While Newsday’s investigation of Nassau County’s property tax assessment system has primarily focused on the effect County Executive Edward Mangano’s overhaul has had on residential property owners, commercial property owners have been affected, too, in ways both similar and more profound.
Business owners are both more likely to file a grievance than other property owners and pay a higher effective tax rate. As a result those that have not filed a challenge — whether they thought they were already underassessed or were not fully informed of the advantages of appealing — have been hit even harder than homeowners who haven’t filed.
However, their plight is not as apparent as it is in the tax bills of homeowners, because business owners with successful assessment challenges often see no change in their property tax bill. Instead, they receive massive tax refunds covering multiple appeals filed over several years, representing 70 percent of all the refund money paid out.
Commercial property owners have already been paid $95.9 million for appeals filed since the start of Mangano’s reforms in 2010, according to county data. They are expected to receive another $153.7 million in additional refunds for settled claims the county hasn’t paid or unresolved claims it expects it will have to pay in the future. The refund data runs through the county’s 2015-16 tax year, for October 2015 school tax bills and January 2016 general tax bills.
The tax bills of commercial property owners don’t reflect those refunds, resulting in them not showing the true impact of the reforms. The median bills of those who have appealed increased $2,981 between 2010-11 and 2016-17, compared to an increase of $3,569 for those who did not appeal over the same period, according to a Newsday analysis of county tax bill data. The median bills are those of typical property owners whose burden falls halfway between the largest and smallest ones.
David Molloy, 70, has owned Locust Valley Coach and Motorworks for nearly 40 years. In the first six years of the assessment overhaul, tax bills on his company’s 100-year-old building and two adjacent parcels have risen $23,514, or 57 percent, since the year before Mangano’s overhaul.
“It’s sort of pushing me into selling my business and the building,” Molloy said. “The rents I can get for the rest of the building plus what I have to charge myself kind of prices me out of the market for what I can charge for an oil change or a routine maintenance.”
Commercial property grievances can be more challenging to file and court appeals for such claims are handled by attorneys in State Supreme Court, unlike claims for owner-occupied homes, which are handled in a small claims court. For small business owners, that can make appeals more challenging in terms of the time and the expenses involved. The cases often last for years, resulting in significant interest accumulating on any refunds the property owners eventually receive.
Molloy said he didn’t file a grievance because the county’s appraisal on his building is low, not knowing that the county assessed those filing an assessment challenge far lower. He points out how the high taxes affect the property’s value.
“Anybody who comes in here asking about buying the building, the first words out of their mouths are, ‘How much are your taxes?’” Molloy said. “Everything hinges on what your taxes are.”
Attorney Michael Helfer, 65, also said he didn’t grieve the assessment on the converted Bellmore home housing his practice because the county’s appraisal seemed fair. His bills have increased $9,918, or 46 percent.
“I didn’t realize that the property owners that didn’t grieve were footing the bill,” Helfer said. “To me, it’s robbing from Peter to pay Paul.”
Helfer’s bills increased this year alone by $4,263, and this was at least partially due to a new tax shift. A 2014 state law championed by Mangano began essentially charging the cost of commercial property refunds back onto just commercial property owners this year instead of onto all types of property owners or to future generations through borrowing.
The law established an escrow-like Disputed Assessment Fund made up of the taxes raised from the disputed portion of assessments that property owners are challenging. The money is designated to be used to cover grievance payments and settlements, with any leftover sums distributed to the school districts and other governments that otherwise would have received them when they were first collected.
Because the tax money is sequestered in the fund until a grievance is resolved, the county and its constituent tax authorities have increased their tax rates on all commercial property owners to make up the difference, essentially charging them for the cost of the refunds. This contributed to an $8,735 year-over-year increase Molloy saw in his bills.
Robert Staber, 59, said he is also being pushed into retirement by the tax bill increases. He no longer has any employees at the automotive shop he has owned since 1984, Mid Island Auto in Rockville Centre. The bills on the two parcels that make up the property have increased $13,749, or 63 percent, including $4,415 this year alone.
Staber said he thought about appealing but couldn’t find a firm willing to do it on a contingency basis.
“I’m getting ready to retire out of state, ‘for sale by owner.’ They just can’t keep doing it,” Staber said of the tax bill increases. “I have to cut corners elsewhere to make the difference up.”