City Is Facing Big Hike in Property Tax

New Yorkers could see their tax bills rise next year if Mayor Bloomberg decides to roll back a 7% property tax cut and end a $400 property tax rebate for homeowners to help close a projected $3.1 billion budget gap in the city.

Returning the property tax to its earlier level would give the city about $1 billion extra in revenues. Ending the rebate would save another $256 million.

Fiscal policy experts say the rebate could be on the table as the mayor sizes up the city's budget in preparation for his annual State of the City address next Thursday and his subsequent presentation of budget plans for next year. The Bloomberg administration could be eyeing an end to the property tax relief as well.

The 7% property tax cut, which went into effect this year, was presented as a onetime bonus the city could afford, given its record $4.7 billion surplus. Mr. Bloomberg said at the time that he would keep a close eye on the city's finances to determine whether his administration could afford to extend the cut.

"When the good times are rolling, that's great, but we have to prepare for when they are not," he said in June.

Mr. Bloomberg's outlook on the economy has changed since then, with an economic downturn that prompted the city's Independent Budget Office to project a $3.1 billion shortfall next year, a $4.6 billion shortfall in 2010, and a $6.3 billion shortfall in 2011.

The IBO noted in its report, released on Monday, that forgoing the 7% property tax reduction is a way to raise revenues.

Last fall, the Bloomberg administration instituted its first hiring freeze since 2002 and asked city agencies to find areas in their budgets to cut. At the time, the city's Office of Management and Budget was projecting a $2.7 billion shortfall for the next fiscal year.

"We are going to have some tough times and it's very easy to leave them for our successors to deal with," Mr. Bloomberg said in December. "Anyone that thinks the bad times aren't coming is not being realistic."

Any tax increase proposal would have to be looked at in the context of a possible Bloomberg presidential campaign. How politically damaging such a proposal would be to Mr. Bloomberg could depend on who his opponents are. The three remaining major Democratic candidates, senators Edwards, Obama, and Clinton, have all promised federal tax increases. And one of the top Republican candidates, Michael Huckabee, raised taxes as governor of Arkansas. That could either defuse the tax issue for Mr. Bloomberg or make it more important for the mayor to differentiate himself from the rest of the field as a tax-cutter.

The chief economist and deputy director of the Fiscal Policy Institute, a labor-backed group, James Parrott, said New Yorkers should be prepared for the possibility that the $400 rebate, first introduced in 2004, could disappear next year.

"The mayor has always billed that as something we will do when we can afford it, but it's not permanent," he said. "It seems to me, nobody should be surprised that it would happen."

The president of the Partnership for New York City, Kathryn Wylde, said ending the rebate is an option the city could use to help close the gap.

"That was clearly a program that was initiated to say, 'When we have a surplus, let's give it back to the people whose taxes we raised,'" she said, referring to the 18.5% property tax increase pushed through in 2002 to combat soaring deficits. "If we don't have a surplus, that rebate wouldn't make as much sense."

The average tax bill for owners of one, two, and three-family homes in New York is about $2,770, a spokesman for the IBO, Douglas Turetsky, said.

A spokesman for Mr. Bloomberg, Stuart Loeser, declined to comment on the possibility of such cuts, saying the administration is not previewing its budget.

The chairman of the City Council's Finance Committee, David Weprin, said he's certain a proposal to end the property tax rebate is "going to be on the table, no question."

A council member who represents parts of Staten Island, Michael McMahon, said he doubted Mr. Bloomberg would consider ending the $400 rebate and rolling back the property tax cut from last year.

"It is the least popular measure that I can think of" to close the budget gap, he said."It's kind of like a fire extinguisher in a glass case. It should only be used in an extreme emergency."

He said the city is facing "a dip" in its budget, but is far from being in the throws of a fiscal emergency that would merit such action.

The mayor would face stiff opposition if he tried to tamper with property tax relief, he said.

"This is not the once-in-a-generation type of crisis we faced in 2002," he said. "This is your cyclical budget pressure and that has to be handled through better fiscal policy, better management of the city's budget, and belt tightening."