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Falling Values Send Tax Rates Soaring

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. In Great Neck, many residents approached were not surprised at all. Although several had not yet opened their tax bill, many explained that they expected increases since they had followed the issue in the Great Neck Record.

These residents displayed a real understanding of the state-mandated tax cap, how the school district strictly kept to the cap, and how outside pressure forced the tax increase.

Great Neck Public Schools Superintendent of Schools Tom Dolan told the Record: “The Great Neck School District stayed under the state-imposed levy cap. We have done so every year since the legislature passed the levy … and also for the year before we were obligated to do so.” Dr. Dolan added: “The tax rate is our of the school district control.” He promised that all of the “variables associated with the computation of the tax rate” will be explained at the district’s next public meeting on Oct. 21, “to help residents better understand this complex topic.”

The latest school tax bills, reflecting the higher rates, will be mailed to Syosset and Jericho residents this week.

District figures show the school tax rate for Syosset homeowners increasing by 9.13 percent. Jericho homeowners face a rate increase of 8.15 percent.

While not as big a jump as last year—Syosset residents saw a 12.7 percent increase in their school tax rate in 2012 and Jericho residents saw an 11.8 percent increase—the latest figures from both districts show tax rates far exceeding what was expected when voters passed 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 property values are forcing another year of dramatic rise in school tax rates.

“In Jericho, the tax rate is increasing at more than two and a half times the rate that the tax levy established by the board of education (and approved by the voters) increased: 8.15 percent as opposed to 3.13 percent,” says Victor Manuel, Jericho’s assistant superintendent for business affairs.

Syosset schools will receive a 2.84 percent increase in tax dollars from homeowners. In Jericho, schools will receive a 3.13 percent increase. Those are 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 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.  

Secondly, 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.

“The change in the ABP added an additional 1.2 percent to Class 1,” says Jericho’s Manuel. “And assessment reductions added an additional 3.82 percent to bring the tax rate increase for Class 1 to 8.15 percent.”

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 Joseph Dragone, Roslyn School District’s assistant superintendent for business.

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.