A program that delivers $2 billion in tax relief a year to New York homeowners loses millions of dollars a year. Fraud, poor record-keeping and plain old ignorance are to blame, and for a cash-strapped state, that's far too much money to throw out the window.
The New York State School Tax Relief Program, better known as the Basic STAR, could cost the state $73 million more than it should over the next three years, according to a recent audit by state Comptroller Thomas DiNapoli. Much of the excess is due to lax oversight, outdated records and insufficient enforcement.
That's why an agreed-upon measure in this year's state budget is so important: Starting in 2014, property owners must renew their registration for the program, enabling the creation of a statewide database of property owners. That should cut down on double-dipping and stop those who own homes, but aren't full-time residents, from collecting. Abusers will lose the exemption and have to pay a 20 percent fine capped at $2,500.
Basic STAR was enacted in 1998 and provides an exemption on the first $30,000 of assessed value for primary residences if the household income is less than $500,000. It is distinct from Enhanced STAR, which provides tax exemption benefits for senior citizens. And don't confuse it with the now-defunct STAR Rebate program, which went away in 2009, and included an actual check in the mail.
The STAR programs offer relief to property owners who pay among the highest taxes in the country. Confusion over the rules, combined with mostly local supervision, creates a system that's difficult to police and ripe for abuse.
The comptroller, in a sampling of 6,500 parcels in 46 localities earlier this year, estimated that as many as 20 percent of exemptions shouldn't have been granted. Another investigation by Rockland County's district attorney uncovered 516 property owners -- including 75 who lived outside the country -- were getting exemptions they shouldn't have, costing the state $679,000.
Registration was required when the program began more than a decade ago, and applicants have not had to reapply or verify that they remain eligible. That distinguishes it from the enhanced program for seniors, which mandates that systemwide "check" every year.
Across New York, 2.6 million property owners benefit from Basic STAR, including 400,000 in nine Hudson Valley counties, creating more than $460 million in savings in that geographic area. Local assessors administer it. Since they don't necessarily have the time, resources or ability to cross-check properties, Social Security numbers and voter registration outside their municipalities, enforcement is scant. There's virtually no way to detect if a Manhattan dweller is wrongly claiming a second home in the Catskills or if a Poughkeepsie resident is also claiming a Lake Placid getaway as a primary residence. In other cases, a home that is sold often keeps the STAR benefit even though the new owner might not be eligible. And it's far more difficult to know if someone living out of state with a second home in New York is double-dipping.
Now the state must set up an effective system that can root out fraud and inefficiencies. It must re-educate the public about how the program works, including penalties and enforcement.
Local school districts and municipalities need the millions that are being lost. And STAR needs more oversight to keep people honest.