It's hard enough balancing our own personal budgets without having to worry about an entire city's bottom line. But that's exactly what New York City Mayor Michael Bloomberg asked property owners to do last year when he sought a tax hike of nearly 25 percent to cover budget shortfalls.
After some wrangling, the final property tax increase came in slightly lower at 18.5 percent. Considering that New York City property taxes had been frozen for the previous decade, the bite on property owners' wallets was still a substantial, albeit, necessary one. According to mayoral spokesperson Jordan Barowitz, "Nobody likes tax hikes, least of all the mayor, but this is how we pay for law enforcement, for education, for the things the city needs to function."
According to the mayor's office, the new tax rate was designed to help the city generate enough revenue to cover a projected budget shortfall of nearly $1 billion in 2003 and $2 billion in 2004. Round one of the tax hike was estimated to have brought in some $837 million into the city's coffers, and continued revenue is expected to equal somewhere in the neighborhood of $1.7 billion annually for the city, according to The New York Times. That's good news for the municipal number crunchers, but "this was an unprecedented increase," says Jarvis Irving, managing partner of the Manhattan-based accounting firm Jarvis W. Irving & Company LLP.
The fact that taxes went up was not a shock to co-ops, condos and financial advisors. What did come as something of a surprise was that the increase came as a result of a higher tax rate. For years, New York had relied on increased assessment values to fill its coffers. Assessed values usually increased alongside market value, allowing for predictable raises that were less painful when it came time for co-op and condo owners to pay the tax bill. "Rates have always been harder to raise," Irving says. "Usually increases are always a fraction of a percentage point, not 18.5 percent." All told, when the tax rate increase and the normal higher assessments were factored together, The Times estimated that some homeowners were facing a tax increase of nearly 30 percent.
Because of a state law affecting the way different properties are assessed, however, co-op and condo owners have fared better than their suburban counterparts. No matter where the decimal point lands, though, the increased burden still produces some sticker shock.