Bill Morris in Bricks & Bucks on January 19, 2022
The city’s Department of Finance (DOF) has released the Tentative Assessment Roll on property taxes for the 2023 fiscal year, which runs from July 1, 2022 to June 30, 2023. That means property managers and accountants at many co-ops and condos are now in a race against the clock. They have until Feb. 15 to advise boards on a critical question: Should they begin paying their non-union employees the prevailing wage in order to keep receiving the cherished co-op and condo property tax abatement, or should they keep their current pay and benefits structure and forfeit the abatement?
The question is driven by a law signed on Labor Day 2021 by Gov. Kathy Hochul. It requires buildings with non-union staffs to pay prevailing wages (and benefits) in order to qualify for the co-op and condo tax abatement, which ranges from a hefty 17.5% to 28.1% of shareholders’ or unit-owners’ property tax bills. (The prevailing wage schedule for building service employees, which is set by the city comptroller, is available here. Buildings with unionized staffs will not be affected by the law.)
“It’s going to be a big deal for some properties,” says Robert Ferrara, president of the Ferrara Management Group. “We have a hard time finding employees for buildings that are non-union or don’t offer specific benefits such as health care and a 401-k. It’s difficult to beat what the union offers. If co-ops and condos lose this abatement — at a time when all costs are going up — it will hurt.”
Drew Donovan, the chief operating officer at Choice New York Property Management, is putting his accounting background to use as he weighs the cost of prevailing wages against the benefit of the tax abatement at the 40 co-ops and condos in the company’s portfolio that are affected by the new law. The math is complicated by such factors as each worker’s position, wages, tenure in the building and benefits. “We advise our clients on both the financial and human factors,” Donovan says. “If the tax benefit far outweighs the increase in payroll, it’s a no-brainer. But some boards want to keep their super and doormen happy, so they’re willing to pay more in wages than they would save in taxes. Or maybe the board wants to keep the union out. There is no one-size-fits all analysis.”
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Donovan notes that a union doorman’s wages and benefits total about $40 an hour, and he estimates that paying prevailing wages to all service employees in a fully staffed, non-union building could increase payroll by 50% or more — a prohibitive number. Service employees include doormen, porters, handymen, janitors, security guards and others who work at least eight hours a week in the building.
For Class 2 properties — cooperatives, condominiums and rental apartment buildings — the total market value registered $346.9 billion, an increase of $27.8 billion, or 8.7%, from Fiscal Year 2022, according to the DOF press release. The total assessed value increased by 7.2%, to $108.5 billion. (The assessed value, a fraction of the market value, is part of the equation used to compute a property tax bill.)
A summary of the 2023 Tentative Assessment Roll and comparison with the two previous fiscal years is available here. A list of buildings that are required to file a notarized affidavit by Feb. 15, affirming they will pay prevailing wages in order to receive the tax abatement, is available here.
Co-ops and condos with an average per-unit assessed value of $60,000 or less are exempt from the prevailing-wage requirement. An affidavit must be filed by properties with 30 or more dwelling units and an average per-unit assessed value of more than $60,000, and by properties with fewer than 30 dwelling units and an average per-unit assessed value of more than $100,000. The abatement is available only to units occupied by the owner.
Amid all the uncertainty, there is one unassailable fact. Property managers and accountants have just received a major addition to their workloads. “I worked until midnight last night,” Donovan says. “Between now and Feb. 15, there will be many more nights like it.”
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