Why Property Tax Reform Keeps Stalling

Every New York City mayor since Ed Koch has attempted to promote some kind of property tax reform, only to fall short or else create new, unintended inequities. Arguably, Mayor David Dinkins got the furthest in tackling the tax system’s problems with his 1993 Real Property Tax Reform Commission.

Calling the system “opaque,” “confusing,” and “unfair,” the commission proposed three main suggestions for fixing it: (1) end the preferential treatment of homeowners over co-op and condo owners; (2) raise the effective tax rate as a property’s market value increases; and (3) use a homestead-exemption for some portion of the market value of owner-occupied houses – meaning, reduce taxes on homes valued at $150,000 or less when the homeowner actually lives in the home.

The commission produced its official report on the last day of the Dinkins Administration in 1993. Four years later, well into the administration of Mayor Rudolph Giuliani, the city created the Co-op and Condo Tax Abatement in an effort to create more parity between co-op owners and homeowners – an effort that has unspooled in such unwieldy fashion that today, many co-op and condo owners actually pay far less than homeowners, because their buildings are so demonstrably undervalued.

The lesson of the Giuliani attempt might be that trying to fix just one part of an unequal system is bound to create new disparities. That’s why critics have called for a more comprehensive approach. Hence, the proposed City Council commission on property tax reform, called for in 2014 by City Council Speaker Melissa Mark-Viverito and Finance Committee Chair Julissa Ferreras. In response, the City Council allocated more than $400,000 in the 2015 budget for two task forces to study taxes (property taxes and commercial tax expenditures). So far, the latter task force, created in January 2015, has met three times. The task force on property taxes has yet to be created.

One problem is that, ultimately, changes to the overall tax structure can only be made in Albany. While the City Council has the power to raise the tax rate assigned to each class – and did so in the early 2000s when it raised and then lowered the tax rate in response to changing city fortunes – the assessment rate for each class is set by the state. That keeps the percentage shares relatively consistent.

In April 2015, Manhattan Borough President Gale Brewer found herself in an awkward position during a question-and-answer period at a conference of the Regional Plan Association, a not-for-profit regional planning organization that focuses on recommendations to improve the quality of life and economic competitiveness of a 31-county, tri-state region in the New York metropolitan area. When asked why there had been no efforts to reform the current system, Brewer stuttered for a while before finally acknowledging it was “just too political” to do.

Brewer’s office declined to answer an e-mail and phone call regarding her comments. It’s fair to note that a borough president has no power over property taxes. But some critics of the tax system feel Brewer’s candor was revealing.

“That little line of hers is why there is no commission,” says Carol Kellerman, president of the nonpartisan Citizens Budget Commission, who listened as Brewer hemmed and hawed her way through her answer. “She basically fumbled around and in broken sentences said, ‘It’s just too complicated and political, and nobody wants to touch it.’ I went back to my office and told my staff that her efforts to answer the question, as well as her answer, pointed out precisely how hard it is to reform taxes.”

This story is excerpted from “Why the Effort to Reform the New York City Property Tax System Has Stalled” on citylimits.org. It is reprinted with permission.