The full consequences of the Trump Tax Bill with its cap on State income and Local Tax property tax deductions (SALT) at $10,000 won't be felt until New Yorkers file their 2018 taxes in April 2019. While the extent of the impact on homeowners taxes next year is debated by accountants, one practical effect of the SALT cap in high property tax Westchester will be that every new dollar added to a homeowners tax bill will be felt by the typical taxpayer at a 30% premium compared to previous years when each added tax dollar was "discounted" by the payer’s corresponding Schedule A deduction (yes, AMT complicates this calculation for high earners). Yet, warning tremors are even now shaking the status quo. For example, the just-released tentative townwide assessment shows lower assessment growth in the high-end Edgemont and Irvington school districts compared to their immediate neighbors, suggesting some softening in these markets which may reflect tax pressure. Anecdotal reports from brokers and home sellers reveal that prospective buyers are asking pointed questions about taxes and factoring the Tax Bill into their decision making.
Town, school, fire and village authorities demonstrated time and again that they are unable to contain annual budget growth. Local officials, however, may be facing trouble ahead if they stay the course with their routine 2%-5% annual tax increases (e.g., the Town of Greenburgh raised B budget (TOV) property tax appropriations for 2018 by 2.95%). Annual reassessments (and adjustments to exemptions, like STAR) help elected officials disguise the actual amount of tax increases by enlarging the taxable base and holding down tax rates. This gamesmanship allows taxing jurisdictions to stay under the purported state tax "cap" when actual tax $ increases are much higher than the cap allowance. Tax authorities, however, can't control the real estate market: while homeowners paying property taxes through their mortgage companies may not be entirely clear about their tax increases, buyers will factor the bottom line results of the assessments and tax rates into their offering prices
The recent revenue grab by the Town of Greenburgh with a new local hotel tax is one example of the town’s resourcefulness in extracting revenue from residents as market values plateau and dip along with rising property taxes and increasing mortgage rates. In a measure with even more significant consequences, Greenburgh town officials have started hinting about undermining the thick walls that protect the privileged tax positions of condos and coops.
Condos and coops in Greenburgh, like most New York town, are not taxed like single-family homes at purported market values calculated by the assessor’s office. Instead, condos/coops are taxed at their value as rental properties which severely discounts their assessments and taxes compared to single-family homes with identical sales value. For example one Boulder Ridge condo sold this past fall for $865,000 but is newly assessed at $473,900 for tax purposes: this 45% discount saves this Boulder Ridge owner over $12,000 in taxes per year compared to the taxes that a single family homeowner with the same sales price would have to pay in 2018. This $12,000 tax savings enjoyed by the condo owner is absorbed by single-family homeowners whose taxes are raised to cover the condo discounts.
This article provides an excellent account of the condo/coop tax controversy: This article from syracuse.com provides an excellent account of the condo/coop tax controversy.
In the past, when offered the opportunity, the Town of Greenburgh has refused to even consider the possibility of taxing condos and coops at the single family tax rate (known as adopting the “homestead option”). In recent months, however, Town Board member Francis Sheehan and Supervisor Paul Feiner have spoken at Town Board work sessions about changing the tax status of NEW condos. Their immediate target are the 175 new condos proposed for the Elmwood County Club property, as well as future apartments that may result from redevelopment of the Hartsdale Four Corners. Sheehan and Feiner have made clear that they are focused only on changing the tax status of future condos, not existing apartments. Consistent with this aim, the Town Board passed a resolution on May 31, 2018, supporting the Galef/Little Bill A02874A/S01191B – co sponsored by Greenburgh’s Assemblyman Tom Abinanti - described in the article linked above, which would allow localities to tax newly constructed and converted condos and coops like other residences beginning in 2021. See: http://nyassembly.gov/leg/?default_fld=&leg_video=&bn=A02874&term=2017&Summary=Y&Actions=Y&Committee%26nbspVotes=Y&Floor%26nbspVotes=Y&Memo=Y&Text=Y
No matter how cautiously the Town Board discusses bringing condo/coop taxation up to regular residential rates, they are excavating the first cracks in their previous resolve to defend the condo/coop tax privilege. If the impetus is to find new revenue streams to alleviate the tax burden on single-family residences – the majority of homes – then fully taxing only future condos will accomplish almost nothing toward that purpose.
Instead, revenue needs - along with the tax pressure that will be stirred up by the Tax Bill - will inevitably raise public discussion and awareness of the usefulness of taxing all condos and coops at regular rates. Now that the Town Board has now opened the Pandora’s Box of equalizing condo/coop tax rates, the adoption of the “homestead option”– to tax all residences equally – will be just a matter of time. Major pieces of legislation, like the Trump Tax Bill, always have unintended consequences. Tax fairness among Greenburgh residences maybe just be one of them.
