Changes to Nassau County's flawed property tax assessment system pushed by politically connected taxpayer grievance firms have helped those companies win more challenges and increase their collected fees by millions of dollars, a Newsday computer analysis found.
The seven largest firms handled 72 percent of the nearly 137,000 residential property tax challenges filed for the 2015 tax year and they have seen their success rate skyrocket under the Residential Tax Grievance Negotiation and Settlement Program, which Nassau County Executive Edward Mangano implemented in 2010. Only 42 percent of all tax grievances were settled for 2009, but the figure spiked to 84 percent by 2013, according to county records. The seven largest firms, who collect from residents up to half of any first-year tax reduction as their fee, settled roughly 88 percent of their cases for 2015.
Those top firms -- who each settled at least 1,000 cases for 2015 -- have rewarded Mangano since his first run for county executive in 2009 by donating at least $1.2 million to his campaigns, to a political action committee they formed and to other Nassau County Republican candidates and committees, campaign finance records show.See alsoThe analysisSee alsoThe process: Protesting your taxesSee alsoMore Newsday investigations, analysis
To be sure, Mangano's new program settles a far greater share of tax challenges and replaces a system criticized for waste and overtaxing. But Newsday's analysis points to an ongoing flaw: Nassau County operates a property tax system in which a homeowner's best chance to keep money the county erroneously tried to collect is to hire a private firm that worked with Mangano to create this system.
Property owners can choose to pursue tax grievances by representing themselves, allowing them to earn a reduction while paying no fee. But Newsday's analysis found those cases to be settled far less frequently. Fifty-nine percent of such pro se cases were settled for 2015, an improvement compared with the old system but 29 percentage points lower than what the top firms manage.
Robin Laveman, chairwoman of the county's Assessment Review Commission, the administrative body that handles the first step in the grievance process, said she works hard to ensure all challenges are given the same chance at a reduction. She said her staff does not know who filed a claim while it is being reviewed unless a challenger has a conference with the commission.
"Everything is worked on blind," Laveman said. "Our staff doesn't necessarily know if they're working on a representative file or a pro se file."
Mangano has said he changed the old system to reduce the county's annual $20 million cost of residential property tax refunds, paid to property owners who appealed commission rulings in court. The process sapped court resources and county staff time and forced the county to borrow money to pay for refunds due to its inability to budget for them.
With the new system, the county now avoids most of the tax refunds by settling cases that otherwise might have ended up in court, where cases sometimes weren't settled until after tax bills had been paid by the homeowner.
As the number of settlements soared, so have the representative firms' fortunes. Although the county does not maintain records on how much representation firms earn, a 2008 Assessment Review Commission report shows firms saved homeowners $30.9 million in property taxes by settling 31,400 cases (this does not include another 13,000 cases settled in court for that year, according to the county's Office of Legislative Budget Review). For 2015, the firms settled 95,400 cases, according to Newsday's analysis, without the cost of going to court.
Fred Perry, a Westbury attorney who settled the third largest number of grievance cases this year, said the political connections of the firms, and their high success rates, are to be expected.
"It is not unusual for a few experienced companies to dominate a specialized field, get better results than the public at large, benefit when their clients -- the public -- benefit from fair policies, and make large political contributions to lawmakers that encourage those policies," Perry wrote in an emailed statement.
Mangano spokesman Brian Nevin said he "won't dignify the assertion with a response" that there could be a connection between the firms' success under the new system and their campaign contributions to Mangano. He noted that Mangano has pursued numerous other fixes to the system but has been rebuffed by court rulings and resistance from state legislators.
"With the limited local authority we have to address the system, the administration has saved present and future taxpayers tens of millions of dollars while providing an annual process for taxpayers to grieve," Nevin said.
Laveman said Nassau County legislators have conducted numerous training sessions about the process for their constituents, and homeowners looking to represent themselves can get help from her staff. Laveman said she is also working on a video tutorial on the county's online filing system for the commission's website.
"That's one of the things that we've worked very hard to do -- is to make it very user friendly for pro se litigants to file," Laveman said. "Our staff is very hands-on with pro se litigants to help them."
Nonetheless, pro se challengers who spoke with Newsday said they did not feel the system was fair, even when they have received reductions.
Henriette Sheriff of East Meadow has seen her home's assessed value reduced more than 18 percent through grievances she filed herself since the 2012 tax year. But she said she lost her most recent challenge to reduce her assessed value, which she said was warranted because a contractor walked away from a renovation and left half her home unfinished.
Despite her mixed record of success, Sheriff said, "the system doesn't really work" the way it should.
"When you use those firms, you're losing 50 percent," Sheriff said. She called it a "Catch-22 where you're not getting justice."
Paola Orsini, who runs Re-Assessment & Evaluation Services, a firm that settled the seventh-largest number of residential grievances for 2015, made an analogy to illustrate the difference between pro se cases and cases handled by the major representation firms.
"There are some people who file their own tax returns, they use Turbo Tax. There's some people who use a CPA," Orsini said. "There's a reason you hire a firm."
'Quashed by government'
The large taxpayer representation firms thriving under Mangano's program watched their business model wither under Mangano's predecessor, Thomas Suozzi.
Nassau County had reassessed properties annually for six straight years by 2009, and county officials pushed back against the tens of thousands of challenges representation firms filed on behalf of their clients.
Shalom Maidenbaum, owner of three firms that, when combined, represent the largest group of tax grievance clients in the county, said Suozzi's stance threatened his business by preventing more homeowners from obtaining reductions.
"He basically made us more aware that if you don't get out there and speak the truth, you may be quashed by government," said Maidenbaum, who operates Long Island Tax Reductions, Maidenbaum & Sternberg, and Maidenbaum Property Tax Reduction Group. "That has been my motivation for becoming more involved."
As Mangano vied for Suozzi's position in 2009, he tapped into the anger residents had over their property tax bills, which were among the highest in the nation. Mangano, who has called the assessment system "dysfunctional," made property taxes a campaign issue and pointed to the costs of defending assessments and paying refunds.
It was during that race that the largest tax representation firms created and funded a new political action committee -- the Committee for Fair Property Taxes.
Campaign finance records show five of the firms, or their officers or directors, gave at least $51,675 to the Committee for Fair Property Taxes, the Nassau County Republican Committee or Mangano's campaign account in 2009.
A partner with the Mineola firm Schroder & Strom, which had the sixth-largest number of settlements for 2015, was the only key member of one the county's largest firms to make a donation, for $500, directly to Suozzi, records show.
The Committee for Fair Property Taxes gave $5,000 each to Mangano and Suozzi in 2009, but the committee's single largest donation was $60,000 to the North Valley Stream-based committee "NVS Victory Campaign Fund II." That organization then gave $34,669 to the Nassau County Republican Party's longtime political consulting firm, Mclaughlin & Associates, and the rest to four Nassau County Republican committees.
Suozzi lost to Mangano by 386 votes.
Orsini is listed as the treasurer of the Committee for Fair Property Taxes and is also a member of the Nassau County Republican Party Committee. She said the committee wasn't formed to save her industry or curry favor with politicians but to support candidates of all parties who care about a homeowner's right to challenge their assessments, which she said Suozzi took away from them.
"The Committee for Fair Property Taxes gives to candidates who want to do the right thing towards the homeowner," Orsini said.
After taking office in 2010, Mangano formed a residential assessment reform team to examine fixes to the property assessment system. Members of his four-person team included Orsini and Maidenbaum.
Mangano implemented the team's recommendations and announced the results of his new program in an April 2011 news release touting that officials had resolved 81,000 grievances without going to court and owing refunds.
"This is an important step in the total transformation of the broken property tax assessment system that has pushed Nassau County into fiscal instability," Mangano said at the time.
The assessment system still faced criticism. As thousands of homes received reductions, governments increased tax rates to make up for their shrinking tax base. In 2013, Newsday reported homeowners' school tax rates jumped an average of 19.1 percent in two years, and critics claimed those who didn't challenge their taxes bore the brunt of those increases.
Suozzi made the increasing tax rates an issue when he sought to regain the county executive job in 2013. He called Mangano's assessment program "simplistic political skulduggery" that increased taxes on those who didn't challenge their assessments.
The Committee for Fair Property Taxes -- backed by representation firms flush with fees collected under Mangano's program -- put its money behind Mangano.
Campaign finance records show the seven largest representation firms, their officers and directors contributed at least $749,000 to the Committee for Fair Property Taxes, the Nassau County Republican Party Committee and Mangano's campaign between January 2010 and the 2013 general election. It was more than a 1,300 percent increase over the 2009 contributions for the first contest between Mangano and Suozzi.
Mangano beat Suozzi by 17 points, or 49,315 votes.
Firms v. pro se
Any inequities created by Mangano's system are likely to remain until the county conducts a reassessment of properties. Mangano froze assessed values from increasing, with some exceptions, and the next reassessment will not be completed until 2018, after Mangano's current term expires.
Meanwhile, county officials and the taxpayer representation firms point out that every Nassau homeowner has a way to ensure they've been assessed fairly.
"There is a remedy to it: File," Orsini said. "It's not that it's a closed process, or it's hidden and it's only for a select few."
That process is different for the firms and those who file pro se grievances. The large firms can have tens of thousands of cases, and bringing them all to the Small Claims Assessment Review court would require county staff to defend them and could result in millions of dollars in refunds.
To avoid that outcome, the county's Assessment Review Commission exchanges larger and larger offers with the firms until enough of the cases are settled. In a final attempt to avoid a court hearing, the firms may also receive another offer from the county assessor's office for the cases that don't get settled.
The pro se filers follow a process similar to the one in place before Mangano's changes. If the county makes them a reduction offer, it is sent in the mail and doesn't change, with few exceptions. Laveman said pro se filers can negotiate with her office, and their offer letters invite them to call or email the commission with "any questions regarding our settlement offer." But fewer than 400 of 16,000 pro se filers continued to negotiate with the commission this year, Laveman said.
Although pro se challengers represent the sixth-largest group of claimants, court records show for 2015 they filed less than 5 percent of the cases in SCAR court, where hearing officers determine whether a reduction is warranted.
Andrew Rothstein, an attorney with a home in Roslyn Heights, filed pro se last year after noticing similar homes in his neighborhood were assessed far less than his.
Rothstein said he took his case to court after the commission offered him a reduction of just 1 percent. After his hearing in court, where his case was denied, Rothstein said he did not know he could negotiate with the commission and was disappointed to learn that representation firms trade multiple offers with the county before they go to court.
"That's why we have this whole process is fairness, but that's not what it's about," Rothstein said. "The campaign contributors have a wink-wink deal."
The soaring number of tax grievance cases has created another unintended consequence: A growing number of clients who are unwilling, unable or even unaware that they need to pay the representation firms when they get a reduction.
Data from the state court system show a spike in small claims collections cases filed by the seven largest tax grievance firms. Of the 8,599 cases filed since 2000, nearly 61 percent occurred after Mangano became county executive.
Before 2011, the firms would frequently take their fee out of the refund check issued by the county. But now that most cases are settled before a tax bill is paid, firms must bill their clients for their share of the tax savings.
Maidenbaum, whose firms have filed more than 1,100 small claims cases since 2010, said he sends numerous notices to clients before filing in court and that they often just don't open their mail. He said he works with clients by accepting payment plans or forgiving debts when there are genuine issues with their ability to pay.
Douglas Hard of Garden City said he paid a $1,148.34 bill and a court fee for a small claims case brought by Orsini's company. Hard said he didn't pay originally because he was confused and thought settling his 2011 claim meant Orsini was going to be sending him a check.
Hard said the experience left him "displeased with both how it was handled and what I was led to believe."
Sean Acosta, whose Property Tax Reduction Consultants firm is the county's second-largest with 19,000 cases settled for 2015, said customers who remember the days of refund checks now seem to be the least willing to pay.
"People used to love me when I got back a refund check, took my fee, and gave you a check," Acosta said.
"I was like Santa Claus. . . . Now, it's almost like the government -- they collect your taxes."
With Celeste Hadrick
Newsday analyzed nearly 137,000 residential property tax assessment appeals filed with Nassau County's Assessment Review Commission for the 2015 tax year, which includes the October 2014 school tax bills and the January 2015 general tax bills. The analysis focused on challenges that resulted in a settlement and a reduction in a home's value between the tentative and final assessment rolls. Because the commission sometimes considers a case "settled" even when a challenger agrees that no reduction is warranted for their property, some homes may have been reduced for other reasons, such as those assessed for superstorm Sandy damage during the grievance period. Sandy struck Long Island after Mangano implemented his program, so the jump in settlement cases are not attributable to the storm.
Newsday's story doesn't address the firms that settled fewer than 1,000 cases. They typically had settlement rates below the larger firms and pro se challengers. Representatives with some of those smaller firms, as well as county officials, agreed that this group made for a poor comparison with the large firms and pro se cases because they handle small caseloads and often specialize in litigation -- two factors making them more likely to reject the commission's offers and take their cases to court.