Property Tax Cut Coming..?

Posted by urbandigs

Wed Jan 17th, 2007 09:58 AM

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A: Mayor Bloomberg is proposing to cut property taxes by as much as 5% as '...New York enjoys the bounty from its booming economy and real estate market...". The proposed tax cut would apply for at least the next fiscal year, and would combine with a sales tax cut for clothing to total $1 billion of the city's $55 billion budget.



This is both good news & bad news for homeowners:

Good News - A property tax cut is good news because it will lower the monthly costs to the homeowner at the end of the day. Although the tax cut won't be as fruitful as it sounds because the homeowner is already writing off their real estate taxes come tax-time, as one of the benefits of owning. However, lower monthly expenses associated with any property should increase affordability on the open market; as long as buyer demand remains healthy enough to support price appreciation.

Bad News - Generally speaking, property taxes are directly associated with the city's assessed value of your home on the open market. Therefore, as property taxes rise it is because the value of your home has increased. In this case, a property tax cut could be the city's first official acknowledgment that home prices have hit a standtsill and may even had started to dip a bit. The theory continues, as property taxes fall it is because the value of your home has also dropped a bit.

According to Wikipedia: The taxing authority requires and/or performs an appraisal of the monetary value of the property, and tax is assessed in proportion to that value

NOTE: Mayor Bloomberg boosted property taxes a total of about 21% or so between 2002-2004 when the housing market realized incredible gains. I recall my own property taxes being raised from $650/month or so up to about $800/month during this time; causing what is known as a shortage spread in my monthly mortgage payments and a temporary surge in my monthly living costs to correct the issue.

The question that comes to my mind, is what Bloomberg really knows about the city's budget and generated revenues both now and in the future. For example, all those new developments that have been sold and now occupied will eventually lead to growing tax revenues as the city's granted tax abatement expires on each building and homeowner. So, there will be much more property tax revenue going to come into the city reserves from these guys. This makes me wonder whether or not the proposed property tax cut is a result of flattening/falling property values or good fiscal planning and management.

In today's NY Times article:

The tax cuts represent a departure for Mr. Bloomberg, who last year used the bulk of a $5 billion surplus for a reserve fund to pay future health care costs and to offset projected deficits. This time, Mr. Bloomberg concluded that given the city’s overall fiscal health, revenues that had come in so much higher than expected should be shared with taxpayers and plowed back into the economy, aides said.

The proposals are likely to further burnish the mayor’s reputation among New Yorkers, which took a heavy beating during his first term, when he pushed through an 18.5 percent tax increase. Mr. Bloomberg is in his second and final term, and has drawn increasing interest as a potential candidate for national office, and his decision to cut taxes fuels speculation about his future.

But, they said, the city was flush enough to set aside $750 million for the property tax cut, at least for the fiscal year beginning in July, which would translate into an average overall reduction of 5 percent. The average yearly tax bill for a condominium owner is $6,449, so a 5 percent cut would translate to $322 annually. The average tax bill on a house is $3,098, and a 5 percent cut would save $160.