June 13, 2023
NYREJ: Even in a stagnant market one thing increases - property taxes
The value of your property has flattened, and rents are not increasing, yet your real estate taxes continue to escalate. The reason for this is because property taxes on Long Island are not solely tied to a property’s current market value. We’ve seen less activity in the commercial real estate market in terms of buying and selling recently. In such a situation, the market value of properties in many sectors has remained relatively stable over the same time period. However, these same properties have seen their property tax bills increase.
Property taxes are a crucial source of revenue for local governments. They fund budgets, infrastructure, as well as many critical services. If market values and corresponding assessed values are not increasing, but costs are rising, increased budgets still need to be filled by taxpayers. The only way to reconcile this shortfall in revenue is to increase the tax rate.
This inequity can be exacerbated depending on the school district where a property is located. It is the school district taxes within each county that are responsible for 60% to 70% of the property tax burden. The school district tax bill is a product of that district’s budget each year. Districts with large numbers of students, multiple schools, and specialized programs must pay large amounts each year to operate these schools. Those schools must also pay teachers, administrative and maintenance staff, benefits, and other typical costs. While Long Island taxes are one of the top complaints of residents, there is usually at least some solace taken by the fact that Long Island boasts some of the finest schools in the nation.
The location of commercial properties within a school district’s lines can be incredibly significant. If a particular school district has a large mall or a number of large commercial properties within its boundaries, the district’s home and business owners have the benefit of bigger taxpayers to help shoulder the tax burden. The dollar amounts paid by these large commercial properties often translate into a lower tax rate for smaller property owners. While the school district rate is the most significant rate, all local rates need to be reviewed.
There are other unique factors that may be particular to certain jurisdictions as well. There have been instances where a previously sizeable taxpayer, such as a power plant, has become functionally obsolete. That taxpayer may be in line for a reduction in their assessment that is so severe that the reduction in dollars from this property alone will leave a budget shortfall. The tax rate will then need to be increased in order to achieve the same total budget amount required to make up the loss. This increase will be spread amongst all those in the district and it is an increase that is likely to be felt immediately and in the future.
Some jurisdictions may have properties of their tax roll entirely due to their tax-exempt status. While an area with development would appear to have a large tax base to spread the tax burden, if those properties are exempt, they may not contribute anything in taxes. Churches and other nonprofits that qualify for tax-exempt status under the Real Property Tax Law are those properties most often associated with tax exemptions, but other properties such as hospitals and buildings associated with their use can remove a large portion of a tax base as well.
The best solution to reducing tax rates is to encourage improvement and redevelopment of current properties and the development of new projects. Eliminating actual and perceived barriers to development will provide for new projects and additional taxpayers to contribute to the county’s coffers. Many jurisdictions on Long Island have encouraged development by offering property tax breaks as an inducement by way of an Industrial Development Agency (IDA). Some of the IDA agreements have been criticized for their minimal or reduced payments in regard to the tax burden. However, municipalities have shown that the long-term positive impact, beyond more jobs, economic growth, improved quality of life, etc., also includes significant contributions to the tax base when those properties become fully taxable.
When purchasing a property with high real estate taxes, the owner needs to determine whether the high tax obligation is the result of an overassessment or a high tax rate area. The difference is significant in terms of options that can be taken to provide tax relief, especially when a property’s value is not appreciating.
Brad Cronin, Esq., and Sean Cronin, Esq., are partners at Cronin & Cronin Law Firm, PLLC, Mineola, N.Y.
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Brad W. Cronin, Esq.
Brad W. Cronin is the founding Partner at Cronin & Cronin Law Firm. He has over 40 years of Legal Experience. Brad represents a cross section of many of the largest New York developers, property owners, national corporations, REITs and retail chains. He has extensive trial experience having successfully litigated and resolved high profile cases throughout New York State which has resulted in a number of landmark decisions in the field of Tax Certiorari.
Over the years Brad’s reputation for honesty and integrity has led to long term relationships with municipal assessment officials. His expertise and extensive experience along with his reputation has resulted in some of the highest property tax reductions in New York State.
Brad has been selected as a Who’s Who of Long Island Business News for the past 7 years in the fields of Tax Certiorari law and Real Estate Law. Each year Long Island Business News honors business leaders whose creative approach to challenges and positive results help to make Long Island better.
For over 30 years Brad has earned the highest rating awarded by Martindale Hubbell in both competency and ethics in his field. This is an honor bestowed on him by his peers for his professional excellence.
Brad is a columnist for the New York Real Estate Journal’s “Ask the Expert” quarterly feature discussing current real property tax issues. Some issues addressed are Hurricane Sandy’s effect on property taxes, Nassau County’s Disputed Assessment Fund, emerging market trends, New York’s property tax rates, and how your purchase price can affect your taxes.
Brad has been an invited speaker and participant on various panels involving different subjects affecting tax certiorari and valuation of property such as condominiums, environmental contamination, and reviewing changes in the tax certiorari field. As a member of the Nassau and Suffolk Condemnation and Tax Certiorari committees, he has worked to implement changes to facilitate the timely resolution of commercial tax protests.
Brad currently serves as executive member of the steering committee and served as Co-President of the Long Island Real Estate Group for three years. This organization has supported various Long Island charities, as well as real estate related projects, educational real estate programs and networking events. He is Cofounder of the North Shore University Hospital Department of Medicine Leadership Circle Committee and serves on the Village of Plandome Planning Board.
Sean M. Cronin, Esq.
Sean M. Cronin is a founding partner at Cronin & Cronin Law Firm with over 20 years experience. He specializes in negotiating tax certiorari matters for prominent developers, national REITs and tenants in Nassau, Suffolk, and Westchester counties, as well as the five boroughs. He is responsible for successfully reducing the assessments, and thereby the real estate taxes, on many of the largest properties in New York State thanks to his expertise in property valuation issues and knowledge of market conditions and demographics. His clients include developers and owners of all property types, including office buildings, industrial buildings, shopping centers and retail locations, restaurants, apartment buildings and condominium complexes, golf courses and assisted living facilities.
Sean is an Executive Board member and past Co-President of the Long Island Real Estate Group, a charitable organization created to support local communities. He is an Executive Board Member of Vision Long Island which advances more livable, economically sustainable, and environmentally responsible growth on Long Island through Smart Growth. Sean is an Advisory Board Member of the Viscardi Center and on the Board of Advisors of the Energeia Partnership. He is an active member of the Chaminade Lawyer’s Association and Real Estate Group as well as the Washington & Lee Alumni Association.
Sean is featured regularly in the New York Real Estate Journal’s “Ask the Expert” section and has been quoted in various publications, including the Long Island Business News and Newsday. He has been recognized by the Long Island Business News as a “Who’s Who in Commercial Real Estate” multiple times, most recently in 2023 and by the Long Island Herald as the Top Tax Certiorari Attorney in 2023.
