Richard Fromewick Authors, "Suffolk Real Estate Taxes: My Property is Worth How Much?" for NYREJ

Publication Source: New York Real Estate Journal

It has become increasingly difficult to live or work in Suffolk County without ending up in a discussion about real estate taxes. Whether you are a homeowner, or an owner or tenant of commercial property, you have likely experienced a drastic increase to your real estate taxes over the last several years. What most owners do not realize is that their property’s market value, as determined by the Town Assessor, has most likely also increased greatly. Of course there are 10 different Town Assessors and each one has their own way of looking at market values.

The harsh reality is that most people only look at the actual taxes due as opposed to how the assessing jurisdiction actually arrived at the figure. By only analyzing the change in taxes payable a property owner, or manager, loses sight of the proverbial forest for the trees. If a particular property is over-assessed the owner is paying more than the fair share of taxes. If examined carefully, most tax bills make note of the assessment for the property and usually there is mention of the corresponding market value.

Since most of the Suffolk Towns and Villages do not assess at full market value; they use an equalization rate or percentage of full market value. The problem is that the bills usually do not utilize the most recent or accurate equalization rate as put forth by the State. In other words, in most cases the valuation listed on your bill is wrong. Worse yet, the valuation on the bill is usually far below the assessor’s estimate of market valuation. This problem effectively reduces the number of owners protesting their taxes because they are basing a decision on an erroneous number.

Making the situation more confusing is that there is one equalization rate for one and two family homes in each municipality and another rate for commercial properties. Moreover, there are different equalization and tax rates for every Town and Village in Suffolk. There are many assessors who have reduced or increased assessments based on the tremendous changes to equalization rates over the last several years. This helps alleviate some of the problem, but with tens of thousands of properties, most assessors simply can’t keep up with the ever changing real estate market and new construction.

The Suffolk Towns’ equalization rates for the 2004/05 tax year have all decreased again this year. Translated, this means the assessor’s estimate of assessed market values for all commercial properties are increasing, again. To give the historic drop in equalization rates more meaning, one only need look at an example. Property X, a commercial property in the Town of Huntington, was assessed at 20,000 in the 2001/02 tax year and is still assessed at 20,000 for the 2004/05 tax year. Property X’s market value as determined by the equalization rate in 2001/02 was $1,418,440. The market value determined by the current equalization rate is $2,127,660. In just a few years, the market value of this property increased 50% for real estate tax purposes.

While the real estate market on Long Island and nationwide has been as hot as any other time in history, a substantial increase isn’t necessarily justifiable for every commercial property in the Town. As any real estate expert knows, there are parts of any town or area that are more valuable or less valuable than other areas.

Perhaps more problematic is that the typical taxpayer has no knowledge of recent court developments, settlements reached by local assessors and legal representatives and other matters that help answer the ultimate question of whether an assessment is fair. One route some believe to be the panacea for real estate tax confusion is assessments at 100% of market value. In other words, your assessment would be set at the current market value.

The Town of Southampton apparently believes this approach is the solution. While this system does arguably remove some confusion, it still leaves the ultimate question unanswered - is the valuation correct? It also arguably necessitates yearly re-assessments. Nassau County has been slowly digging out from the after effects of its court ordered County wide re-valuation in 2003 and again in 2004. In fact, the re-valuation had to be essentially redone with a dramatic change in the equalization and tax rates.

Of course, Suffolk County’s 10 different Town assessors is so dissimilar to Nassau and even New York City’s single assessor that a County wide re-valuation is frighteningly difficult. With ten towns and over two dozen villages, a total Suffolk revaluation could prove impossible. Which leads us to the inevitable result that real estate taxes are getting higher and more confusing every year without any plan for relief.