Help Book | Real Estate
[Editor's Note. Although most of this article is still accurate, some things have changed since it was written. The county-wide reassessment in Nassau, changed its assessment basis from cost-approach to market-value. The filing deadline in Nassau is now the first day in March.]
Property Tax Assessment
About Property Tax Assessment
The bane of homeowners is property taxes, and at the root of property taxes is a technical-sounding word with a heavy impact on the pocketbook: assessments.
Property taxes are based on assessments -- the taxing authority's judgement of what your property is worth. In Nassau, it's the county that does the assessing, and Nassau towns and school districts use the county's figures. In Suffolk, each town does its own assessing.
How much is it worth? Assessors judge a property's worth on a variety of factors, including surrounding values. Is the judgment accurate? Maybe. Is it arbitrary? Sometimes. Can you do anything about it? Absolutely.
Each year thousands of homeowners seek reductions in their property taxes by trying to show that the assessment is unfair - either because the evaluation is overstated, or because neighbors with similar houses pay lower taxes. Of course, the latter doesn't necessarily prove anything. Sometimes houses on the same street belong to different school, garbage or other special districts, and the taxes will differ even with identical assessments.
Those costly details. Let's say you have a legitimate beef. Charlie next door has the same size house, but your taxes are somehow higher.
If you protest, Charlie may not appreciate it. That's because assessments take into account not only the size and type of house, but any permanent amenities. Central air conditioning, for example, might increase an assessment by 50 cents a square foot in some places, more or less in others. Fireplaces, showers and baths, tiling, finished walls, heated garages all add to the assessment. Even bay windows push up taxes because they add to square footage. On the outside, decks, pools and other permanent additions are grist for the assessor.
Charlie may have some of those things, but the assessor may not know about them. Sometimes it's because assessors don't get around to reviewing properties for many years. And sometimes it's because property owners prefer to keep any changes quiet.
Technically, a permit for any major work must be obtained from towns, villages or cities, thus alerting the assessor to a change. In practice, homeowners may do the work themselves, or may deal with contractors who don't notify authorities.
When assessors do get around to a review, they can't insist on entree to the house. But they can make educated guesses based on the exterior - a guess that may not be to the homeowner's liking.
Looking for true value. Once an assessment is arrived at, it's converted into a percentage of true value. Your Merrick home, for example, might be assessed at $10,000 and a friend's home in Huntington at $5,000. Is your home really worth twice as much as his?
Not quite. To calculate market value, you divide the assessed value by the Residential Assessment Ratio (R.A.R.), a figure the State Board of Equalization and Assessment sets for each locality every April (January in Nassau County.) It's based on recent home sales in the area and is designed to reflect current market value.
Nassau 1998 ratio was 2.99, putting the estimated value of your Merrick house at about $335,000. The ratio for Huntington was .0189, making your friend's home worth about $265,000. So while yours is worth more, it's not nearly what the respective assessments would suggest.
Differing approaches. A factor complicating the procedure is the fact that Nassau bases its assessments on a cost-approach method while Suffolk's towns use varying market value approaches. The Nassau method assesses on the basis of replacement costs of building a house in the county in 1938, regardless of location. That can result in overevaluation in poorer communities, since market values vary from area to area. The system has been found unconstitional by a lower court, but an appeals court overturned the ruling in March, 1994.
The market value approach used in Suffolk attempts to peg evaluation to recent nearby home sale prices, but the technique has been applied in varying ways. In 1994, state assessment authorities informed Brookhaven and Babylon that their assessments were unfair, with some similar homes attaching widely different values in the towns. The towns have disputed the charge, but it illustrates the continuing difficulties of arriving at a just assessment system. Only two of Suffolk's towns have reassessed in the past 15 years.
Whatever the assessment method used, the state's equalization rates are then applied to determine taxes. Nassau's rate is a median rate of communities throughout the county. Suffolk's rates are pegged to the individual towns.
The Tax Bill Maze. Figuring a tax bill gets a bit more complicated. Tax rates are quoted on the basis of each $100 of assessed valuation. But you might have separate tax rates for town, schools, libraries, police, fire, highways or other special districts, depending on location. Sometimes the homeowner down the block or even across the street might be in one or more different districts.
For example, a recent tax bill for an Oyster Bay home listed a tax rate of $33.12 per $100 of assessed valuation. It broke down the figure into eight separate rates on behalf of the county, including two sewage districts, Nassau Community College and fire prevention; plus 11 town rates, including eight special districts from lighting and parking to fire, drainage and garbage.
That's why assessments are a better basis for comparison than taxes paid. To compare your assessment with those of your neighbors, or to check your assessment against prices recently paid for similar homes in the area, visit your county or town assessor's office. An informal meeting may help explain a disparity.
Mutterer's Day. Still think your assessment's too high? You're not alone. Assessing units set one day - known as Grievance Day - for homeowners to make personal pleas for assessment reduction. Thousands of rankled citizens show up at boards across Long Island, and tens of thousands let their applications do the talking.
Grievance day is usually the final day for filing petitions, the third Tuesday in May (January for Nassau County.) Assessors' offices become heavy-traffic areas as the day approaches.
The Big Burden. There's a price to pay for all the lowered assessments. Since all municipal and school district spending is based on tax revenues, lower assessments means lower tax revenue - unless funds are borrowed or taxes are raised accordingly to make up the difference. In 1994 alone, $100 million - $50 million in each county - had to be paid out to petitioners who won assessment reductions.
Some school districts have been particularly hard hit. School budgets are normally made up before assessment rolls are set, so anticipated tax revenue may not be there. In 1994, for example, the Farmingdale district found that because property values were lowered by $3.5 million, it lost $1.65 million in revenue built into its budget.
The Path of Protest: For most, the personal pricetag is the prime factor. If you want to join the ranks of protesters, you have two options.
1. Complaint by Proxy. Use one of the firms or lawyers that specialize in challenging assessments. Typically the firms - sometimes just individuals calling themselves firms - solicit through the mail implying great savings and offering to handle the entire procedure for you. The contingency fee is usually half the first year's savings, but could vary widely. Such firms are not licensed nor regulated, and may or may not be effective.
The Long Island Better Business Bureau did a study in 1994 and found rampant abuses and deceptive advertising. The BBB suggests asking for a fee schedule upfront (but pay no upfront fees), avoidance of any firm promising a refund, and insisting on a three-day cancellation agreement. Suffolk voted in 1995 to require licenses for those who challenge assessments for a fee.
2. Do It Yourself. It's not difficult, only time-consuming. Here's how to approach it:
Determine your filing period. Reduction requests are considered only once a year. The deadline for filing grievances across most of Long Island was traditionally the third Tuesday in May, but in 1994 Nassau County changed its deadline to the third Tuesday in January. For Suffolk towns, the May deadlines remained.
But you don't have to wait till filing time to start your research; assessors' office recommend an early informational visit to avoid the late crush. Note that new assessment rolls do not come out until the first date of the filing periods; in some cases you might find a change in your assessment then.
File a petition, available from the assessor's office, with the Board of Assessment Review in your town or county. There is no fee. Be prepared to defend and prove the current market value of your property.
The board will conduct a hearing (on Grievance Day), at which you present your evidence. A recent purchase price in the area may be offered, along with neighborhood comparisons on assessments. You do not have to appear perso ally, however. If you choose not to, be sure to include all pertinent evidence with your petition.
A homeowner unhappy with the decision has 30 days to file with the county clerk for a Small Claims Assessment Review - involving another hearing. There's a $25 filing fee, which must be refunded if you win at least half the amount of the reduction you sought (if the reduction is less than half, the hearing officer makes the determination). This one could take awhile, though. In recent years thousands of appeals were filed, clogging the system. But if you win, the adjustment will be retroactive to your original appeal filing date. And be sure to check the next assessment roll to be certain the change has been made.
Paying up: One way or another, you'll have to pay your property taxes. Nassau residents pay their taxes quarterly, and most Suffolk residents pay taxes to their towns semi-annually. Or you can build your taxes into your mortgage payments and let your bank or other mortgage-holder do the worrying. Of course, you'll have to be paying a little in advance each month so the mortgage-holder can accumulate the taxes in an escrow account.
Copyright © Newsday, Inc. Produced by Newsday Electronic Publishing. Presented in the public interest by NY Property Tax Reduction.