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Nassau STAR errors benefit school district taxpayers, Newsday review shows

The county miscalculated nearly a million exemptions, which were small but added up to hundreds of thousands of dollars over seven years.

The Nassau County Department of Assessment in Mineola.

The Nassau County Department of Assessment in Mineola. Photo Credit: Howard Schnapp

Over the past seven years, Nassau County miscalculated nearly a million exemptions provided through New York’s primary school property tax relief program, causing the state to send hundreds of thousands of dollars more in aid to county school districts than it should have, Newsday’s investigation of the county tax system shows.

The errors involving the state’s most popular tax exemption, the School Tax Relief or STAR program, usually cost or saved homeowners $2 or less in a given year. But they added up, with state taxpayers footing the bill. When the homeowners saved more than they should have, state payments meant to compensate school districts for lost revenue ended up being larger, too.

The mistakes, which occurred in five of the past seven tax years, raise new questions about Nassau County Executive Edward Mangano’s management of the assessment system. After taking office, he reduced the staff of the Assessment Department by 40 percent to save money and promoted a department employee with no experience assessing to the position of acting assessor. The Mangano overhaul also included awarding reductions in almost four out of five assessment challenges and an assessment freeze on nearly all other properties.

While these decisions saved the county budget tens of millions of dollars, they also reversed years of effort to increase the accuracy and fairness of Nassau’s assessments, Newsday’s investigation showed.

The end of the freeze, which had already been delayed for years, will not occur in January 2018 as planned.

In all, the miscalculations led to 426,317 homeowner tax bills being smaller by a total of $993,686. The mistakes also led to 548,721 tax bills being larger than they should have, but by a far smaller total, $186,835.

Because the errors saved county taxpayers far more than they cost them overall, the state payments ended up being larger overall than they otherwise would have been. Among the 54 affected school districts, East Meadow taxpayers were the biggest winners, as they saved $344,339 more than they should have, according to the Newsday analysis of county tax bill data.

The errors emerged when Newsday recalculated 2.5 million tax bills to estimate how much revenue firms that handle assessment challenges billed their clients during the first six years of Mangano’s overhaul, which began in 2010. The STAR errors first appeared on bills sent in October 2011 and continued for the next two years. October 2014 and October 2015 bills were accurate, but errors appeared again in October 2016 bills and those sent this year.

The mistakes occurred because of a failure to properly implement caps on STAR tax savings, which the state had allowed to rise no more than 2 percent year-over-year starting with October 2011 tax bills. The limits, which are posted on the state’s public website, were not accurately adhered to by the county, the Newsday analysis shows. Instead of obtaining the limits from the state, county officials calculated the caps themselves, and most of their errors were due to a failure to round the numbers.

Acting Assessor James Davis conceded that Newsday found errors of between $6 and $31 on the October 2013 bills of 45,208 homeowners in six school districts. Those errors accounted for 90 percent of the extra savings homeowners benefitted from due to the miscalculations. While those miscalculated caps were also not rounded, the county’s formula resulted in those larger errors because it also failed to account for a decrease in a separate cap on how much of an assessment can be exempted under STAR that affected only those six school districts.Davis asserted that the other 929,830 instances were not mistakes but computations arrived at by using to-the-penny calculations rather than the rounded numbers used by the state.

“We stand by our calculations and the calculations are consistent with the state’s formula,” he wrote in an emailed response to Newsday’s request for an interview, pointing to a state web page that in simple examples explains how to calculate the caps.

However, the section of the state’s real property tax law pertaining to the STAR savings caps states that it requires the calculation to be “rounded to the nearest dollar.”

The web page referred to by Davis does not relay the technical requirements in the state law, which the county adhered to in two of the seven years examined by Newsday, but repeatedly states that Albany officials calculate the STAR caps and links directly to lists of them for every New York school district.

James Gazzale, a spokesman for the New York Department of Taxation and Finance, said his office rounds the STAR savings caps to the nearest whole dollar “because that is what the law requires.”

Frank Mauro, executive director emeritus of the Fiscal Policy Institute in Albany, a nonprofit research group, said rounding rules are included in many laws where dollar amounts are calculated by formulas.

“For a subset of such laws, particularly for those that involve the issuance of checks, the language frequently requires rounding to whole dollar amounts,” Mauro said.

STAR either reduces homeowners’ school district tax bills or — for those who first applied in 2016 or later — results in them receiving a savings check after getting their tax bills. The program, enacted by the state in 1997, seeks to reduce taxes for those who live in a home they own and earn $500,000 or less annually. Senior citizens earning $86,000 or less can obtain the Enhanced STAR exemption for a larger tax break.

Newsday did not review the accuracy of the checks sent to newer STAR recipients that are calculated and mailed by state officials — and which many taxpayers waited through months of delays to receive last year — but found errors with the STAR tax bill reductions calculated by the county. Errors were found in the calculation of both the Basic and Enhanced STAR exemptions.

Gazzale said state officials were not aware of any instances of the sort of mass miscalculation of STAR exemptions identified by Newsday.

Smaller errors have been caught by the department or school districts and fixed, Gazzale said. Delays or any errors with checks the state now mails to some newer STAR recipients will be addressed this year through a new property tax processing system, among other changes, he said.

When errors have been noticed in state aid payments already sent to school districts, they have been accounted for by adjusting future-year payments, Gazzale said. Newsday could find no record of adjustments following Nassau’s errors.

The county’s mistakes led to 11,150 homeowners in the East Meadow school district saving an additional $341,854 on their October 2013 tax bills for the 2013-14 tax year, according to Newsday’s analysis. That resulted in the district receiving a state payment larger by that amount than it should have, the largest single-year discrepancy caused by the county’s errors. But the district’s payments were not reduced in any subsequent year, according to data from the New York State comptroller’s office.

However, neither Gazzale nor Davis responded to Newsday’s questions about what, if anything, would be done to address Nassau’s errors.

The county’s miscalculations resulted in homeowners saving far more than they lost, by a total of $806,851. Homeowners out the most money were those in the Great Neck school district, with a five-year total of $14,876. Aside from East Meadow, other major beneficiaries include homeowners in the Plainview-Old Bethpage school district, who saved $210,316 more than they should have, and those in the Massapequa school district, who saved $190,071 more than they should have.

Newsday reported this year that Davis, the acting assessor, does not meet the qualifications voters required for the position in a 2008 referendum. While he has worked in the department for 23 years, he had no experience valuing property, according to the two former assessors he worked under.

Aside from East Meadow, the other large errors in the October 2013 tax bills occurred when 7,273 homeowners in the Plainview-Old Bethpage school district all received bills $28.41 smaller than they should have; 11,528 homeowners in the Massapequa school district all received bills that were undervalued by $16.99; 4,321 homeowners in the Wantagh school district all benefited from miscalculations of $13.31; 7,643 homeowners in the Farmingdale school district saw bills that were $9.06 smaller; and 3,342 homeowners in the Island Trees school district received bills smaller by $6.11.

All other errors in all years resulted in bills that were less than $2 above or below what they should have been.

Newsday’s analysis excluded about 900 co-op apartments and four properties bisected by school district boundaries because of data limitations and the challenge of calculating such properties’ exemptions. The analysis examined the tax bills as they were mailed to homeowners each year and therefore did not account for any adjustments made after they were mailed, such as property tax refunds.

CORRECTION: A previous version of this story misattributed several statements by Acting Assessor James Davis.

Where the error happened

During its investigation into Nassau County’s property tax system overhaul, Newsday recalculated more than 2.5 million tax bills delivered to property owners between October 2011 and January 2017 to determine how much money tax appeal firms may have billed their clients. In the process, it found something more: how nearly 1 million tax exemptions were miscalculated.

Property tax exemptions reduce a property’s assessment before it is taxed. So, to recalculate a property’s tax bill it is necessary to account for its exemptions. When Newsday obtained the records necessary to calculate STAR exemptions, it discovered the county had inaccurately computed nearly 1 million of them. Specifically, the county failed to properly limit the savings a homeowner can achieve from the exemption, a cap the state prevented from increasing more than 2 percent per year starting with October 2011 tax bills.

For this story, Newsday updated the data to include new school tax bills sent in October. It also added up the discrepancies on each bill to determine how they affected homeowners in each school district in the aggregate, as their districts receive state payments to make up for the revenue lost due to the exemptions.

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