Property tax files are stacked for processing by clerks at...

Property tax files are stacked for processing by clerks at the Nassau County Department of Assessment in Mineola on Jan. 12, 2017. Credit: Newsday / John Paraskevas

A bipartisan plan to correct widespread disparities in Nassau County’s assessment system may take years and could even add to the problems, according to interviews with assessment experts and a Newsday analysis.

The agreement that the new county executive, Democrat Laura Curran, reached with the Republican-controlled Nassau Legislature, which could be approved Monday, allows a long-delayed reassessment of property in the county to proceed.

But the plan may not correct and might even worsen the assessment inequities caused by the tax overhaul launched by former County Executive Edward Mangano. As revealed in Newsday’s “Separate and Unequal” investigation last year, the overhaul consisted of awarding reductions to three-quarters of those who challenged their assessments each year while freezing nearly all others. That caused a cumulative $1.7 billion shift in tax burden during its first six years from generally more affluent property owners who successfully appealed their taxes to generally less affluent owners who did not. It also reversed years of efforts to improve assessments after Nassau settled a lawsuit alleging it overtaxed minority homeowners in 2000.

The latest proposal is intended to phase in the tax hikes caused by the reassessment over a period of perhaps 12 years for homes, one county contractor analysis suggests. The reassessment will hit those who benefited from the overhaul hardest because their assessments lag furthest behind their properties’ true market value. A long phase-in would shield them from jarring tax increases, but it would leave others continuing to pay a disproportionate share of the burden.

With tens of thousands of taxpayers on either side, the ramifications of implementing the reassessment are significant.

Supporters of the phase-in plan say a failure to act now would guarantee the current system leads to another year of increasingly large disparities on the county assessment rolls.

“Either we move this along or . . . we have another year in which the system gets worse,” the legislature’s presiding officer, Richard J. Nicolello (R-New Hyde Park), said at a recent hearing. “The roll that we have now just has to be corrected and we can’t wait any longer to do it.”

Proponents said the phase-in is the only legal way to complete the reassessment. But some question this, saying the county used a different strategy with its 2003 reassessment after the settlement of the racial discrimination lawsuit, a strategy that was upheld by the state’s highest court. Critics of the 2003 strategy said it circumvented the provisions of a state law that limits residential assessment increases to no more than 6 percent each year or 20 percent over five years. That’s because the county decreased the assessments of overvalued properties to restore accuracy, rather than increasing the assessments of undervalued ones.

Legis. Siela A. Bynoe (D-Westbury), who represents hundreds of homeowners whose tax bills increased during the overhaul, wants the 2003 strategy considered again before the reassessment is finalized. She said the new plan “goes further than prolonging, it actually makes it worse for Nassau County taxpayers. There’s more of a disparity. We want to move forward in a way that we don’t make it worse for people.”

Underscoring the political challenge presented by any plan that raises many homeowners’ taxes, the effects of the last reassessment in 2003 led to widespread upset and contributed to Mangano’s surprise victory in the 2009 county executive race. Tax bills affected by this reassessment will arrive in mailboxes in 2021 when races for county legislative seats and the county executive office will occur.

Risks and uncertainties

The effects of a long phase-in are somewhat unpredictable because of the uncertainties of the real estate market. Newsday’s analysis, however, indicates it runs the risk of continuing or worsening disparities.

One analysis cited by county legislators suggests that a phase-in that adheres to the state law’s assessment-increase limits may take 12 years. The analysis completed by county reassessment contractor Standard Valuation Services focused on how long it would take for a home currently valued by the county at 59.9 percent of what it is worth — typical for those that benefited from the overhaul — to get to 100 percent under the state law’s limits. During that time, properties that benefited less would continue to carry a disproportionate burden.

But that analysis doesn’t account for changes in property value, which can move the target the county has to reach even higher, making it take even longer to get to 100 percent under the law’s limits. And experts say higher-end properties like those that generally benefited from Mangano’s overhaul usually rise in value faster. If they rise in value more than the state law’s caps in one year, they could become even more undervalued. Meanwhile, other properties might not increase in value at all and move relatively quickly to 100 percent. That could prevent a phase-in from happening at all, and could in fact widen the disparities.

That is why the International Association of Assessing Officers, which sets professional standards, opposes assessment increase limits, said Larry Clark, the organization’s director of strategic initiatives. Absent “something unusual in the market,” higher-valued properties tend to benefit from assessment increase limits, Clark said.

“It distorts the property tax,” Clark said. “Eventually, everything is going to be out of balance.”

That was also the conclusion of Standard Valuation Services in a December report. If Nassau did not employ the 2003 reassessment strategy, the report said the state law “will predominantly benefit higher valued parcels, at the expense of lower valued parcels” and could lead to a legal challenge. Company officials did not reiterate this position during hearings on the plan before the county legislature. But company president Matt Smith said they understood the need to move quickly on a reassessment.

Tax bill disparities are spread throughout the county in every school district. But to get an idea of how the county’s plan might play out, consider a comparison of Manhasset school district homes, which frequently benefited from the overhaul, with homes in the predominantly minority Uniondale school district, which benefited less frequently.

Newsday’s analysis of county and contractor data suggests Manhasset homes are valued by officials about 58.7 percent of what they are worth on average and increased in value 4.3 percent a year since the tax overhaul began. Uniondale homes are valued at 68.1 percent of what they are worth on average and increased in value 0.2 percent annually over the same period.

If those real estate market trends continued, there would never be a phasing out of the assessment disparity between the two districts under the county’s plan, because Manhasset homes would increase in value faster than the state caps, which average 4 percent per year over five years. Instead, Manhasset homes would become even more deeply undervalued and the disparity between the two districts would double in three years.

Chief Deputy County Executive Helena Williams said hypotheticals such as those ignore the potential of property value declines. She pointed to several possibilities that could lead to that, including the recently passed federal tax law’s limitations on property tax deductions, changes in mortgage interest rates and even a recession or natural disaster.

“We have no crystal ball as to what will happen,” Williams said.

Indeed, if a recession caused home values in Manhasset and Uniondale to decrease at the rate they had been increasing, the disparity between them would close in three years. However, in that instance, the Manhasset homeowners would see the tax burden shifting onto them during a period when their home values were declining.

But Williams pointed out that properties within school districts tend to be similar and change in value at roughly the same rate. As a result, there could initially be little change in the distribution of the portion of the tax burden paid to schools, which makes up nearly 70 percent of the total.

“Our plan is to get good market values on the tax roll,” Williams said, adding that “what we think is tremendously unfair” is the current system that would only end with a reassessment.

Challenges ahead

To get around the problem of the limits in the state law, in its last reassessment the county chose to focus not on increasing the assessments of undervalued properties but decreasing the overvalued ones. That fixed things in about three years, and Newsday’s investigation found residential assessments were within industry standards right up until Mangano’s overhaul began in 2010.

The reassessment stemmed from a lawsuit filed by a group of homeowners led by community activist Diana Coleman. The case, which was later joined by the U.S. Department of Justice and New York attorney general, argued that the county’s assessments violated federal fair housing laws by overtaxing minority homeowners.

The situation today is roughly similar to when the Coleman case was settled, according to Newsday’s most recent study, which compared 2002 values to those from the sixth year of the overhaul.

While earlier studies, conducted around the time the case was filed in 1996, reported wider inequity, Newsday found the racial disparities at the sixth year of the overhaul were slightly wider than they were just before the 2003 reassessment occurred.

Leon Friedman, a professor of constitutional law at Hofstra Law School who helped craft the Coleman case, said the county could face another lawsuit if its current plan leads to racial disparities.

“I can’t say we would do it right away,” Friedman said. “We would have to do analysis before we could decide to go forward.”

New York City, the only other assessment system to which the state law limits apply, is being sued by civil rights groups and real estate interests over alleged inequities there in part because it has not addressed them by decreasing the assessments of overvalued properties.

Martha Stark, a former New York City Department of Finance commissioner who compiled data for the plaintiffs in that lawsuit, said Nassau’s plan would at a minimum cause the current inequities to persist and at worst would add to them. If the plan leads to racial disparities, she also said Nassau could face a lawsuit similar to the Coleman case.

“I would argue that it flies in the face of the notion of uniformity, if that is what they are opting to do,” Stark said. “They are going to end up right where we are.”

Williams said county officials will monitor the situation in New York City, including any assessment reforms officials pursue.

Though the state’s highest court ruled in favor of the strategy Nassau employed with its last reassessment, Deputy County Attorney Conal Denion said he did not want to speculate how a court would rule now and said any court challenge could hold up the reassessment, which would guarantee increasing disparities under the current system.

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