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Thousands of Homeowners Caught In Local Political Crossfire

County residents wait more than a year for refunds from adjusted real estate assessments

In a stalemate that mirrors events in Washington during the last few years, Republican county legislators led by County Executive Edward Mangano are engaged in a war of words with the nine Democratic county legislators, each side accusing the other of holding taxpayers hostage for their own political motives. In a turn of events, here in Nassau County it is the Democrats who are refusing to authorize more borrowing to balance the budget while the Republicans are advocating borrowing $102 million to pay the outstanding real estate tax refunds.

The most recent salvo in this war of words was fired a few weeks ago in a letter from Mangano to more than 17,000 Nassau County homeowners. The letter marked “Time Sensitive Information About Your Tax Refund” says that, “For purely partisan political reasons, nine Democrat county legislators are threatening to shut down county government and, in doing so, to deny you the property tax refund you are owed. Simply put, they are holding you hostage in a bid to force me to raise property taxes 25 percent on every homeowner in Nassau County, including you.”

The real estate tax certiorari process and the resulting refunds to homeowners and commercial real estate owners who have overpaid their real estate taxes is an extensive undertaking.

The History

Tax certiorari is the process county residents follow in order to challenge the real estate tax assessment on their property in an attempt to reduce the property assessment and therefore lower their real estate taxes. Residents, who are successful in reducing their tax bill, receive a refund for the tax year in question. Even though, “tax grievances,” as they are commonly called, are filed for a future tax year, the court proceedings are not settled immediately, resulting in a backlog of refunds due to residents.

Historically, the county has routinely “bonded” the entire debt owed to homeowners and commercial real estate owners. This means they issued bonds to cover the proposed debt. This method has the benefit of providing readily available funds to pay homeowners, allowing the county to budget the expense over time. Some believe this to be the most manageable way to handle the debt to taxpayers. The down side is the interest paid to bond holders and any additional costs associated with lending. In addition, if reassessments are not done in a timely manner, the debt to taxpayers continues to mount causing the county to borrow more and more just to stay current with what they owe to property owners.

Commercial tax certioraris involve larger assessments and are more complex. These cases may be many years old before they are settled by the courts, increasing by millions the debt owed to county property owners. The total due to residential and commercial property owners for current and old refunds is about $1.6 billion.

When former County Executive Tom Suozzi was voted into office he proposed a plan that would pay 50 percent of the debt associated with tax refunds from bonding and 50 percent from the operating budget. According to County Legislator Wayne Wink, this effort called “pay as you go” was an integral part of an attempt to restore financial integrity to the county’s finances. By paying the certiorari funds at least partially from current revenues the county would reduce borrowing costs and lower the pace of accumulating debt. It was believed this approach would slowly begin to lower the total debt burden to taxpayers while moving the county toward surer financial footing.

Republicans point out that the pay-go program never actually reached more than 20 percent of the total, and the tax reform needed to make it feasible did not occur. In 2010 County Executive Mangano proposed, and the legislature passed, the redesign of the antiquated property tax system that was described by Bloomberg News as “A tax system so crazy that the county is more than a billion dollars in debt from assessment adjustments.” One of the key points of the legislation was to repeal the county guarantee of refund adjustments, which had been in place since 1948. Under the old system, although the county collects all the real estate tax, it keeps only 17 percent while 65 percent goes back to local school districts that set their own tax rates. However, the county pays out 100 percent of the refunds. The new legislation effective for 2013 eliminates the guarantee and shifts back to the school districts their portion of the refund while making a concerted effort to redesign the assessment system so that it is correct in the first place, substantially reducing the need for refunds. Also part of the 2010 legislation is a an aggressive plan to pay off the $1.6 billion certiorari debt in four years beginning in 2013, and $50 million in bonds issued to cover the certiorari for 2010-2011.

To further complicate matters, Nassau County finances have been questionable for the last 10 years. In 2000, the state was so concerned about the county’s record of borrowing such hefty amounts to pay tax certiorari that they created the Nassau County Interim Finance Authority, NIFA. The Authority has been overseeing Nassau County’s finances ever since. Each year NIFA must approve the Nassau County budget. If they determine the budget is not balanced they are authorized to take over the county’s finances. The state board took control of Nassau’s finances last year.

The Politics

County Executive Mangano maintains that the budget cannot be balanced without another $102 million in bonds to pay off the existing 2010-2011 tax certiorari. Brian Nevins, spokesperson for County Executive Mangano said, “Democrats have routinely voted every year for bonding of these certiorari funds in order to repay taxpayers. Why won’t they vote yes this year? Is it because there is a Republican county executive?”

Democrat legislators say these claims are nonsense. County Legislator Wayne Wink says the Democrats are simply saying, “Show me your plan. Where is the additional money going?” Wink maintains, “The county has chosen to pay $30 million of the $50 million 2010 bond issue to commercial real estate holders at the expense of homeowners. There is about $14.5 million remaining in the fund that can be used to pay 70 percent of homeowners.”

Sources who asked not to be identified said that they believed that if Mangano would agree to paying out the remaining $14.5 million, a bipartisan plan could be reached to come up with the remaining $6 million due to homeowners, most of whom are owed anywhere from a few hundred to a few thousand dollars. According to the source, “It is the county executive who has chosen to take hostages in order to force Democrats to join him in fiscally irresponsible decisions.” Democratic legislators maintain that an assessment by NIFA made in early 2011 holds true today. “Although the bond issue offers immediate budgetary relief, it simultaneously creates a long-term debt for real estate refunds that shifts the debt to our children and grandchildren,” the source added.

The head of the Democrats’ caucus in the Legislature, Minority Leader Kevan Abrahams, was also critical – both of Mangano’s plan for borrowing, and of the way the county executive presented this issue to the public. Abrahams said, “The fact that not only has the county executive been sitting on millions of dollars that should be paid to county residents who are owed that money, but then also spends taxpayer dollars to a mail scare tactic letter that contains out and out lies defies all logic and reason. It is absolutely unacceptable that the head of our government acts in such an incompetent and irresponsible manner.”

The minority leader explained that among the issues raised by Democrats when the borrowing was up for a vote, was the fact that claims under $100,000 are not subject to approval by the Legislature. Claims under $100,000 would represent most or all of the residential claims owed to homeowners. His caucus argued that these residential claims, therefore, did not have to even come before the legislature and were unfairly bundled with commercial claims.

On the afternoon of Friday, Feb. 17, therefore, “the Mangano Administration was forced to file an amendment to remove all tax certiorari judgments and settlements under $100,000 for approval from the Nassau County Legislature,” the Democratic caucus explained in a release, adding, “This pushback by legislative Democrats that resulted in the county executive submitting the amendment is a victory for residents who have had their tax refunds held hostage by the Mangano Administration as they sought to lump all residential and commercial settlements together into a $102 million bond.”

Michael Florio, communications director for the minority caucus, commented on this development, saying, “This affirms our position that these refunds due to residents should have been paid long ago and have been unfairly held hostage by the Mangano administration.”