Taxes, grievance firms fuel Nassau assessment problems

Seven years after Nassau began court-ordered, annual reassessments to correct a tax roll that had favored the wealthiest, officials say it's been transformed into one of the fairest big rolls in the state.

So why did more than one in every four Nassau residents grieve their taxes this year?

County Executive Edward Mangano, who won an upset victory last fall after a campaign that tapped voter anger over taxes, says Nassau's assessment system "is broken, does not work and is not fair to taxpayers."

But many assessment experts say the factors driving Nassau's residential grievance epidemic are sky-high taxes, rules rigged to generate more grievances, and a homegrown cottage industry of tax-challenge companies that have become so efficient that they can turn a profit by shaving just a few points off your tax bill.

With the grievance companies ready to do the work and taking a fee only if they win, and with state and local laws tipped in your favor, appealing taxes requires no effort, carries no risk and costs you nothing - at least not directly.

Experts say that's why Nassau homeowners, who had gained a national reputation by filing 59,256 tax grievances a decade ago, are filing even more challenges now than they did before the reassessment; 99,632 homeowners appealed their taxes this year.

"It's not because assessments are bad, it's because taxes are so high," said Lee Kyriacou, the state's top assessment official from 2007 through 2009 as director of the state Office of Real Property Services.

Nassau also is the only jurisdiction in New York State in which you can win a reduction in taxes without providing any proof they were unfair, he said.

"I have lived in this house for 42 years and I don't have any idea what the market value is," said Massapequa resident James Stubenrauch, who has allowed a grievance firm to appeal his taxes for each of the past 15 years - and won five times.

But every year, tax rates across Nassau must be increased to compensate for the revenue lost from the homeowners who have successfully grieved their assessments, county Assessor Ted Jankowski Jr. showed in a report to the county last spring.

Residential errors account for roughly $15 million to $20 million of the tax refunds the county pays each year, and the county spends perhaps another $11 million in administrative expenses to address those grievances, Jankowski estimated.

An average of 1 in 4 appeals to Nassau's Assessment Review Commission have won reductions over the past five years; of those rejected, a smaller number go on to court, and 35 percent of those win a reduction. The proportion, however, varies year to year.

The decades-long record of inequities in Nassau's tax system has bred a lack of public confidence that is hard to shake and continues to drive grievances, said Deputy County Executive Patrick Foye. Nassau has contributed to those perceptions, he said, with sloppy property records such as those that miscounted plumbing fixtures in Mangano's home and others detailed by Newsday, though those errors amounted to less than 3 percent of the roll. "The residential roll could do with significant improvements," he said.

But Jankowski argued in his May 2009 report that "financial and political players," including the tax-challenge firms, have fueled public mistrust of the system "to make money or score political points." Elected officials at every level have used the assessor's office as a scapegoat for high property taxes, he said then.

The amount of Nassau's appeals is "rather unique" nationally, said Massachusetts appraiser John Ryan, a former New York tax official and consulting former trustee of the Washington, D.C.-based Appraisal Foundation, a nonprofit that promotes professional appraisal standards. "You have a system which encourages constant appeals."

Here are some reasons why:

High taxes +

no "correct" values

There is no such thing as a "correct" value for a home, Foye said. "It's just a fallacy," he said. "Ask any three appraisers what your home is worth, and you'll get three different answers."

The best appraisers, he said, will deliver values likely to vary by up to 10 percent.

Winning reductions of less than 1 percent is not unheard of. More than four out of five reductions won by Nassau homeowners in recent years have been for less than 10 percent, Jankowski found, an observation echoed by tax-challenge attorney Fred Perry.

"When we started this process, many people could be 30 percent overassessed, 25 percent," Perry said. "The roll has changed favorably in the aggregate over time."

But taxes are so high in Nassau that a 10-percent variation in values means you could argue that you are paying $1,000 to $1,500 more than neighbors with comparable homes - or $1,000 to $1,500 less.

And in Nassau, those who suspect they may be on the high side lose nothing by going for the savings.

A grievance costs nothing; even a court challenge carries a fee of just $30. And New York imposes no minimum standard for the amount an assessment must be off to win an appeal. Last month, for instance, a Nassau hearing officer reduced Oyster Bay resident Charles Bradley's assessed value by a grand total of $1 - resulting in a net tax savings to Bradley of $1.95. He says he sent the check back to his tax-challenge representative in disgust.

"I don't see any sense in this," Bradley said.

By comparison, in New Jersey, an assessment must be off by at least 15 percent before a court can change it. Over the past three years, combined property tax protests for the entire state of New Jersey averaged just one third of Nassau County's tally, records show.

"It's to discourage litigation, to save the towns some money. People get crazy about their taxes," said Joseph Small, retired presiding judge of New Jersey's tax court. "You put the towns to the expense of litigating it, they have to pay lawyers and experts, and the taxpayer only gets a few bucks. Let sleeping dogs lie."

You can't lose

You face no danger of having your assessment increased when your grievance is reviewed, thanks to a New York State law that allows assessments to be adjusted only downward on appeal.

In New Jersey and Connecticut, your home's assessment can be increased during the appeal process if it is found to be lower than comparable homes. That has had the effect of deterring marginal or frivolous grievances, experts say.

Waterbury Assessor David Dietsch has never found a solicitation from a residential tax-grievance firm in his mailbox. In Connecticut, it's unheard of. "There's not as much money in residential appeals, so I have not seen that here," he said.

No proof required

That's the biggest incentive to file, Kyriacou said. Nassau's Assessment Review Commission is the only body of its kind in the state that does not require applicants to submit any evidence in support of their request for a reduction.

That is partly, staff say, because the county views ARC's job as correcting the tax roll promptly, so taxpayers don't need to go on to court for a refund. Because it has countywide jurisdiction to draw up the tax roll, Nassau County is accountable for refunding all erroneously assessed taxes, including those paid to schools, towns and special districts.

One result of Nassau's approach is that the work involved in a tax reduction is shifted from applicants to the commission, which needs a staff of 43 to evaluate the more than 100,000 appeals annually, using a different valuing technique from the assessor.

For homeowners, the process entails no risk, no effort and no cost - all they need to do is sign any one of the half dozen solicitations likely to land in their mailbox, and let the grievance companies do the rest. That ease has created a "lottery mentality" toward appeals, said Legis. Wayne Wink (D-Roslyn), ranking Democrat on the government services committee.

For instance, Stubenrauch, 85, has used a tax-grievance firm to challenge the assessments on his three-bedroom ranch home for the past 15 years.

"It's an automatic renewal thing . . .," the retired loan officer said. "If it turns out that my assessment is reasonable, then fine, it doesn't cost me anything."

Tax-challenge industry

Over that 15 years, Fred Perry's firm has won five reductions for Stubenrauch, trimming anywhere from $3,158 to as little as $597 off his $9,000 property tax bill.

In keeping with the standard practice of tax challenge firms, Perry's share was 50 percent of the savings in the year his firm won the reduction.

A sum as small as $298.50 would hardly be worth the attention of a private attorney.

But Nassau County's homegrown tax-challenge industry, which uses automated computer analysis to identify customers, bulk mail to solicit them and even bulk data uploads to file their grievances, has turned the roughly 362,000 homes on the county tax roll into a virtual assembly line of profits. Those firms represented 9 out of 10 filers over the past five years, according to the county.

Perry, who estimated in an interview that he can turn a profit on as little as a 5 percent reduction in taxes, won $10 million in residential assessment reductions from 2005 to 2009, the county estimates. His and the three other most active tax-challenge firms collected $36 million altogether.

A sample of several thousand appeals obtained by Newsday under the Freedom of Information Law shows just how little work these companies need to do at the first level of review:

Of more than 80 fields of requested information, just a handful were filled in: the name of the property owner, the parcel number and type and a request to reduce each assessment by the legal maximum of 25 percent.

Even in cases appealed to State Supreme Court, it's rare for anyone to actually visit the home in question. Instead, reps for the assessor and grievance firm face off in front of a hearing officer across a small conference table at the courthouse, armed with computer-generated lists of comparable homes. These rapid-fire informal hearings, scheduled in groups of 15, typically last two to four minutes each; the hearing officer is paid $300 to decide each set of 15.

The calendar assures

repeat filings

Over the past five years, more than 75 percent of appeals have been turned down by the Assessment Review Commission. But a quirk of the calendar helps explain why some 60 percent of all Nassau grievances are repeat filings, even from those who win reductions:

The ARC has 16 months to review tax grievances. But the assessor's office is required to issue the next year's tax roll in 12 months - four months before the ARC has notified it of reductions. So homeowners are forced to grieve again because the reassessment doesn't take ARC's corrections into account. Nassau residents' tax grievance filing deadline was March.

Solutions

This last problem would be eliminated in a single stroke if Mangano's plan to reassess only every four years becomes a reality: By the time the new roll comes out, there will have been time for grievances to be resolved and new values fixed.

Cutting back to reassessment once in four years also may calm taxpayer nerves already frayed by the roller-coaster changes in the value of what for most is their biggest asset: their home.

That change, plus other improvements not yet instituted, would gradually bring down the rate of grievances over the next few years, Foye predicted.

But because Mangano does not plan to seek limits on how often residents can grieve their taxes, Perry and others say they don't expect the practice to abate.

Meanwhile, the legislature's Democratic leader, Diane Yatauro, worries that cutting back the frequency of assessments will reverse years of progress in making them more precise and fair, and bring bigger errors back into the system. Annual reassessment is considered the gold standard for that reason, experts say.

Some local officials believe frivolous grievances would evaporate overnight if New York, like its neighbors, put some risk back into the process by allowing assessments to be increased as well as decreased on appeal. Privately, they acknowledge there's little political support for that.

Many in the tax-grievance business contend that the high rate of grievances isn't necessarily a problem at all, but an efficient way for errors in the system to be corrected.

Others, such as Stubenrauch, believe the whole mess proves that fluid, changeable home prices are a lousy way to decide how much of the cost of government a resident should bear. It's time to shift that burden to the income tax, he believes.

"When our taxes were small it wasn't important," he said. "But when the taxes are so horrendously high, to base the tax on this fuzzy questionable number, you are bound to have debate all the time . . . It's just inherently faulty."