New Formula for Evaluating Hotels Means Higher Taxes, Finance Department Says

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The New York Sun

A new method of assessing the city’s hotels will mean higher taxes for most of them, according to the Department of Finance, which is denying reports that Deputy Mayor Daniel Doctoroff was involved in pushing for a new tax assessment system that would benefit the city’s hotels and booming tourist industry.

A recent report in the Chief, a weekly newspaper focusing on the city’s unions, said Mr. Doctoroff had asked the city’s finance department to change the formula used for evaluating hotels.

The article suggested that Mr. Doctoroff, the Bloomberg administration’s leading development official and an active supporter of the city’s tourism business, had asked for a tax policy that is friendlier to hotel owners.

A spokesman for the Department of Finance, Owen Stone, said the new taxation methodology was created internally.

“City Hall is not involved. This did not come from Dan Doctoroff,” Mr. Stone said.

Mr. Stone said the tentative assessment of all of the city’s hotels, released in January, showed a taxation increase of 8.3% under the new system. That rise is roughly in line with the increase for commercial properties around the city.

Still, some hotels will see their tax bill drop under the new system. The Grand Hyatt’s assessed value dropped nearly 30%, the Sheraton New York dropped about 23%, and the OmniBerkshire Palace dropped more than 15%, according to figures provided by the city.

An economist for the Fiscal Policy Institute, James Parrot, said that with occupancy rates and room rates at record levels, the new assessments should raise some eyebrows.

“Clearly, this has been a very strong hotel market. It is surprising to see that any market valuations would go down for any hotels in Midtown Manhattan,” Mr. Parrot said.

With several prominent Manhattan hotels recently converting to condominiums, the number of hotel beds in the city reportedly decreased slightly last year. All of the city’s hotel rooms are subject to a daily tax of $1.50, instituted to pay for the planned expansion of the Javits convention center, a project championed by Mr. Doctoroff.

Mr. Parrot said that he had never seen the city issue a tax credit through the assessment methodology.

“If you are going to have a tax credit, it needs to be above board so everyone can see it,” Mr. Parrot said.

Mr. Stone said that some assessments decreased in value because the old methodology was inaccurate.

“We felt that we couldn’t accurately reflect full market value using the old method, and now we can,” he said.

Other hotels saw their assessments rise significantly under the new system. The Waldorf-Astoria, the Millennium Broadway, and the Regency could see their tax bills rise by more than 25%.

The managing director of Hospitality Valuation Services International, a firm that does appraisals, Richard Williams, told The New York Sun he has never seen a valuation system like the one the city has adopted.

The president of the city’s chapter of the assessor’s union, David Moog, called the new system “quick and dirty.”

Mr. Moog denied that the union was involved in promoting the story about Mr. Doctoroff’s involvement. Following a 2002 scandal, when about 15 city appraisers were found guilty of accepting bribes to lower assessments, Mr. Moog said that individual assessors probably spoke out to avoid being implicated in more controversy.

“They don’t want to be blamed for more impropriety,” Mr. Moog said.

The president of the Real Estate Board of New York, a real estate industry group, Steven Spinola, praised the formula change and said it was overdue. Mr. Spinola said the new formula is a “cleaner, clearer,” and more accurate method.

He said the union could be seeking to sink the new methodology, which could threaten jobs or lessen the power of assessors.

“They don’t like the openness, they don’t like the transparency, they don’t like the simpleness,” he said.


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