Public Employee Press

How the city lost billions of dollars in revenue
understaffing, undertaxing

By GREGORY N. HEIRES

The city is losing billions of dollars in uncollected taxes each year by grossly under-assessing commercial and apartment buildings.

An expert study released in December also found that the city could lose up to another $2.9 billion a year through legal challenges from owners seeking equal treatment with undervalued buildings.

The study, conducted by Baruch College professor Joshua Kahr and commissioned by the union, examined 13,000 commercial and income-producing residential properties sold in 2003. The Finance Dept. is supposed to assess such residential properties at 45 percent of their market value, but the report found that the properties were assessed at an average of only 25 percent.

“This tremendous loss of tax revenue is largely the result of recent downsizing,” said David Moog, president of Assessors, Appraisers and Housing Development Specialists Local 1757. The local has pressed for greater independent oversight of the assessment process in recent years.

“We need to hire more assessors and we need to do it right now,” said DC 37 Executive Director Lillian Roberts.

Since 2001, the ranks of the assessors at Finance have declined from 185 to 140.

Property taxes are the largest share —about 40 percent — of the city’s nearly $30 billion in local taxes, which also include taxes on personal income, sales, business income and other items.

“The City is not collecting approximately half of what it could,” says the study, suggesting that the city is losing billions of dollars each year because of the lowball assessments.

Mr. Kahr provided stunning examples of the tax losses caused by under-assessing commercial buildings, which in fiscal year 2004/05 were taxed at 11.6 percent of their assessed rate:

• The General Motors Building at 761 Fifth Ave. sold for $1.4 billion. Because it was assessed at only $284 million rather than $630 million (based upon 45 percent of its market value), the city lost $40 million in taxes.
• The Colgate Palmolive Building at 300 Park Ave. recently sold for $387 million. At 45 percent of market value, it should have been assessed at $174 million. But it was actually assessed for $74 million. The difference, in lost tax revenue, amounted to about $11.5 million.

Ms. Roberts said the union has shared the report with local and state politicians in hopes of pressing the Finance Dept. to address the understaffing. The union is calling for public hearings on the issue.