We Are Not Alone
Nassau County, New York, on Long Island just east of New York City, is having a good deal of trouble with its budget. At the heart of the problem is an antiquated property assessment system. Their assessments apparently have not been updated since 1938. Since New York is a market value state, that means that lots of taxpayers who appeal their assessments win. The county has borrowed $800 million to pay taxpayers who have successfully challenged their assessments, a rate of $100 million a year.
And we think we have problems.
Here are three articles from the New York Times about budgets and property assessment in Nassau County. This first, from October 2000, could apply to any assessment problem, anywhere.
October 9, 2000
A Path to Fairer Property Taxes, but
Where Politicians Fear to Tread
By DAVID M. HERSZENHORN
O ver the next few weeks, property assessors carrying digital
cameras will fan out across Nassau County to begin the gargantuan
task of updating the assessed values of about 416,000 parcels of real
estate. It will be the county's first full revaluation in 62 years.
Revaluations are an essential responsibility of local government, and
Nassau's reluctance over six decades has left its property tax system so
off kilter that nearly everyone pays too much or too little. The county
now spends about $100 million a year on refunds to taxpayers who
challenge their bills.
While Nassau has delayed unusually long, and its foot-dragging is all the
more visible because of its larger fiscal crisis, the county is not alone in
failing to maintain fair taxes. In many communities across the New York
region, the expectation of paying one's fair share, inherent in any tax
system tied to property values, no longer exists.
In Westchester County, where real estate prices have shifted widely as
the suburban population has boomed in recent decades, many towns
have not revalued property in more than 40 years. Efforts in the last five
years by the State Legislature to force a countywide revaluation have all
In Newark, the last revaluation was in 1961. After a 28-year court fight,
the State of New Jersey recently won permission to order a revaluation
against the city's wishes.
And in Rockland County, N.Y., a threat of litigation over disparities in
school taxes led officials in the county's five towns to agree to an
exceedingly rare joint revaluation, which began last year.
Many experts say that to guarantee fairness, revaluations should be done
every year. But of the three states in the New York region, only
Connecticut explicitly mandates revaluations, requiring them every four
Local governments have had many reasons for putting off revaluation.
The process has always been expensive and labor-intensive, requiring a
small army of assessors to visit and inspect each property. And for most
of the last century, major social changes — like urban decay and the shift
from an industrial to a service-based economy — provided the argument
that revaluation would hit homeowners too hard.
New technology — including constantly updated databases of property
sales, computerized maps and digital photographs — has made
revaluations much easier. And the relative economic and social stability of
the last decade has meant that once the tax rolls are updated, there is far
less chance of unpredictable changes in tax bills.
Still, there is rarely a rush to revalue. Taxpayers and politicians generally
see nothing but peril in tinkering with property taxes. Taxpayers fear that
no matter what happens, they will end up paying more, and elected
officials worry that they will be blamed for any increases that occur.
Over time, almost inevitably, inequities develop as land values change
and wealthier property owners pay less than their fair share while poorer
owners pay more than theirs. Owners of homes worth similar amounts
often have tax bills that differ by thousands of dollars.
In Nassau County, the disparity has also played out on racial and ethnic
lines. In the predominantly white hamlet of Manhasset, assessments on
average are 27 percent too low, according to a statistical analysis
conducted last year by Newsday. In Roosevelt, which has a large black
and Hispanic population, property was judged to be overassessed by
about 16 percent. A lawsuit brought by minority residents forced Nassau
into the revaluation that is about to begin.
Another hindrance in Nassau and elsewhere has been the hodgepodge of
local and state laws and court rulings — often antiquated and at times
conflicting — that regulate property taxes. Even these laws are often
upended by the haphazard granting of exemptions and other discounts.
But the largest obstacle to property tax reform, experts say, is the fear
among elected officials that they will be held responsible by voters whose
tax bills increase. And those whose bills increase tend to be affluent or
middle class, and thus more vocal and politically active.
Dick Netzer, a public policy professor at New York University, said
politicians find safety in the status quo. "It's been like this for a long time
— nobody has been voted out of office because of it," he said in
explaining their thinking. " `If we change it, somebody is going to be hurt
and maybe I will be voted out of office. So let's leave it.' "
In some places, the worries are reasonable. In tax districts that have seen
an erosion of industrial and commercial property, like Newark,
revaluation will shift the tax burden heavily onto middle-class
homeowners. Homeowners say that amounts to a punishment for building
a stable neighborhood.
New Jersey law requires property assessments based on full market
value, which would seem to require annual revaluations. But that simply
does not happen in many places, and the state's ability to enforce the law
is limited. New York, which is widely regarded to have some of the most
convoluted property tax systems in the country, has laws that are similarly
difficult to enforce.
But Professor Netzer and other experts say the fearful thinking
underscores just how little most people, even most elected officials,
know about how property taxes work and what revaluations accomplish.
Assessors say the resistance to revaluation proves another point: forget
fairness — every taxpayer wants to pay less than the next.
What makes revaluation complicated for many people is that it is not a
straight raising or lowering of everyone's tax bill. The goal of a revaluation
is not to change the total amount of taxes collected by the local
government but to rebalance or equalize the tax burden in light of market
Whether taxes go up or down depends on the budget drawn up by a
local executive and legislature. Local finance officials determine how
much revenue is needed from the property tax, and accordingly the tax
rate — a fixed amount per $1,000 of assessed value — is raised or
lowered in the annual budget.
What a revaluation changes is how much each property owner pays in
relation to others. If every house in a town doubles in value, everybody's
taxes stay the same. But if some values rise while others drop, those with
increasing values will pay more tax, while those with reduced values will
Professional assessors say that in theory, everybody wins in a revaluation
because the property tax system is made fair, contributing to the overall
fiscal health and well-being of a community. Tax challenges are reduced.
Local budget directors can make more accurate spending plans.
But it seems that no matter how many local assessors' offices distribute
pamphlets trying to explain this very point, the prospect of a revaluation
immediately sends property owners and the politicians who represent
them into a frenzy. Who will win out, by paying lower taxes, and who will
lose, by paying more?
This mind-set was certainly the case this month in East Meadow, on
Long Island, when the Nassau County assessor, Charlie O'Shea,
attended a meeting of the local Chamber of Commerce to discuss the
impending revaluation. Before the meeting, Mr. O'Shea predicted a
friendly crowd because East Meadow would get lower taxes.
"All reports here have shown that they will benefit from a reassessment,"
he said. At the meeting, questions from local business owners quickly
focused on how they would be affected. Rather than stressing the equity
of an update, Mr. O'Shea made clear that East Meadow would "make
Mr. O'Shea, a former state legislator, said he hoped to move to an
annual cycle after Nassau's revaluation is completed in 2003.
Recognizing the benefits, New York State now offers an incentive — $5
in state aid per parcel of property — to local governments that revalue
annually. About 250 districts have expressed interest, said Thomas G.
Griffen, executive director of the State Office of Real Property Services.
The incentive program requires the physical inspection and reappraisal of
property at least every six years — a practice that some assessors,
including the New York State Assessors Association, say should be state
New York City now updates its property assessments annually by using
a sampling of inspections and statistical estimates. The city has won
praise for trying to stay up to date, but critics caution that estimates are
no substitute for physical inspections.
Inspecting every property can be expensive, costing tens of millions of
dollars in large tax districts. But computers and mass appraising
techniques now make it possible to conduct fairly accurate revaluations
without the cost of hiring inspectors.
Greenwich, Conn., an affluent town with a robust residential and
commercial tax base, has a tradition of maintaining a low tax rate. Its
current revaluation, using every available technological tool, demonstrates
how a diligent local government can keep pace with even a fast- changing
real estate market.
Among the tools Greenwich employs are computerized maps, with
overlays showing wetlands and other areas that might affect property
values; aerial photographs of the town that show construction changes
not visible from the street; and a constantly updated database of property
As part of a revaluation about to be completed, Greenwich is taking
digital photographs of every residential and commercial property in town,
making comparisons easier. And, where many municipalities would use a
single assessing firm, Greenwich is using at least five, each with different
specialties. One, for instance, is assigned to assess golf courses.
Still, the town assessor, Harriet S. Gotz, sees room for improvement.
"Ideally, I would prefer to do every year," she said. "I would love to
move toward having an annual revaluation."
Cathy L. Conklin, the chairwoman of the multitown task force overseeing
the revaluation in Rockland County, said New York State could improve
simply by passing a law that requires revaluations at some regular
Inequities in school taxes, which make up a large portion of the property
tax, seemed to develop in Rockland because towns with shared school
districts had revalued at different times. Clarkstown, for example, last
revalued in 1985, while the town of Ramapo had not revalued since the
"To have some sort of a cycle bill in place that essentially mandates that
assessments have got to be at least in the same decade with each other
would make sense," Ms. Conklin said.
May 10, 2000
Pataki Proposes a Fiscal Bailout of Nassau County
UNIONDALE, N.Y., May 9 -- Gov. George E. Pataki went to Nassau County today offering a $100 million state bailout to help one of the nation's wealthiest counties avert financial chaos. In return, the debt-ridden county has to allow the state to monitor its finances and future budgets and agree to make large spending cuts over the next four years. If the politically fractured county fails to make the required spending cuts -- $50 million this year and an additional $70 million in each of the next three years -- the state will withhold the aid and impose a more powerful financial control board with the power to tell the county what cuts to make and even to abrogate civil service contracts.
"It is a carrot and stick," Governor Pataki said as he announced the plan, which he said could restore the county to fiscal stability without raising taxes. His proposal requires the approval of county officials and the State Legislature; leaders of both parties on both levels of government reacted favorably to the plan today and said they expected it to pass.
The governor took the extraordinary steps of intervening in the affairs of a local government -- and of pledging millions in state aid to the wealthy county -- after years of unbalanced budgeting left Nassau County running out of money during one of the longest periods of economic prosperity in the nation's history. The plan would include $100 million in state aid spread out over five years and would set up a financial authority with the ability to sell new bonds, guaranteed by the county's sales tax revenue. That would allow Nassau County to borrow money at a lower interest rate than the county, whose bonds are hovering just above junk status, can now get on its own. The arrangement is intended to buy the county time while it makes severe, long-term spending cuts.
In announcing his fiscal recovery plan, the governor said that he wanted to ensure that a county of vital economic importance to the state did not go bankrupt. Credit rating agencies have already threatened to reduce the county's bond rating to junk status if it does not put a financial plan in place by June 30. Wall Street reacted guardedly. "This gives them more time, but it highlights the necessity to come up with real, ongoing changes in the fiscal operation of the county," said Steven Murphy, a managing director at Standard & Poor's, the credit rating agency.
But the governor's actions have a political impact as well: the fiscal crisis already led Nassau County, long one of the state's most solid Republican bastions, to elect a Democratic majority to its County Legislature in November. And Republicans fear that continuing anger over the county's finances could mean more losses this November in races for the State Legislature, the United States Senate and the presidency.
The plan that was announced today has been in the works since March, when Governor Pataki appointed Frank G. Zarb, the chairman of the group that runs the Nasdaq stock exchange, as his special adviser on Nassau County. Mr. Zarb found that the county's 2000 budget of $2.2 billion was $178 million short, and that if no action were taken the deficit would balloon to $233 million next year and $321 million by 2003. Mr. Zarb painted a grim portrait of Nassau's fiscal practices, noting that the county had become increasingly dependent on selling off its assets and borrowing money through bonds to meet its expenses, which have grown drastically as its spending far outpaced the rate of inflation.
The county is now $2.7 billion in debt; Mr. Zarb found that the county spent roughly one out of every five dollars servicing its debt. And he noted that Nassau's antiquated property tax system -- the county has already agreed to overhaul it -- had forced it to borrow $800 million to pay refunds to people who successfully challenged their taxes, and to pay interest on that money.
To put the county back on its feet, the governor proposed the creation of the Nassau Interim Finance Authority, which would sell new bonds backed by the county's sales tax at a lower cost to the county and refinance the county's existing debt so that it could be paid back in smaller installments over a longer time. In return, the authority would have the power to monitor the county's finances. If the county met its obligations, it would get $100 million in state aid over the next five years, and the state would give the county an additional $5 million to hire lawyers and assessors to help the county reduce its backlog of tax refund claims. But if the county failed to immediately cut $50 million in spending and adopt a balanced four-year financial plan, the state would appoint a control board with the power to tell the county what cuts to make.
Just where the county's cuts would come from -- $260 million over four years -- was far from clear. In recent days Democrats and Republicans have met to discuss possible cuts, including $10 million to the county's Police Department, reductions of county contracts, the abolition of one county agency and the mergers of others. Such plans are unusual. Noting how rare it is for a state to bail out a foundering local government, David Liebschutz, an adjunct professor at Rockefeller College at the State University at Albany, invoked the other famous case of a wealthy suburb in distress: Orange County, Calif., which went bankrupt in 1994 after losing $2 billion on bad investments. "They asked for help and the state basically said to them, 'Tough, you work it out, you have the resources,' " he said. "That tends to be the approach."
New York State came to the rescue of New York City in 1975, Yonkers in 1975 and 1984, and Troy in 1994. But the scale of the assistance proposed for Nassau County is unusual, and it is even rarer for the state to establish a fiscal monitor and create a new agency to help the county borrow money. Mr. Pataki's plan was generally welcomed today by the Nassau County executive, Thomas S. Gulotta, and both Democrats and Republicans on the County Legislature.
March 30, 2000
Coping With Nassau's Fiscal Crisis (editorial)
Nassau County's political leaders are finally responding to the fiscal crisis that has pushed one of the richest counties in New York State and the nation toward junk bond status.
On Monday the County Legislature voted 14 to 4 to overhaul Nassau's antiquated and unfair property tax assessment system, a long-resisted move that is essential for the county's long-term financial health. Currently Nassau pays some $100 million a year in refunds to residential and commercial property owners who successfully appeal their assessments -- a tab it has covered by adding to its staggering debt load. In another promising step, the county executive, Thomas Gulotta, a Republican, and the Republican and Democratic leaders of the County Legislature have signed a joint pledge to raise taxes if necessary to close this year's budget gap -- projected at $100 million to $200 million.
These long-overdue steps were extracted from tax-averse lawmakers only under duress. The agreement to reassess all residential and commercial property within three years was necessary to avoid trial of a civil rights lawsuit challenging the racial disparities caused by the current system of assessing homes based on 1938 building costs, not their fair market value. The pledge on taxes came only after Standard & Poor's warned it would reduce the county's credit rating to junk status unless officials committed to raising taxes this year if other measures fail to close the budget gap. That pledge sufficed to buy some time -- but only about three months. Standard & Poor's says it will go ahead and lower the county's bonds below investment grade "unless the county reacts swiftly and decisively by June 30, 2000, to implement a credible achievable multi-year financial plan."
The burden of leadership now falls to Mr. Gulotta, the county executive, whose reckless budget practices over the years helped to make this reckoning inevitable. He must quickly lay down a long-term recovery plan that can form the basis for negotiations with the nine Republicans and nine Democrats who now make up the Legislature. The plan will presumably have to include a mix of fee increases, service cuts, departmental consolidations, government layoffs and, yes, some dreaded tax increases. There may be steps that Albany can take to help out. But these should be considered only as the final piece of a disciplined plan in which the county bails itself out of the mess it has created.