Co-op / Condo Tax Protest Reaches Commissioner; May Spread Thru City

"Event the least astute among us know property values have been falling or are at best flat," says Bob Friedrich, president of the Glen Oaks Village complex in Queens and head of the co-op and condo board-member group the Presidents Co-op Council. "So when they released these valuation numbers and we took a look, we found that the computations were terribly flawed. There were increases of 75 to 146 percent in Queens!"

At a meeting on Wednesday, Feb. 23, 2011, at the Community Center of Chabad in Bayside, Queens, attorney Mark Hankin speaks before a crowd of attendees. Seated at the table are State Senator Toby Anne Stavisky (center), City Councilman Mark Weprin (second from right) and President's Co-op Council founder Bob Friedrich. (Click to enlarge)

In response, and with the help of City Councilman Dan Halloran (R-District 19)  and State Senator Toby Anne Stavisky (D-16th Senate District) primarily, Friedrich and other PCC representatives met yesterday (Thursday, Feb. 24) with New York City Dept. of Finance (DOF) Commissioner David M. Frankel, a 2009 Mayor Bloomberg appointee, and Deputy Commission Michael Hyman. They brought the spiking percentages with them.

"Commissioner Frankel said property assessment is not based on affordability," Friedrich says. Even so, just considering simple mathematics in a flat or depressed outer-borough market, "The Commissioner was concerned about triple digits and very high double digits," Friedrich added. "He wasn't sure why that was, except he thought that Queens [previously] had been undervalued — which we vehemently disagreed with, because in the last 20 years of the Department of Finance doing valuation, no one there said, 'Oh, Queens is undervalued."

Budget Bonanza?

The obvious suspicion would be that with a city-budget shortfall looming, the skyrocketing valuations were designed to bring in a property-tax bonanza. "When we ran that by him, he said these numbers have nothing to do with [the city's revenue projections," Friedrich reports. "I'd let readers draw their own conclusions."

A message left for Owen Stone, press officer for Commissioner Frankel, was not returned.

What might have impacted the remarkable spike is a recent change in the way the city evaluates real property, which it does every year. New York State's Real Property Tax Law Section 581 requires cooperatives or condominiums be valued as if they were rentals. This means that their values aren't based upon the sale price, but on a comparison to similar rental buildings, or "comparables."

The DOF's property division requires annual filings of confidential Real Property Income and Expense (RPIE) statements from all property owners whose tax lots have a total assessed valuation of over $40,000. Consequently, the DOF has an enormous amount of property-rental data by neighborhood and applies this data to create financial models for condominiums and cooperatives. From this model, the estimated net operating income is  capitalized to create a Full Market Value (FMV), to which an equalization rate is applied. The result is called the Total Assessed Value (TAS).

Staring in 2008, however, the DOF began utilizing a new method, creating a multiplier applied to the gross income of the building. This is then used to ascertain the FMV to which the aforementioned equalization rate is applied.

For Fiscal Year 2011/2012, however, the DOF went back to the old method, which it now calls "a more widely accepted method for valuing income-producing real property, taking into account the income and expenses of individual properties."

And yet . . . triple-digit increases in assessed values in a depressed market? Something doesn't add up.

Commissioner's Plans

Frankel at least paid lip service to the co-op and condo presidents and their elected officials, telling then, Friedrich said, that he would review the assessments in the affected co-ops and condos, which are primarily in eastern Queens. "I thought it was a positive meeting and went in a positive direction," Friedrich says, who noted that the standard assessment-appeal procedure, a legal specialty called certiorari, can be expensive and time-consuming, and that with spikes of double- and triple-digit percentages, even a negotiated assessment might still be back-breaking.

Will other parts of the city also rise up, a la the populist revolutions in Tunisia, Egypt, Wisconsin and elsewhere? If Muslims and Christians can work together, why not American political parties?

"This is a tax-protest Queens style," says Friedrich. "It started from the ground up — Democrats and Republicans together."

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