"Every flaw in the assessment and review system
is magnified to the detriment of property owners."

New York State lacks virtually all of the required elements of a fair and effective system to assess real property values.  In turn, the State also lacks a comprehensive review process for such assessments.  The requisite elements not present and furthermore, not even required in the State's current system include: annual or periodic reassessments of properties, and effective, full-time and professional administrative review process, a committed full-time judicial review and finally, realistic State determinations of assessment ratios.

A gleaming example of the State's lack of uniformity can be seen in New York City and Nassau County.  These regions are special assessing units, which assess and tax commercial property at much higher levels than residential properties.  With effective commercial tax rates of 5.14% of full value in New York City and up to 8.29% in Nassau County - versus a nationwide average of two to three percent - every flaw in the assessment and review system is magnified to the detriment of property owners.  However, the fact remains that only the city and Nassau County have some, but not nearly all, of the elements needed for a fair system.

Most states require property value reassessment on an annual or periodic basis, but New York does not.  No assessment system can be truly fair without annual reassessments, or perhaps, periodic reassessment every two or three years, as is required in New Jersey.  Even a good reassessment loses its accuracy over time as values change dramatically for different properties.

New York City since 1982 and Nassau County since 2003, voluntarily reassess annually and there are a few other New York municipalities that will soon do the same.

The first step in an assessment review is administrative.  New York City and Nassau County have the beginnings of full-time professional administrative review systems.  the City over a six-month period examines the assessment of virtually every property seeking such a review.  However, the rigid application of overly strict rules and an occasional political mindset can hinder the review's effectiveness.

Since 2003, Nassau County has been creating a year-round professional administrative review system but, even with the best of intentions, many kinks remain.  The Nassau review system was created after 20 years of court ordered tax refunds, which nearly bankrupted the court.  Previously Nassau County had a virtually non-functioning administrative review system.

Administrative review elsewhere in New York is performed by local assessment boards with no professional staff.  Typically they meet for a five-week grievance period.  These boards are often deferential to the Assessor and generally lack the expertise to review properties other than homes.  

The next step is judicial review.  Tax review is generally a part-time assignment for a single judge and this is a major source of delay.  Judges also often lack valuation expertise and in many cases they do not set or enforce scheduling orders or deadlines.  Attorneys, mostly for municipalities, thus get repeated adjournments and cases do not quickly settle unless both parties believe there is a real and firm trial date.  Nassau County courts are firmer in this regard.

A better system would be a full-time tax court, similar to the United States Tax Court.  Many states have such a court to review State and local income, sales, estate and property taxes.  These bodies develop genuine expertise, with judges specializing in real property taxes.  Consequently, cases move much faster.  

Finally, true ratio determinations are an absolute necessity to obtain fair settlements or judicial decisions.  Tax review cases are won by proving both the value of a property and the ratio of the assessment to full value.  Few assessors assess at 100% of market value.  New York City assesses at an unrealistically high 45% of value, while Nassau County assesses commercial property at less than one percent; most assessment ratios in Westchester and Suffolk Counties are under three percent.  Even a small difference in ratio can make a big difference in obtaining assessment reductions.  With the exception of equalization rates determined by the Office of Real Property Services (ORPS), allowable methods of proving ration are expensive, difficult and rarely used.  Unfortunately, the equalization rates issued by ORPS are not the accurate and professional determinations they once were.

Now is an ideal time for real estate operators, developers, boards and business associations to organize a lobbying effort for a more effective and fair property assessment system.

William D. Siegel is a senior partner of the Garden City, NY office of Siegel, Fenchel & Peddy PC. He may be reached at wds@nytaxappeal.com