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As Values Fall, Tax Rates Soar

Residents across Nassau County are being hit with sharp school tax rate increases, leaving politicians pointing fingers and school administrators blaming a broken property assessment system, and specifically, valuation reductions on commercial properties.

The latest school tax bills, reflecting the higher rates, were mailed to Manhasset residents last week.

District figures show the school tax rate for Manhasset homeowners increasing by 4.52 percent.

Last year, Manhasset residents saw a big jump of 10.5 percent in their school tax rate—the latest figures from the district show this year’s rate far exceeding what was expected when voters passed the school budgets in spring.

School administrators say the sharp increase is caused by lower property valuations, especially commercial properties. Many owners have challenged their assessments through the Assessment Review Commission (ARC), an independent agency which reviews the valuation set by Nassau County. If it finds a property excessively overvalued, the ARC reduces the assessment, which lowers the taxes—and sometimes includes huge rebates—for that individual property owner.

But the school budget calls for a specific amount of tax revenue; if the value of taxable land falls then the tax rate must rise to bring in the same amount. Thus, those lower values are forcing another year of dramatic rises in rates.

Manhasset schools will receive a 1.97 percent increase in tax dollars from homeowners. That is in line with the budgets passed in the spring. But two factors are conspiring to drive homeowner tax rates higher than that.

Nassau County uses a tax class system, segregating different types of properties. Classes 1 and 2 include all properties that are primarily residential. Class 3 consists of utility company equipment and special franchises. Class 4 contains all other property, including commercial, industrial and institutional buildings, and vacant land.

Each class contributes a different percentage of the overall tax bill, called the “adjusted base proportion” or “ABP.” Those rates were changed last year, too, by the county raising the portion of taxes paid by residential homeowners.  Roslyn Assistant Superintendent for Business Joseph Dragone is among those studying this issue closely. He says that of the 22 districts that have shared numbers so far, “in every case the tax rate for homeowners increased faster than the tax levy due to the drop in assessed value.” He adds that increases in the ABP paid by residential owners compounded the problem in 13 of those 22 districts.  

While changes in ABP favored residential owners in nine districts—including Manhasset—those decreases were small  (about ½ percent or less)  and thus did little to offset the increases from other forces.

Manhasset homeowners, Dragone explains, were the beneficiaries of a quarter-percentage-point decrease in the ABP this year, but it comes on the heels of significant increases  in the past few years “The reduction does not make up for that increased burden on homeowners,” says Dragone.

There’s a second factor at play. Owners in every class are eligible to challenge their assessments. But the impact on revenue of revaluing a home—worth about $400,000 on average countywide—is negligible next to the impact of revaluing a commercial property—worth well into the millions in Nassau county. (And remember, when one taxpayer wins a reduction, the rest must make up the difference.) School officials are saying that hefty commercial property reductions are a major driver of the latest rate hike for residents.

“A shopping center or medical office that’s worth $10 million or $30 million … Think of what a 5 percent reduction on a $30 million building would be—how much more people who own houses are going to pay,” says Ronald Friedman, Superintendent of the Syosset School District. “You didn’t even do anything as a homeowner to change the value of the house but you’re getting a change. Why? Because 300 office buildings and six strip malls got reductions.”

On top of that huge imbalance, there’s a difference in how much of the burden each class of taxpayer carries.

 When the Department of Assessment issued homeowners their 2012-2013 tax roll disclosure notice last year, Nassau properties had been given the lowest possible assessed values, according to the department.

“The lowest possible value was chosen because of our commitment to keep the assessments at a reasonable level that is fair and equitable to all property owners,” said Gregory Hild, chairman of the Department of Assessment’s transition team at the time.

However, these lower property taxes have caused school tax rates to rise, making up for, and in some cases far surpassing, the money saved on property taxes.

“County officials encourage homeowners to challenge their assessment and then proudly announce that 87 percent of the assessment review claims are granted,” says Dragone.

School taxes rise when the district seeks more money than the previous year, but typically budget increases are relatively small. The bigger impact, according to school administrators, comes from changes in assessed value—both of people’s homes and of commercial properties.