Long Island property owners spared from the massive damage of superstorm Sandy may end up taking a bigger hit on their tax bills, as local governments grapple with the possibility of widespread declining property values and tax revenue caused by the storm, economic experts said.
"Certainly it will cause losses in property values, which likely will cause taxes to shift to less-damaged properties," said Donald Boyd, senior research fellow at the Rockefeller Institute of Government at the University of Albany.
The reason for the shift? Each property within a taxing district pays a varying share of taxes based on its assessment. If one property's assessment drops below its neighbor's, then the neighbor's taxes increase to make up the difference. Overall, if assessed values go down, tax rates must increase to bring in the same amount of money generated in the previous year.
For example, an Oct. 5 Newsday analysis of Nassau school tax rates found that falling house values and successful assessment protests led to increases in rates of up to 29 percent for taxpayers whose assessments stayed the same or increased.
Nassau County Tax Assessor James Davis said his office is still analyzing the toll of Sandy on property values, and it's too soon to "speculate" on the impact on tax revenue. But Lorraine Deller, executive director of the Nassau-Suffolk School Boards Association, said "obviously the diminution of property values . . . will have to be offset in some form or another."
In Suffolk, where tax assessments are handled at the town and village level, assessors have started the process of surveying damage and calculating the toll on tax rolls. But the impact could vary depending on the municipalities' assessment timetables, officials said.
In the Village of Mastic Beach, hit hard by the storm, properties will be assessed on what exists as of Dec. 31. But for homes outside the village that are assessed by the Town of Brookhaven, assessments will be as of March 1, 2013.
Brookhaven Town property appraiser Jim Ryan said owners of damaged and uninhabitable properties will likely be eligible for decreases in the assessed values, and his office has started encouraging owners to file claims with the assessor's office documenting the damage. But even then, the reductions likely won't appear until the 2014 tax bill.
"Depending on how much loss in assessment there is, the tax rate could conceivably go up next year, but I couldn't tell you that for certain," Ryan said.
Fred Pollert, Suffolk's chief deputy county executive for finance, said there are about 420 homes in the county that so far have been deemed uninhabitable. While the financial hit to the county is still being calculated, he said assuming there is a 10 percent uptick in assessment appeals filed related to the storm, the county could lose $10 million. County property taxes constitute a small portion of overall property tax bills.
Suffolk Comptroller Joseph Sawicki said it's too early to gauge the tax impact to Suffolk with many questions still lingering -- including whether property owners will get tax breaks from the state, similar to state legislation passed last year in the wake of Tropical Storm Irene and Tropical Storm Lee.
"It will undoubtedly cause a strain, but it's impossible to quantify at this point," he said.
Nearly 40,000 Long Island households have been approved for Federal Emergency Management Agency housing grants, and Nassau's tax assessor office has received nearly 400 calls from property owners asking about assessment adjustments.
Nassau Comptroller George Maragos said he didn't believe the storm would have "a significant impact" on tax rolls because most homeowners are invested in refurbishing their properties. He said storm recovery efforts could boost county sales tax revenue, given the spending on new furnishings and home repairs.
"The recovery is very robust," he said. "People have gone back to their normal lives. The stores are as crowded as ever, traffic is as congested as ever, and FEMA and the state have poured a lot of money into the county."
The prospect of a reduced tax base comes as municipalities throughout Long Island have grappled with closing multimillion-dollar budget gaps over the past five years.
Brian Butry, spokesman for state Comptroller Thomas DiNapoli, said the comptroller's office plans to closely monitor Sandy's impact on local governments in communities such as Long Beach that suffered severe storm damage.
"There are a number of municipalities that are already approaching fiscal stress," Butry said. "The storm's impact is something that will certainly be taken into consideration when we review local budgets and reserves."
Several assessors are looking at other local governments for guidance, researching how New Orleans after 2005's Hurricane Katrina and Miami-Dade County following 1992's Hurricane Andrew dealt with declining property values.
In New Orleans, because of the logistical nightmare of inspecting all damaged homes, the tax assessor applied uniform assessments based on the house size and flood-map location. To make up lost tax revenue, local officials relied on FEMA subsidies, but it's still unclear the type of aid FEMA will offer New York and New Jersey municipalities.
Miami-Dade Property Appraiser Pedro J. Garcia said that after Andrew, which destroyed 117,000 homes, the county did not end up having to raise property taxes because of a combination of federal aid and dramatic hikes in sales tax revenue.
"The insurance companies and FEMA came with large amounts of money in their hands, and people were spending tremendous amounts to repair their homes, which helped the local economy," Garcia said.