EXPLAINING THE 2011 TAX INCREASE, P.2

But the city got this income-per-square-foot from...

Other buildings.

...who actually filed?

Yes, who filed. All rental buildings — all the income-producing ones — have to file real property income and expense reports in late summer.

Is the takeaway that a rental building got less income?

Or that the city chose to use different comps from last year to generate this imputed income.

So is it policy or politics?

Policy, possibly the judgment of an individual assessor or a particular team of assessors. I mean, clearly, with the Queens garden apartments, somebody made a judgment call to use completely different numbers than were used last year.

Was there an assumption on the part of the city that this segment — the Queens garden-apartment group — would not protest these increases?

If we’re looking at small co-ops that are self-managed, there may [have been] that assumption. Most co-ops that have managing agents know that there’s an opportunity to file a protest.

If 95 percent of those garden apartments file protests, wouldn’t that say something about the city’s performance?

Yes, I think it would. Even more is what the tax commission will do with it. And I think, in light of an increase like that, there [are] going to be a lot of reductions. All of these assessments are really done on a building-by-building basis, but I think that there is thought behind what they’re using. For instance, here is a Queens garden apartment co-op where, last year, the assessment was based on an estimated gross income of $1,557,000. This year, it’s based on $2,111,000. Now, the likelihood of an increase in income on a building like this is pretty thin. And I can’t tell you why the city itself isn’t tracking what they’ve done in prior years.

They’re not tracking?

They’re not. We came across one building where the income went down, and that’s relatively unlikely to have happened in the real world, and another building where the income went up by 30 percent, another fairly unlikely scenario in the real world, given the type of building we’re talking about.

Does the Department of Finance operate in a vacuum?

Good assessment policy, in my opinion, should change but should not change radically. It should be gradual. If there’s new construction, that’s another story, but I’m talking about the run-of-the-mill building.

Let’s look at Manhattan. What do you see there?

Manhattan is also kind of interesting. Park Avenue had a 15.3 percent increase; Upper West Side walk-ups overall increased 8.4 percent; Upper West Side elevator apartments had a 9.7 increase; Upper East Side walk-ups had a 9.2 percent increase; Upper East Side elevator apartments had a 12.4 percent increase.

I think many are going to find property-tax increases difficult to understand when apartment values have decreased.

But the assessments are not based upon apartment values. The assessments are based upon creating a residential rental building model. That’s what the law says you have to do. And, for the most part, with rent-stabilized buildings, those rents have continued to go up, even though the economy is weak. The unregulated rents in older buildings have remained pretty flat. Maybe they’ve come down a little. In the high-end buildings with high rents, those may have come down a significant amount. But they haven’t crashed. So, again, if we’re looking at rental models, most likely, income has gone up.

If I look at the segment on Park Avenue that has a 15.3 percent increase, would you consider that gradual?

No, gradual would be eight to twelve percent. Part of the problem with these swings is it’s very difficult for co-ops to budget for their taxes. There’s a real uncertainty there.

In conclusion, what would be your advice to co-op and condo boards?

Have somebody familiar with the assessment review process look at the assessments. There are still plenty of properties that are under-assessed. You know, there’s a bell curve. And, hopefully, in the middle are the properly assessed properties. Then, on one side, you’re going to have properties that are underassessed and, on the other side of the bell, you’re going to have properties that are properly assessed. Then, really, it becomes the assessor’s job to make the bell as narrow as possible. And that’s a good assessment role.

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