Commercial Property Tax Rates To Increase
Office buildings, hotels, and retail properties were set to enjoy a 2.2% drop in property tax rates this year. But under a new law, commercial buildings’ taxes will instead increase slightly so that 1- to 3-family homeowners’ taxes won’t increase as much.
Commercial buildings really could have used the tax break. Retail has suffered through increased vacancy and lower asking rents. Hotel supply outpaces demand while RevPAR falls.
The city has said that they haven’t increased taxes. They really mean that they haven’t increased the “overall” tax rate. But no one pays on the “overall” rate, which is just a weighted average of the real rates that people pay, which depends on their tax class.
Meanwhile, the other side of the Tax = Rate x Assessment equation is the rise in assessments. If the assessment increases 10% and the tax rate drops 1%, the owner still pays more taxes. This year, citywide total taxable assessed value increased 7.03%. So even with steady or declining tax rates, the tax dollars will keep increasing. Owners should protest over-assessments during the January 15 to March 1 protest filing period. The city needs its money, especially the property tax revenue. The IBO expects the property tax to be the city’s steadiest and strongest tax source, with growth averaging 5.5 percent annually. The IBO anticipates property tax revenue will increase 7.3% this year, and expects growth to gradually slow averaging 4.6% annually from 2021 through 2023.
Property Tax Rates for Tax Year 2019/20. On June 19, 2019, the NYC Council passed the tax rates for the 2019/20 tax year. Residential properties were set to increase: homes by 6.3% and apartments by 0.8%. Commercial buildings would have decreased 2.2%. Meanwhile on the same day, the NYS Legislature passed a bill to “provide relief for residential property tax class one without placing a burden onto class two, which is the other residential tax class.” Legislators wanted to shift the tax burden from residential to commercial.
On October 25, Governor Cuomo quietly signed the bill into law “to cap the maximum class growth rate at 0%.” Now, the City Council must revise its rates, which it’s scheduled to do on November 14 at 1:30 p.m. after the City Council Finance Committee meets at 10:30 a.m. Compared to 2018/19 tax rates, homes will increase less than 6%, apartments will decrease to the lowest in 10 years, and commercial buildings will increase less than 1%.
The NYC Dept. of Finance already used the old 2018/19 rates for the first half of 2019/20. DOF used the old rates to compute the June 5, 2019, tax bills for payment due July 1, 2019.
Contributing Advisors
Richard L. SussmanMember, Rosenberg & Estis, P.C.
