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01/10/2007: "Reforming New York’s Property Tax System: A Report on the January 10 Conference sponsored by the Center for Governmental Research, the Fiscal Policy Institute and the Empire Center of NYS Policy"

Everyone agrees. New York’s property tax system is inequitable, inefficient and things are getting worse. If everyone agrees, then why can’t it be fixed? The answer to that question became a lot clearer to me after attending a half-day conference on the property tax mess and listening to several well-informed policy experts.

Here’s a short list of what’s wrong:

1. New York has more than 1,000 jurisdictions that place value on real property for tax purposes (assessment). As a result inequity is inevitable and the cost of maintaining the current assessment system at both the local and state levels is out of proportion to what other states pay.
2. While local government is raising property taxes, some people blame state policies rather than prolifigate local officials, while others blame a system that allows increases without sufficient controls.
3. The Star Program, the state’s ten-year old effort to provide property tax relief, has only succeeded in increasing the rate of local spending since the Legislature refused to go along with Gov. Pataki’s original idea of capping annual school tax increases.
4. The Star Program, revenue-sharing, Medicaid and other policies that impact the cost of local government contribute to distorting the property tax system, resulting for example in increasing the gap between wealthier school and poorer school districts.
5. Boundary wars, including upstate versus downstate, urban versus rural, and school districts versus the rest of local government, flare up whenever anyone tries to come up with solutions.

Let’s review the consequences of having a property tax system that is outmoded, expensive and unfair:

1. The system breeds corruption, encouraging local assessors for example to act like emperors and some jurisdictions to hire experts to help them get a leg up over neighboring villages, towns, cities or counties.
2. New Yorkers pay billions of dollars in taxes above what they might be paying, diverting monies that could be used by taxpayers to finance business growth, improve their properties and donate to charities.
3. New York is holding the tide against a drain of businesses and middle class people who can live cheaper and do better simply by moving to another state. Even our neighbors in what used to be called Tax-a-chusetts are in better shape since passing Prop 2&1/2 several years ago.

When something like New York’s property tax system persists in the face of logic, someone must be benefiting. Who benefits?

1. Those who can game the system to benefit themselves personally, their political party apparatus (through patronage jobs) or their businesses – starting with the NYS Legislature. A fair, equitable, impartial system would result in a huge loss of power to the Speaker of the Assembly and the Senate Majority Leader.
2. Thousands of people who hold or rely on local government jobs that would disappear. These people get salaries, benefits and a pension system doing jobs that a rational system would eliminate.

Is solving New York’s property tax problems that complicated? Yes and no. Here are a few steps in the right direction that should be relatively easy to pass and implement, were it not of course, for the fact that the Legislature would be giving up some of its power base in the process:

1. Only invest counties and cities with populations above 100,000 with the authority to conduct assessments.
2. Establish full value assessment as the standard for all jurisdictions.
3. Require re-assessments every five years. Today some jurisdictions have locked in assessed values set before World War II.
4. Reform that Star Program to impose a cap on school district spending increases with provisions for enrollment increases and capital spent on new buildings.

Other partial reforms were suggested during the session that are worthy of consideration. Contact Erika Rosenberg at the Center for Governmental Growth (www.cgr.org). She may have copies of the presentations or at least can provide contact information to the speakers.

The Best Solution?

The governor should take the same approach to property tax reform as was taken for health care institutions -- namely, set up a commission made up of experts (with no more than 10% being elected officials) with their recommendations becoming law 30 days after they are submitted. Certain benchmarks would have to be built into the enabling legislation, including imposing ceilings on annual property tax increases and reforming the assessment system.