Assessment revaluations have become a controversial issue throughout Westchester County recently. In recent years, Pelham, Scarsdale, Rye, and Mamaroneck have conducted revaluations. In 2016, Greenburgh and Ossining will debut new assessment rolls. Meanwhile, Yonkers, the largest city in Westchester, continues to seriously consider conducting their own revaluation. As a commercial property owner, how can a revaluation affect you and what can you do to protect your bottom line?
In Westchester, there is no requirement that municipalities annually re-assess. In fact, many jurisdictions have left their assessment rolls unchanged for decades. Instead of changing the assessments, most Towns, Cities and Villages leave assessments static from year to year. In order to translate these static assessments to value in a fluctuating real estate market, New York State reviews sales within an assessing unit to set annual ratios of assessment to value. An example will illustrate how this works:
A medical office building has an assessed value of $400,000. The assessing ratio in the Town is 20% for that year. Therefore, for assessment purposes the Town’s position is that the building is worth $2,000,000. The next year the Town’s assessment ratio drops to 19.5% but the assessment remains unchanged. Now, for assessment purposes, the Town’s position is that the building is worth $2,051,282.
As you might imagine, adjustment of a Town’s assessment roll via annual changes to the assessing ratio can be problematic. In the example above, every property in the Town including the medical office building was deemed to have increased in value by 2.56%. However, in reality, some classes of property and property in some areas of the Town may have increased in value by more or less than 2.56%. Proponents of reassessment argue that the process will address this problem by more accurately valuing property based on each individual parcel’s type, location, size, and other factors.
This position has superficial appeal. However, the implementation of these reassessments usually does not result in more accurate and equal assessments.
A full revaluation is generally a multi-year process. A municipality will usually hire a third-party consultant to collect financial and physical data about real property within its borders. Often, the municipality will contact commercial property owners and request income and expense statements, rent rolls, or other financial data about the property. While in some instances it may be helpful to an assessor to provide such financial data, there is no requirement that a property owner do so. If you are unsure whether to respond to a request, you may want to consult with counsel first.
After the data is collected, the Assessor and the third party consultant will work together to develop a new tentative roll. The majority of jurisdictions in Westchester release a tentative roll on June 1st of each year.
Reviewing your new Assessment
When the new assessments are released, you have a short window in which to review the new numbers. In most Westchester jurisdictions, the grievance day, or the day by which an administrative challenge to the assessment must be filed, is statutorily set as the third Tuesday in June. Notable exceptions to this policy are Yonkers (November 15th) and White Plains (January 21st).
Even if the full market value of your assessment is unchanged, your taxes are likely to change at least to some degree. This is because the your share of the tax levy is determined by your relative share of the total taxable assessed value in your community. If the full market value of your assessment dropped or was stable, but your percentage share of your jurisdiction’s total taxable assessed value increased, your taxes will also increase. Therefore, we almost always advise clients to challenge their assessment in the first year of new assessment roll. A tax certiorari petition can always be discontinued but if filing deadlines are missed there will be no opportunity to achieve retroactive tax relief.