Richard Fromewick Authors, "Now is the Time for Taxpayers to Protect Their Rights" for Nassau Lawyer

Publication Source: Nassau Lawyer

As the tax-paying Nassau County residents know full well by now, Nassau County has been sending new assessment “Tax Impact Notices” to the County’s 420,000 parcel owners for the past few months. As discussed further below, it is more critical than ever that Nassau County property owners seek assistance from experienced legal counsel to make sure that the new taxes imposed are consistent with the complex web of applicable legal rules.

The current re-valuation was undertaken because last year the County reached a settlement with a group of homeowners who claimed, in Federal Court, that their property assessments were unfairly high and they were discriminated against. For over sixty years, Nassau County has assessed residential property on the basis of its construction cost. Since some neighborhoods increased in value more than other areas, a vastly disproportionate tax burden fell on the lower income neighborhoods. For example, clearly, property values increased more in the past 60 years in many North Shore communities than certain minority communities of the South Shore. In 1986, the County did re-assess non-residential parcels on the basis of market value. However, over the ensuing years, the commercial assessments have become hopelessly out-of-date.

The re-assessment program started over a year ago with the County’s mass appraisal company, Cole- Layer Trumble (“CLT”), photographing each property and comparing the picture with the County’s improvement records. Since that time, CLT has checked sales and lease information and attempted to correct erroneous and out-of-date information in the County’s records.

The assessor released a report in July identifying several school districts that will have increased assessments, i.e., Port Washington and Manhasset, and school districts that will have decreased assessments, i.e., Hempstead and Freeport.

All the new assessments will be based on 1% of the County’s estimate of full market value. The County will also estimate the 2002/03 tax based on the new assessment. The Tax Impact Notices sent by CLT advise property owners that they will be provided an opportunity to discuss with CLT the new assessments between Labor Day and November 15, 2002. These informal hearings may result in changed valuations. Unfortunately, however, the notice from CLT misstates the law by claiming that “if you do not act before November 15, 2002, your tentative assessment will be the amount on which your school and town tax bill will be based.” Notwithstanding what the re-valuation company stated in these notices, taxpayers still have a right to protest their assessments even if they do not respond by November 15. In reality, on January 2, 2003, the assessor will adopt the valuations with changes and promulgate the tentative assessment roll based on 1% of the valuations. As usual, a taxpayer is given until March 1, 2003 to grieve the assessment by filing a formal tax certiorari protest. It is critical that property owners make sure that they exercise their rights in a timely manner and with assistance from legal counsel familiar with this rather complex and confusing area of law.

The most disconcerting aspect of the County disclosure notice is the so-called “estimated” taxes identified. The new assessments will first be used for the 2003/04 school taxes with the first bill to be the school tax which will be sent in October 2003. The general tax will be for the 2004 taxes with the first bill to be sent January 2004. Since there is an expectation that some assessments will be reduced in the informal CLT hearings and other assessments will be reduced by the formal certiorari process, the estimated taxes will undoubtedly rise. Couple that expected increase with the usual school tax increases that average 10% a year in some school districts and the general tax increase that may well average 15%, and a taxpayer is likely to face a whopping 15-20% higher tax than estimated.

The practitioner faced with a client’s re-assessment must be wary of several factors. Most importantly, one should check to see if there has been any physical improvements to the property over the last 10 years that may have resulted in a partial tax exemption. Also, a relatively new physical improvement may allow for a new partial exemption. If the property has been granted an exemption or assessment phase-in, how the old and new exemption will be applied to the new lower assessments is yet to be worked out, but will surely be controversial. Another problem area to focus on is an increased market value estimate that does not result in an increased assessment because of the new lower 1% ratio, i.e., at the current 8% ratio, a commercial property with $1,000,000 market value is assessed at $80,000. If the new market value estimate is $2,000,000 at the 1% ratio, the assessment will be only $20,000. There is no assessment increase, but a probable 100% increase in taxes. It is unclear whether those “increases” will be capped or phased-in. The Real Property Tax Law has both caps and phase-in statutory guidelines that are couched in terms of assessment increases, not market value increases. RPTL § 1805.

Additionally, any property receiving an assessment decrease during the past two years should be carefully reviewed to determine if there is a proposed market value increase. Although a prior settlement or hearing officer determination may not be binding on a revaluation, it is certainly good evidence to prove an increase is unwarranted. RPTL § 722.

All-in-all, we can expect 1-2 years of working time for the new assessments to be corrected. After that, we should have a system that is consistently updated with recent sales, new improvements and demolition to keep assessments current.

Can we expect assessments that perfectly match current market values? No -- to err is human. All the assessor can hope for is that a rough equality will exist and the most valuable house on the block or the most valuable store in the neighborhood has the highest assessment. Clearly, this re-assessment will not change the budgets of school districts nor affect the cost of street cleaning, so tax inequality will not be achieved even if assessment equality is attained at the end of the day. History tells us that there will always be taxpayers looking to reduce their taxes and a small group of dedicated tax certiorari attorneys to represent them. It is more important now than ever before that taxpayers protect their rights and seek assistance from learned legal counsel.