New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

Jane Street in Wonderland

Read this article in the digital edition.

I’m not a tax expert, but I certainly know something about basic fairness. And what the city has done to our little building on Jane Street is basically unfair – and a little Alice in Wonderland nutty, to boot.

As treasurer of 20 Jane Tenants Corp., in the West Village, I am getting numerous complaints from shareholders. There is considerable anger about the doubling of our property taxes since 2005, while actual unit sales prices are the same as in 2005.

I wrote to the city government. I was told that under New York State Real Property Tax Law, “cooperatives are valued as if they were rental parcels. (As such, sale prices of individual units are not utilized...) Generally, increases among cooperative parcels tend to mirror increases among comparable rental parcels... From tax years 2008/09 through 2010/11, the Department utilized a gross income multiplier... It should be noted that the Tax Commission utilized a different method, i.e., capitalizing an estimate of net operating income, which may explain, in part, for the differences in value...”

I was, of course, aware of the reasons behind the putative increase in market value. The city’s reply was disingenuous, however, implying that the rise in our market value from $793,000 in 2004 to $1,555,000 in 2011 was because of a 96 percent rise in the actual market values of the parcels of comparable rental properties. That is not an honest presentation of how the Department of Finance (DOF) makes its calculations. Furthermore, this 96 percent market-value increase, in actual real estate prices and appraisals, did not exist in West Village low-end rental real estate during this period.

Here is a citation of a real-world increase in value. I am looking at the building next to ours, 16 Jane Street. It is not one of the tax assessor’s two comparables, but it is certainly a valid comparable in terms of location and use. In 2003, 16 Jane Street had a market value of $2,850,000, and in 2010 that had risen to $4,900,000, an increase in market value of only 72 percent. Yet we are being saddled with an increase of 96 percent.

Instead of straightforwardly assessing real market values by means of comparable sales, the tax assessor uses a workaround called the “net income capitalization method.” Here the market value is established by multiplying the net operating income by a capitalization factor. This cap factor varies from property to property and from year to year; it is being constantly manipulated by the DOF, and that is patently unfair. Furthermore, the net income number is also unreliable, since it can be fictional: “the income that your property... could receive” as determined by, you guessed it, the DOF. And co-ops cannot verify whether the numbers of their two comparables are actual or “estimated” because these are, you guessed it, confidential.

And how is it comparable? The rental building at 257 West 12th Street, with its lavish architectural features, has been cherry-picked in order to jack up our taxes. Its distinctive ornamented façade features carvings, pillars, bas-reliefs, pediments, and decorative rusticated stone blocks. The DOF stated that the net operating income for this address for 2005/06 was $100,100; for 2011/12 it is $196,869. That is a 96 percent increase; poor 20 Jane Street’s tax bill went up almost as much during this period (89 percent, from $32,233 to $60,940). And, funny thing, 20 Jane Street’s fictitious, imputed, estimated, could-have-been-received “net operating income” only advanced 70 percent during this period. Some comparable!

The illogic doesn’t just revolve around taxes, either. It extends to facts. We have repeatedly informed the department that its listed date of construction of our building, 1946, is incorrect. Our building was constructed in 1872.

The city’s response? An unsigned, undated form letter stating that our “taxes were calculated correctly.”

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