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Nassau tax assessments: Even some challenge winners lost out

Daniel Heaney, in front of his Merrick home

Daniel Heaney, in front of his Merrick home in August 2017, regrets the two years he failed to file a challenge. Credit: Howard Schnapp

A largely unpublicized facet of Nassau County Executive Edward Mangano’s property tax overhaul contributed to substantial disparities among the bills of homeowners who benefited most from the reforms — those who filed successful assessment challenges.

A Newsday investigation published earlier this year exposed a shift of $1.7 billion in taxes from property owners who won assessment challenges filed since the overhaul began in 2010 to those who did not, revealing what effectively have become two systems of taxation that are separate and unequal.

But Newsday’s ongoing probe of the overhaul has also uncovered disparate treatment even among those who did challenge regularly. Thousands of homes have been deemed ineligible for essentially automatic assessment reductions of 5 to 9 percent each year granted under the largely unknown overhaul component called Carry Forward because they failed to meet changing criteria that have not been made public.

Being deemed ineligible usually came at a price. For a home that qualified for Carry Forward, Assessment Review Commission staffers reviewing its appeal applied the reductions automatically to whatever they last decided the home was worth, a determination that may have been made as long ago as 2011. But for a home that didn’t qualify, the officials instead determined what it was worth when the appeal was filed — often a figure substantially higher — and then applied the 5 to 9 percent reductions. That resulted in the homeowners getting a smaller assessment reduction than Carry Forward-eligible properties, or no reduction at all.

The losses for the ineligible homeowners were then compounded if they appealed in subsequent years, even if they became eligible for Carry Forward. This is because the higher values established for their homes would be used as the base from which any subsequent tax reductions were computed.

Meanwhile, homes in their neighborhoods that were always eligible for Carry Forward obtained the maximum benefit from the automatic reductions year after year, with the commission continuing to value them at whatever they were worth as long ago as 2011.

The process has cost many homeowners hundreds of dollars.

How it works

If they file an appeal, homeowners can qualify for Carry Forward if they also challenged the year before, accepted a reduction offer made by the commission and also met the changing list of criteria the commission has used since 2012.

If a homeowner meets the criteria, the commission “carries forward” the value it developed the previous year, one that may have been carried over every year since 2012.

More than 93,000 homeowners were made Carry Forward offers last year and nearly 69,000 were not, but totals in other years may vary significantly due to the changing eligibility criteria for the process. About 20,000 of last year’s ineligible homes had not been appealed since the year before Carry Forward began, which necessitated them being valued. The rest were ineligible due to the changing criteria.

Among the criteria are actions homeowners might have chosen to put off if they knew the consequences, like listing a home for sale or taking out a building permit for a minor renovation. In at least one year, expensive homes were deemed ineligible.

“Why is this not published?” asked Jeff Gold, a former commission member and experienced assessment challenge adviser, when explained how Carry Forward works. “It might stop somebody from listing their house for sale. It might stop somebody from getting a permit.”

Commission chairwoman Robin Laveman said her staff develops the ineligibility criteria each year in an effort to identify properties that have likely changed in value. Because the criteria can change each year, it’s impossible to inform the public about them ahead of time, she said. Valuing the homes, she said, is intended to maintain accuracy and fairness by, for example, developing higher values for renovated homes or lower values for damaged homes before applying the reductions.

“If there is something we become aware of that at least raises a question that the status quo has changed, then an appraiser on my staff will take a look at it,” Laveman said.

However, the commission does not consider one factor that is usually a strong indication of a change in value: a lengthy passage of time since the last determination of what a home is worth. According to the most recent data, by 2015 the commission had offered reductions every year to more than 41,000 properties it had not valued since 2011 or 2012. Nassau home prices increased up to 11 percent over that period, according to real estate data firm Zillow’s home value index.

Laveman said her department, which was trimmed in size during Mangano’s overhaul, does not have the resources to value all homes that appeal each year, making Carry Forward a useful way to handle the volume of appeals.

The commission, which reviews all grievances and acts independently of the county assessment department, can only order an assessment decrease. In the past it had determined what nearly all homes being appealed were worth each year and offered a reduction if it found the home’s assessment was too high.

This is how the complicated process works now:

  • The nearly 200,000 residential appeals filed with the commission are pooled each year while county officials negotiate with leading tax appeal firms what assessment rate will be used to resolve them. The rates determine what fraction of a property’s value will become its assessment, and as the rate drops it can essentially produce an automatic reduction for those who appeal. The negotiations are part of an involved cost-savings strategy aimed at reducing the county’s cost of borrowing to pay for property tax refunds that was central to Mangano’s overhaul.
  • Any homeowner offered one of the negotiated reductions one year is likely to be offered it the next.
  • Other homeowners whose properties fall into one of the changing criteria that make them ineligible for Carry Forward are not automatically offered the negotiated reduction.
  • Commission appraisers review all ineligible properties, taking into account not just the value of any changes to a home but also each neighborhood’s real estate market. Since most neighborhoods’ prices have been increasing, the new value is often higher, especially if years have passed since the property’s last commission valuation, if any.
  • Higher commission valuations offset or eliminate the negotiated reduction. Even if the new valuation was dramatically higher, the commission cannot increase assessments under state law.
  • The new, typically higher valuation can then be “carried forward” to future appeals. As a result, that homeowner’s assessment and tax bills usually end up larger in subsequent years than they otherwise would have been.
  • Meanwhile, the homes that remained eligible for Carry Forward, which commission appraisers did not develop a new value for, got an automatic reduction year after year, even though real estate prices in their areas have also likely been increasing their worth.

Earliest challengers benefitted most

Carry Forward only affects homeowners, and among the overhaul’s biggest beneficiaries have been the 12,184 who started appealing in 2010 when the overhaul first affected appeals and obtained an automatic reduction each year since Carry Forward began in 2012. They had no way of knowing how much their actions would benefit them, because no one knew what form the overhaul would take when they first appealed and few knew about Carry Forward.

A typical owner of one of those homes saved 20 percent, or $15,338, on taxes during the overhaul’s first six years, after subtracting $2,110 in tax firm fees that Newsday estimated at 45 percent of first-year tax savings, the average of the rates charged by such firms. That savings is equal to more than a year of taxes for such homeowners.

Among the 37,275 homes that appeal each year and didn’t obtain the automatic reduction at least once, a typical homeowner saved $14,246, or 17 percent, after paying $1,848 to a tax firm. That’s $1,092 less. Newsday defined the “typical” homeowner as one whose savings and fees were in the middle or median of each group.

Obviously, homeowners who skipped a year or more of appeals lost out on substantial savings when they didn’t file, but then they also often saved less if they began filing again because they were ineligible for Carry Forward. The typical homeowner among the 12,694 who appealed every year beginning in the fourth year of the overhaul, 2013, saved just $6,541, or 9 percent, and the typical homeowner among the 21,845 who first filed in the overhaul’s sixth year, 2015, saved just $1,393, or 2 percent.

Gold said he had heard of Carry Forward’s name. But despite spending years helping thousands of homeowners appeal on their own for free or with his help for a fee, he said he never knew that listing a home for sale would result in years of higher tax bills due to Carry Forward.

A Democrat who ran an unsuccessful bid for the Bellmore county legislative seat this year, Gold said he has always told homeowners to file every year, even if analyses offered on the county website where challenges can be filed tell them they won’t get a reduction. The website often incorrectly tells applicants they won’t win, Newsday has reported. It also makes no mention of Carry Forward.

“It sounds to me like they are just picking and choosing as they go along what rules they want to apply,” Gold said of the commission.

Merrick homeowner Daniel Heaney, 52, is among those who missed some years of grievances. He had been using a tax firm at the start of the overhaul, but he was displeased with paying a fee to the company because his savings did not result in an overall decrease to his tax bill, only a smaller increase.

So, Heaney didn’t file for the second and third years of the overhaul. He saved just $7,503.34, or 9 percent, on his tax bills in the overhaul’s first six years before subtracting tax firm fees. He says it’s a decision that upsets him to this day.

“I got hurt for not doing it those years,” Heaney said. “You never will make it up, not filing. That will always be money lost.”

Heaney said he now attends one or two workshops every year held by Gold and various officials. He said he learned in those workshops how important it was to file every year, but he had never heard of Carry Forward or what might make his appeal ineligible.

“I think it should be pretty much put out there for you,” Heaney said. “But if I do everything within my power, I go to these classes, it’s still not there.”

Many homes eligible for Carry Forward this year have already been offered the 6 percent cut negotiated with tax firms. After negotiations each year, Laveman said the offers are generated automatically and are handled no differently if filed with or without a tax appeal firm.

That raises the question of whether hundreds of thousands of homeowners have paid thousands of dollars in fees to tax appeal firms for doing little more than filing an appeal form properly, a task that can be completed in minutes on the county website.

Fred Perry, who owns one of the county’s largest residential tax appeal firms, said that in some cases Carry Forward offers need to be appealed in court, something with which his firm has many years of experience. He also pointed out that no one knows what policies the county might adopt each year and whether a tax appeal firm will be needed to properly navigate them.

“I still think we offer a valuable service,” Perry said.

Laveman said that this year these criteria made applicants ineligible for Carry Forward:

  • They failed to file last year.
  • They were not offered or did not accept a commission offer last year.
  • They appealed their grievance in court last year.
  • They took out a building permit.
  • They listed their home for sale or sold their home.
  • They saw their home’s assessment modified by the county’s assessment department.

But Laveman declined to specify criteria used in the years before she began working with the commission other than that particularly expensive homes had been considered ineligible during at least one year in the past.

“I was not there,” Laveman said. “So I can’t really speak as to what was done.”

Criteria may not reflect value

Some of the Carry Forward ineligibility criteria are not well-targeted indicators of whether a home has changed in value because, unlike a building permit, they don’t connote a physical change since the property’s last appeal.

These criteria include a homeowner’s decision to skip a year of grievances or list a house for sale. Laveman said homes that skipped a year need to be reviewed by appraisers to ensure nothing changed since their last valuation. She said properties listed for sale must be reviewed to confirm that the listings don’t contain information that contradicts county records of the home’s condition, and that the commission’s valuation is similar to the sale price of any sold properties.

Condominiums and homeowner’s association residences are always ineligible for Carry Forward, Laveman said, because their appeals are usually filed by a board of managers and a commission appraiser reviews them and settles them as a group.

Carry Forward was noted publicly for the first time last year in offer letters sent to the small segment of homeowners who file without the help of a tax appeal firm. The letters revealed the name Carry Forward, the fact that it only applied to those who accepted a commission offer in the prior year and explained that Carry Forward offers are generally nonnegotiable.

Before that, the commission had allowed Carry Forward offer recipients to schedule a conference to negotiate a better offer. Laveman said she decided to end the practice to redeploy limited resources.

Cindy Kanner Denbaum, who operates a small business out of her home helping people file challenges on their own for a fee, said she had never heard about Carry Forward or how it works. She said the county should tell the public about it directly.

“It should be public information, no question about it,” Denbaum said.

CORRECTION: Cindy Kanner Denbaum’s name was misspelled in an earlier version of this story.

Assessment questions and answers

Question: I know the Assessment Department sends me notices each year, but what is the “Assessment Review Commission?”

Answer: The Assessment Department sets assessments and sends property owners a notice each January informing them of what their next assessment will be if they don’t challenge it. It’s called a “tentative” assessment.

The Assessment Review Commission, which acts independently of the Assessment Department, hears all challenges to tentative assessments and can order the Assessment Department to decrease a tentative assessment before it becomes final if it determines the assessment is too high. It cannot order the Assessment Department to increase an assessment, even if it thinks the assessment is too low.

So, both agencies appraise or value property. The Assessment Department determines what property is worth when it sets assessments and the Assessment Review Commission values property to determine if the tentative assessment is too high.

However, both agencies now value far fewer properties each year than they did before the county’s assessment system overhaul began. The Assessment Department doesn’t value as many properties due to an assessment freeze. The commission no longer develops values for each appeal filed each year, and instead “carries forward” values it developed for properties that accepted a reduction offer in the prior year and met other conditions under an overhaul component called Carry Forward. In some cases, the values “carried forward” were developed by the commission many years ago.

Q: But isn’t there an assessment “freeze” going on right now? How can assessments be changing at all?

A: The Mangano administration “froze” assessments in 2010, but there were exceptions.

First, if the condition of a property changes due to a renovation, demolition, storm damage or for other reasons, the Assessment Department can set a new assessment taking into account those physical changes to a property. That new assessment might be higher or lower than it was before.

Second, if a property owner files a successful challenge of a tentative assessment then the Assessment Department will be ordered to lower it before it becomes final. This is permitted under the freeze.

Q: Is the Assessment Review Commission the only authority that can order the Assessment Department to lower a tentative assessment?

A: No. The court system can also order an assessment lowered. If a property owner is dissatisfied with a decision made by the Assessment Review Commission, he or she can appeal the decision in court.

However, any property owner who does not accept a commission offer each year risks having the commission develop a new value for their property in the next, assuming they file again and the commission continues the overhaul component known as Carry Forward. The result could be a denial of the property owner’s next appeal or a smaller reduction than they otherwise would have been awarded — and that would occur regardless of the court case’s outcome.

— Matt Clark

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