charges on their quarterly tax bill. At that time, the Department of Finance (DOF) provided a detailed spreadsheet listing the 22 apartments where tax benefits were disallowed, the retroactive amounts owed for each year dating back to 2008 and the exact rationale for the change. In most cases, the units had been sold or a previous owner had died, and the specialty tax abatements they were getting — as senior citizens, veterans or recipients of STAR credits — were transferred to the new owners, who weren’t eligible for the exemptions. That crucial information enabled the co-ops to collect the back taxes from shareholders, though it wasn’t always easy. The boards had to take each person’s circumstances into account, Goldstick remembers, which sometimes meant working out a payment plan with shareholders who simply didn’t have the cash upfront.

Fast forward to 2019. Goldstick knew what kind of backup was needed so the 17 co-ops could identify which shareholders owed what, and he reached out to the DOF for documentation. Fifteen months later, he’s still waiting.

Dennis DePaola, executive vice president and director of compliance at the management company Orsid Realty, understands Goldstick’s frustration. “I’ve witnessed problems with abatements, and sometimes it takes the city years to process a credit, DePaola says. “Or we go back and say, ‘We told you this person wasn’t a primary resident, but you continued to give the abatement.’” Even if you have “a good contact over there,” he adds, “it historically has been very difficult” getting answers and adjustments from the DOF.

For his part, Goldstick emailed and called his contacts at the DOF, to no avail. After months of being stonewalled, he contacted State Assemblyman Edward C. Braunstein, whose constituency includes parts of Queens where some of the 17 co-ops are located. But Braunstein’s office also hit a brick wall. “They reached out to the mayor, who reached out to the DOF,” says Goldstick. Finally, in September 2019, the department emailed back, offering a possible clue to the problem. “We have updated our (computer) system,” the agency wrote, suggesting that the management company check the co-ops’ records at the DOF’s Property Tax Public Access online portal. Goldstick did so but found no breakdown of the unpaid charges or the reason why the tax benefits had been disallowed.

After more than a year of back-and-forth wrangling with the DOF – at one point, it reversed itself and told Goldstick that some of the 17 properties would actually be getting a tax credit and then sent a list of overpayment and refund amounts – it wasn’t until October 2020 that the DOF finally offered an explanation. The co-ops’ accounts “(had) been reviewed and adjustments were made after recalculations were administered,” it wrote, adding that “a portion of the Q1 2020 charges can be attributed to an incorrect STAR cap issue, while in other cases, there was a restoration of taxes due to exemption/abatement revocations.”

What the DOF didn’t say, though, was which apartments owed what, leaving no way of recouping the co-ops’ payments. “The DOF is effectively saying, ‘Sometime in the next few years we will tell you what those charges are for, but you need to pay it now,’” Goldstick fumes. “In the meantime, the co-ops have to eat those expenses.”

The Good Old Days

“The city used to have a different computer system, called Fair Tax, which they changed to Property Tax System, or PTS, about two years ago,” says Paul Korngold, a partner at the law firm Tuchman, Korngold, Weiss, Liebman & Lindemann. “But apparently PTS doesn’t automatically generate listings that explain the abatement adjustments and why they were made, which the DOF used to mail out. And I presume that’s the reason you can’t determine which apartment owes what like you could before.”

Indeed, PTS has already been blamed for issuing erroneous tax bills and creating other headaches for many property owners since it went live in early 2019. “Revoking exemptions is within the DOF’s power,” says Korngold, “but changing their computer system is no excuse for not telling taxpayers the reason they owe money.”

So what can a board do when it gets an unexplained tax bill from the city, other than paying it in order to avoid the exorbitant interest charge? Not much, since bringing a lawsuit against the DOF to force it to provide a detailed breakdown would likely cost more than the bill itself. “I have no doubt that if you brought an action against the Department of Finance, they would say what the charges were for,” says Korngold. “But at what point is it really worth it to hire a lawyer? And the real issue is, why should a taxpayer have to bring the city to court to ask, ‘What’s this all about?’”

That’s a question Goldstick is still asking. “The Department has worked closely with the property owners to review and resolve billing issues brought to our attention,” the DOF said in a statement to Habitat, adding that it is the responsibility of owners “to timely review their bills and contact the Department for an explanation of charges.” As for Goldstick’s co-ops, the agency has assured him that it is “conducting an in-depth review of the accounts to ensure all his inquiries are resolved.”

When that will happen is anyone’s guess. “But every month that passes increases the chances that shareholders who owe taxes will sell their apartments and we’ll never be able to charge them back,” says Goldstick.

Adds Korngold: “It’s no wonder Jim has been pulling out his hair dealing with the DOF. You can fight City Hall, but so far at least, you can’t win.”