Nassau County officials are considering a proposal that would provide tax relief to thousands of homeowners who shouldered the huge shift in tax burden caused by former County Executive Edward Mangano’s overhaul of the assessment system.
Officials said they are looking at a five-year, partial tax exemption that would be automatically granted to owners of homes built before the overhaul began in 2010, are assessed at a high level and are worth $1 million or less. As a result, the exemption would primarily benefit the generally less well-off property owners who have not challenged their assessments successfully since the overhaul began and who bore the brunt of the overhaul’s tax shift.
Key details of the proposal, including how much it would save homeowners, must be worked out, officials in the office of Nassau County Executive Laura Curran said.
Disclosure of the proposal comes as a fresh Newsday computation shows that the shift of the tax burden, largely from more affluent property owners to everyone else, reached about $2.2 billion in the program’s seventh year, which includes October 2017 and January 2018 tax bills. That swing cumulatively came to $1.7 billion by the sixth year of the overhaul, as detailed in Newsday’s “Separate and Unequal” investigation last year. It jumped by the largest annual rise — $448 million — in the next year, the latest one for which records are available. Newsday’s projections show it is likely to grow by about $1 billion more in the next two years before a countywide reassessment is scheduled to kick in.
Curran said there are no easy solutions to the assessment system’s issues.
“If there were an easy solution, it would have been done,” Curran said. “This is absolutely a priority for my administration, to have a correct and defensible tax roll.”
The plan under examination would exempt a portion of a property’s assessment from being taxed. The cost would essentially be paid for primarily by the property owners who have challenged their assessments successfully, just as the $2.2 billion in savings they achieved so far from the overhaul has been shifted onto those who did not win grievances.
Curran and the county legislature have moved to scrap the Mangano system and complete the long-delayed reassessment of all properties. The reassessment is expected to address inequities gradually in order to avoid major hikes in the bills of those who successfully appealed. But Newsday has reported that it would lead to those who did not appeal continuing to pay a disproportionate share of the tax burden for potentially years to come.
Curran said the tax-exemption proposal is aimed at addressing concerns with the plan. It would provide some relief to those hardest hit by the overhaul in the reassessment’s first year.
“I heard those concerns loud and clear, and that is why this plan is so important, because it begins to address those concerns,” Curran said.
Because it deals with taxes, the proposal likely will require state and county legislative approval, officials said. Curran said county legislators on both sides of the political aisle have reacted positively to the initial plan.
A Newsday analysis found that almost 100,000 homes — 28 percent of the total number — located in every area of the county met the rough criteria being discussed as requirements to qualify, but that number will decline depending upon how many homeowners appealed for the first time this year. Overall, the total came to 99,693 homes.
The school districts with the most potentially qualifying homes included Elmont, with 5,379; Hicksville, 4,635; Uniondale, 4,433; East Meadow, 4,126; and Levittown, 3,804. Qualifying dwellings make up the largest share of all homes in Roosevelt, where they include 58 percent of homes; Uniondale, 55 percent; Glen Cove, 51 percent; the Nassau portion of the Amityville district, 46 percent; and Elmont, 45 percent.
Mangano unexpectedly won election in 2009, riding a wave of voter upset over tax increases resulting in part from the county’s last reassessment. Shortly after taking office, he developed a plan to reduce the cost of the assessment system by targeting in particular the refunds paid to property owners who won assessment challenges after tax bills had already been sent out.
Under state law, the county has to pay refunds not only for taxes property owners overpaid to it but taxes they overpaid to all the school districts, fire departments, towns and other authorities that base their tax calculations on county assessments.
The solution the Mangano administration implemented was to award reductions so large that challengers would quickly settle grievances before tax bills went out. The county also froze almost all assessments, locking in the large reductions of the victorious challengers as well as the unreduced assessments of other property owners.
The result was that those who were not awarded overhaul reductions essentially paid for the tax savings of those who did. Largely as a result of that, the median tax bills for properties for which assessments were not challenged have now increased $3,196, or 42.3 percent, since the year before the overhaul began. Meanwhile, the median tax bills of appealed properties have increased only $698, or 7.6 percent, Newsday’s latest analysis found. Median tax bills are those in the middle of each group, halfway between the largest and smallest ones.
The reductions and the freeze also largely reversed years of effort to improve the fairness and accuracy of county assessments after officials settled a lawsuit in 2000 alleging minority homeowners were being overtaxed. Newsday found that while some homes in all areas of Nassau are overtaxed as a result of the overhaul, homes in minority census tracts are disproportionately affected, raising the prospect that the county could face another suit, experts said.
Intended to address the disparities, the county’s reassessment project won’t affect tax bills for two more years while the cumulative tax shift continues to grow. After that, assessments will be increased until they are accurate, but the increases for homes would be limited under state law to no more than 6 percent a year or 20 percent over five years. The county said that over many years this would reduce and eventually eliminate assessment disparities.
However, assessment experts, including one of the county’s own contractors, have cautioned that such ceilings on assessment increases tend to increase disparities, something that could enlarge the shift.
County officials describe the reassessment as their first step in addressing the inequities caused by the overhaul and point to the partial-tax-exemption proposal as a next element. Before approving the reassessment, they said they had to move forward on it, arguing that the broadly supported plan operated well within state law and any delay in approving a reassessment would guarantee another year of the significant inequities caused by the current system.
“You have to stop the hemorrhaging at some point,” Chief Deputy County Executive Helena Williams said. “Now, how far away are people from fair market value? That creates the next set of problems.”
The “Separate and Unequal” series established that homes in predominantly minority communities were assessed at a median level 11.8 percent higher than others during the sixth year of the overhaul, which can result in tax bills being that much larger. That figure, which was updated for this story to include data that has become available since last year, grew to 12.7 percent in the seventh year of the overhaul.
After Newsday’s investigation was published last year, homeowners filed appeals in record numbers. The effect those appeals and the ones filed this year will have on the shift will not be clear until the county calculates the tax bills, which will reflect the appeal outcomes. The earliest of those will arrive in October. But the successful ones will cause a larger tax shift that will be borne by a smaller group of property owners who haven’t filed successful appeals.
Through last year, 72 percent of property owners have filed appeals at least once under Mangano’s system, while 28 percent have not, a balance that changed dramatically from the previous year, when 61 percent had filed and 39 percent had not.
The biggest winners were generally the nearly 26,000 homeowners who successfully challenged seven years in a row. As a result, there are wide disparities even among those who did appeal.
Merrick homeowner Paul Daus filed successfully once in 2012, an appeal that has so far saved him $19,072 on his taxes, Newsday calculated. But Daus, an accountant, said that since the grievance had deeply undervalued his home, he felt he couldn’t get another reduction and didn’t file again. When he learned that a neighbor had a larger home assessed lower than his, he tried appealing again. But Daus discovered that he can’t get assessed that low now because he didn’t file every year, something that the county never disclosed to property owners, as Newsday reported last year. The neighbor appealed successfully every year, saving $46,740.
Daus said the system was deeply unfair and never should have been implemented, particularly with little, if any, explanation as to how it works in full. He said the reassessment, which will keep him saving less than his neighbor at least initially, and the proposed tax exemption, which he won’t be eligible for due to his one appeal, might leave him stuck in the middle.
“I’m paying more money due to a lack of information that they didn’t provide,” Daus said. “They essentially passed a resolution that they didn’t tell everyone about.”
Newsday reported in March that the reassessment plan might actually increase the size of the annual tax shift because experts say higher-valued properties, like those that tended to benefit more from the overhaul, increase in value faster than others. If their values increase faster than other properties, it would take even longer for their assessments to catch up to what they are worth because of the limits on increases in the state law. If they increase faster than the limits, they can become even more undervalued, leading to greater inequities and a faster-growing tax shift.
Historical rates of appreciation give weight to the experts’ predictions. Since before the overhaul began, school districts with average home values of more than $1 million have seen values increase faster than other districts on average, according to a comparison of county data and the latest estimates from a county reassessment contractor. In the Manhasset district and the portion of the Roslyn district in North Hempstead, values have increased more than 4 percent on average, exceeding the five-year limit in the state law, which averages out to 4 percent per year.
County officials argue that no one knows how the housing market will behave in the future and whether it will cause racial disparities to shrink or grow after the next reassessment. A recession could even rapidly reduce the tax shift, returning accuracy in perhaps a few years.
Some property owners will immediately save money because of the reassessment, county officials said. Their latest projections show that as many as 3,000 properties will save money on their tax bills after the reassessment because they are now overassessed, officials said.
To get a sense of what homes might benefit from the partial tax exemption plan under consideration, Newsday used the most recent data available, covering appeals filed through last year and reductions awarded through the year before that. The analysis looked at homes built before 2010 where no appeals have been won since the overhaul began. Excluded were homes the county estimated to be worth more than $800,000 before the overhaul began, as they may now be worth more than $1 million, the cutoff point for eligibility.
In updating other analyses for this article, Newsday used the methodology employed last year in its “Separate and Unequal” investigation of Nassau’s tax system.