REPORT ON THE TAX REASSESSMENT PROJECT
BY: HARVEY B. LEVINSON,
Special Assistant for Tax Reassessment
December 30, 2002
The revaluation of Nassau County's assessment roll is one of the most
important, and most expensive, undertakings in Nassau County history.
County Executive Suozzi has stated that an accurate revaluation is
critical to the County's future fiscal health. As the revaluation project
neared completion, he received letters, e-mails and phone calls from
hundreds of residents expressing concerns about reassessment. On November
18, 2002, Mr. Suozzi appointed Harvey B. Levinson, the former Chief
Assistant District Attorney in Nassau County, as his Special Assistant to
investigate the fairness and accuracy of the reassessment.
After using the same outdated assessments since the 1930's, the County
had a residential assessment system that was unfair and that left the
County on the hook for large tax certiorari refunds. The reassessment got
underway in March 2000, when in order to settle the Coleman case, the
County agreed to revalue the residential Class One assessment roll and to
hire an outside contractor to do the reassessment. The Cole Layer Trumble
Company was hired in May 2000 and has worked on the revaluation since then
under the direction of Charles O'Shea, the elected Chairperson of the
Nassau County Board of Assessors.
In this report, I discuss the six significant problems I have
identified in my brief review. All have a single thread in common - they
could have been avoided with more forethought, planning and hands on
oversight by Charles O'Shea and the Department of Assessment.
- Vacant Land The Department of Assessment should not have been
the last to know that State law required that vacant land be taxed at
commercial rates. With proper planning, corrective legislation could
have been proposed in advance, instead of hoping now that the State
will fix the problem before the tax bills go out.
- Failure to Capture The Value of Waterfront and Unique Properties
Many have questioned the assessments placed on harder to value
properties such as waterfront homes and large estates. The Department
of Assessment permitted the revaluation contractors to stand on the
road and attempt to observe the buildings. Clearly, Mr. O'Shea should
have recognized that staring at an entrance gate and perhaps getting a
peep at the property when and if the gate was opened, is not the way
to conduct an assessment of a fifteen-acre waterfront estate.
- Faulty Communication With The Public The Department of
Assessment did not take control of public communication or oversee the
process, so that many members of the public were unnecessarily
agitated by the revaluation.
- Commercial Property Valued Without Current Income and Expense
Information The Department of Assessment did not take advantage of
existing law that allows the Assessor to require property owners to
submit current income and expense information, which is how most
commercial properties should be valued.
- Co-op and Condo Issues Left Unaddressed The Department of
Assessment should have provided more oversight for valuation of these
properties, and conducted studies by school districts to determine the
effect of merging Class One and Class Two into a new single homestead
class.
- Potentially Inaccurate Choice of Comparable Properties There
were enough criticisms of the comparables used to value homes to
suggest that homes were not compared only within school districts and
within neighborhoods. The Department of Assessment will need to give
careful attention to this issue in updating the assessment roll.
Mr. O'Shea testified at a public hearing held on November 26, 2002 that
problems that came to light at the end of the reassessment should have
been addressed in advance:
Certainly, all the laws that we've spoken about here have been on the
books long before this revaluation took place and certainly, if anybody,
either in the State Legislature or the County Legislature or the County
of Nassau had raised any of these issues with me or anyone else, we
would have addressed them sooner. No one is more, no one is more, (sic)
and no one more upset than I am that the vacant parcel property was not
addressed in the spring of this year… I think there were some issues
that we had to address because they were brought to our attention late
in the game? Yes we did and I think that we tried to address them as
best as we could… Have we all learned and realized that we're going to
stay on top of this stuff in the future. Yes we have…
Query: Why did the Chairman expect someone else to inform him of the
assessment law and procedures?
1) VACANT LAND - The New York State Real Property Tax Law has
required for twenty years that vacant residential land in Nassau County be
taxed as if it were commercial property. This was not a concern before the
revaluation because all such properties were valued at artificially low
1964 land values.
Mr. O'Shea stated he was taken by surprise when he learned that vacant
land was subject to the higher commercial property tax rates. His October
2, 2002 press release acknowledged that "Nassau County Board of
Assessors Chairman Charles O'Shea first learned three weeks ago of the New
York State Law that required CLT to apply commercial tax rates on vacant
residential land." When property owners received the notices showing
the vacant land reassessed at full market value and applying the required
commercial tax rate, the owners of vacant land cried foul, and rightly so:
The tax on vacant land would be going up by 1000% or more. When Mr. O'Shea
"discovered" the New York law, although on the books for twenty
years, he belatedly called for legislative action in Albany.
Curative legislation should have been proposed by Mr. O'Shea before
starting the reassessment. Unless some relief is offered, many owners of
vacant land will have little choice but to sell their land to developers.
Sound public policy should encourage, not discourage, maintaining the few
remaining parcels of vacant land in the County.
Belatedly, in October 2002 a bill was introduced in the New York State
Senate and Assembly to reclassify some vacant land from the present
commercial classification (Class 4) to residential (Class 1). This
transfer to a residential class will reduce the amount of the tax
increase.
I urge the State Legislature to act quickly so that this problem can be
fixed before the tax bills go out.
2) FAILURE TO CAPTURE THE VALUE OF WATERFRONT AND UNIQUE PROPERTIES
- There are standards that govern a proper revaluation. For instance, each
property should be viewed before it is valued. The Department of
Assessment did not require that its contractor, the Cole Layer Trumble
("CLT") Company, comply with this standard since properties were
only observed from the public right of way. Using the public right of way,
some properties could not be seen at all, and rear views could be seen of
very few. This was not compliant with the standard promulgated in February
2002 by the International Association of Assessing Office for mass
appraisals, which recommended that mass appraisals include "correct,
complete and up to date property data" and "at a minimum a
comprehensive exterior inspection should be conducted."
The Department of Assessment did not request permission to enter onto
properties to view buildings from the exterior or to view the interior.
Instead, the Department assumed that the interior conditions of homes were
consistent with their exteriors, to the extent the building could be seen,
and that the information concerning the interior conditions as provided by
the assessor's records was accurate, unless observation from the public
right of way would indicate otherwise. The failure of Mr. O'Shea to write
to owners of all properties, but especially large estates where the
exterior could not be seen from the road, to seek permission to do a
comprehensive exterior inspection, and for some, an in house inspection,
may have caused under valuation of luxury property.
In updating the assessment roll, the Department of Assessment should
consider how to do a better job of inspecting properties that cannot be
seen from the public right of way, and to seek permission to view the
interior of selected properties.
There are two types of properties where the failure to inspect property
was particularly troublesome:
-
WATERFRONT PROPERTIES- As reported in the media, a member of
the Board of Assessors complained that many homes on the waterfront
were grossly under assessed and some neighboring properties were over
assessed. Near the end of the reassessment project, the Department of
Assessment's contractor, CLT, reluctantly agreed to take another look
at the waterfront parcels. There are approximately 2,000 waterfront
properties on the North Shore and 7,900 on the South Shore. CLT found
that the Board member's complaint had validity, and raised assessed
values on 300 plus waterfront parcels in southeastern Nassau County.
During this discussion, it came to light that a waterfront estate
on fifteen acres in Center Island Village on the North Shore was sold
in 2002 for $22,000,000. The Department of Assessment had valued the
property at less than $8,000,000. The physical observation protocol
used by the contractor, CLT, as required by Mr. O'Shea, was limited to
viewing the entrance gate to the estate driveway and using the
assessor's property records. The public right of way from Long Island
Sound and inlets was not used as a vantage point. CLT should have been
required to use vantage points other than the roadway when waterfront
estates were being valued.
-
UNIQUE PROPERTIES & ESTATES- Unique homes and estate
type properties may have been significantly under assessed. Attached
is a study of 2001 home sales comparing the market value assessment as
determined by the Department of Assessment's contractor, CLT. This
study examined sales of properties selling for one million dollars or
more in 2001 through May 2002 in Garden City, Great Neck, Jericho,
Lawrence, Manhasset, and Port Washington. My findings are as follows:
Garden City had 22 sales for a total sales price of $31,847,000:
The revaluation put these properties at $26,279,380 a difference of
-21.19% or $5,567,620.
Great Neck had 66 sales for a total of $107,387,245: the
revaluation put these properties at $98,817,930, a difference of
-8.67% or $8,569,315.
Jericho had 30 sales for a total of $52,081,961: the revaluation
put these properties at $47,604,459 a difference of -9.41% or
$4,477,502.
Lawrence had 12 sales for a total of $17,025,000: the revaluation
put these properties at $14,836,600, a difference of -14.75% or
$2,188,400.
Manhasset had 55 sales for a total of $76,704,900: the
revaluation put these properties at $63,286,800, a difference of
-21.20% or $13,418,100.
Port Washington had 32 sales for a total of $53,357,500: the
revaluation put these properties at $50,349,520, a difference of
-5.97% or $3,007,980.
This represents a net loss of $37,228,917 of full market value for
the above six communities. Although there were sales where the
revaluation full market value was higher, the survey suggests that the
process used to assess homes valued above $1,000,000 may have been
flawed resulting in higher tax rates for other taxpayers.
This could be affecting a substantial number of homes. CLT
identified 12,708 homes in Nassau County with a full market value of
$1,000,000 or greater:
| Homes With A Full
Market Value |
Number of Homes |
| $1,000,000
or greater |
12,708 |
| $2,000,000
or greater |
1,772 |
| $5,000,000
or greater |
135 |
The Department of Assessment must exercise more careful oversight
in these areas. A model of valuing property that does not consider
sales prices when valuing high cost homes should not be permitted.
3) FAULTY COMMUNICATION WITH THE PUBLIC - There were problems
with the informal review process that could have been avoided by more
careful oversight:
Some 6,500 homeowners will see an increase in their assessed values as
a result of information that came to light during the informal review
process . The public was never told that by challenging their preliminary
assessment there was the risk of an increase in valuation and many have
been dismayed to receive the increase notice.
Homeowners who complained but did not receive an adjustment in their
property's valuation were sent notices that did not explain why the
Department of Assessment and its contractor, CLT, rejected the homeowner's
request for a reduction to their assessed values. Many owners spent hours
in preparation for their interviews, and supplied detailed documentation
to support their claims. The failure to include an explanation was
perceived by many members of the public as "rude and
insensitive."
The notice informed homeowners that they were required to pick up in
person an application to appeal. This was incorrect. CLT's telephone
recorded message stating that their offices are closed is difficult to
understand due to its rapid speech. The information on the procedure to
file an appeal with the Assessment Review Commission is confusing.
Unfortunately it states that the taxpayer can only file an appeal if he or
she picks up an application at the "certiorari bureau" in
Mineola, which is not informative to the average property owner.
Apparently, mailing an application to the taxpayer, or using the Internet
was not considered as an option. Finally, there is no option given for the
taxpayer to leave a message.
The County should educate the public so that all aggrieved property
owners become aware of the user-friendly appeal process for those claiming
they are over assessed: The Assessment Review Commission (ARC). Homeowners
are encouraged to call the ARC at (516) 571-2391, or go on the web at www.co.nassau.ny.us
for forms or other information.
4) COMMERCIAL PROPERTIES VALUED WITHOUT CURRENT INCOME AND EXPENSE
INFORMATION - As is well known, approximately 85% of the more than one
billion dollars of refunds paid by Nassau County for over assessments have
resulted from successful challenges to the assessed values for Class 4
commercial properties. Accurate commercial assessments are therefore
critical to the County's fiscal health. Unlike the residential class, who
has openly criticized the reassessment project, little criticism has been
heard from commercial side. We will soon see whether this is because the
new tentative assessments are lower than expected or because most
commercial owners represented by certiorari attorneys are lying in wait to
file challenges after January 2003.
Commercial property was valued by view from the public right of way and
on the basis of property description from building permits. The Department
of Assessment did not require that its contractor, CLT, have personnel
inspect businesses, even when the businesses were open to the public. CLT
and the Assessment Department made no effort to secure up to date income
and expense data to value the properties, even though that is the standard
methodology to value most commercial sites. Not having any up to date
income and expense numbers, Mr. O'Shea authorized CLT to retain local
appraisers Michael Haberman Associates and Smith, Salerno Valuation
Services Inc. to calculate this income and expense information. As
experienced appraisers, they had access to their own extensive files for
class 2 and 4 income and expense data.
Nassau County Administrative Code, §6-30, however, requires that Class
2 and 4 owners supply income and expense statements upon request of the
Assessor. Rather than rely exclusively on private appraisers estimates,
Mr. O'Shea should have required income and expense statements be supplied
to his office, pursuant to the Nassau County Administrative Code. I call
on the Department of Assessment to rectify this lapse in preparing the
updated assessment rolls in the future, and to use the income and expense
information provided as part of the administrative protests at the
Assessment Review Commission.
5) CONDOMINIUM AND CO-OPERATIVE HOMEOWNERS - At a recent
legislative hearing many members of the Nassau County Legislature
expressed concern that all co-op owners and many condo owners were taxed
differently than single-family homes. Condo owners living in a 4-story or
higher building are required under the Real Property Tax Law to be taxed
differently than a condo unit in a 3-story building or town house.
Another anomaly is that the assessments of co-ops and condo 4-stories
or higher are not based on market sales values, but rather on the income
that would be produced if all the apartments in the building were rented.
This makes little sense considering the fact that most owners of co-ops
and condos in Nassau County reside in their units and only a small
percentage are rented. The CLT notice to Class 2 property owners did not
explain that market value was determined by using the property's potential
rental income. Since this amount is substantially less than the true
market value, many Class 2 owners thought they were getting a windfall,
when in fact they could end up paying higher taxes.
The Department of Assessment should offer to perform an analysis by
school districts to determine the effect, if any, on merging class one and
two into a single homestead class.
There is another solution to the tax dilemma faced by co-ops and
condos. Section 1803 (b) of the RPTL permits a school board to merge Class
2 (co-ops and condos), Class 3 (utilities) and Class 4 (commercial
properties) into a single class. East Williston has previously done so, as
has Long Beach. In order to reduce the tax burden placed on co-ops and
condos other school districts are considering the merging of Class 2, 3
and 4. I call on the Department of Assessment to analyze for school
districts whether this alternative is financially advantageous for
taxpayers.
6) INVALID SELECTION OF COMPARABLE PROPERTIES - Dozens of
homeowners complained at public hearings and through letters and emails
that the comparable sales data used to determine market value included
homes outside of their neighborhoods or in different school districts. I
was unable to confirm whether this was a consistent problem with the
revaluation based on my limited study. The anecdotal information suggested
that the comparables were unfair and resulted in inflated market values.
For example, an owner of an attached home complained that her group of
homes were compared to single family homes, not other attached homes.
Concerns were heightened because of a lack of information when
homeowners brought complaints to the revaluation contractor, CLT. Mr.
O'Shea's office did not assign staff to supervise and monitor this
critical stage of the reassessment process, in effect transferring his
powers and duties to a paid contractor. Homeowners complained because
although CLT allowed them to see the comparable properties used, they
refused to provide the comparable sales in writing. This would have been a
simple step that the Department could have been required to take to
improve residents' understanding of the reassessment process.
The comparable properties selected could also have been problematic
because of mistakes in the underlying data. Property data cards,
maintained by the Department of Assessment, depend on building permit
information. As is well known, some property owners do not seek permits
before making improvements. If building permits were not sought, the
assessor's property data records would not be up to date. Many homeowners
complained during public meetings that because neighboring homeowners did
not file for building permits, the property information posted on the
website was not current.
Because the extent of these inaccuracies is not known, I urge the
Department of Assessment to give careful attention to these concerns in
developing the updated assessment roll next year.
