It's budget season. What's at stake this year? Your property tax rate. We owe it to taxpayers to send a clear message that higher rates are not up for consideration.
The good news? Mayor Bloomberg and City Council Speaker Christine Quinn each have said that they plan to do everything possible to maintain last year's 7% citywide property tax rate cut and the city's $400 rebate.
The bad news? No one has ruled out raising taxes if economic indicators continue to fall. Last year was the first year since 1994 that the city did not raise rates for small homeowners. We have to do better.
Isn't it hard enough that the economy is slumping? Food prices are up, the Water Board seems content approving annual double-digit rate increases, foreclosures continue and are expected only to rise further in the next year. One would hope that we'd be exploring ways to bring further property tax relief. In the meantime, a failure to at least maintain last year's rate cut would be a double strike to already besieged homeowners in New York City.
Even last year's "reduction" ó while unequivocally positive ó was, at best, a misnomer, as it didn't reduce taxes for small homeowners. Due to the formulas by which one-, two-, and three-family homes are taxed, assessments for many homeowners continue to increase as the market has plateaued and even started to fall.
The system is meant to reduce the impact of rapidly increasing markets, but under the current circumstances, it creates a lag in which tax assessments may continue to adjust upward as the market adjusts downward.
Between 2004 and 2007, a Brooklyn home's property value went up by more than 50%. But, over the same period, assessments rose at a rate of 6% a year. As a result, last year's rate cut succeeded only in mitigating the effect of increases in assessments for that year.
Between 2007 and this year, the market value of the property dropped with the adjusting market, by nearly 8%, but the assessed value continued to go up by 6%. This example is happening throughout the city. For most small homeowners, assessments will rise again this year, resulting in higher payments to the city. If we fail to maintain last year's rate cut, the increase will be compounded and the effect will be devastating.
Unless we commit to yearly downward tax rate adjustments to offset discrepancies between the rate of citywide assessment increases and the rate of inflation, middle-class property owners will continue to take the hit. Need more evidence?
Look no further than the city's Independent Budget Office analysis of the mayor's preliminary budget. IBO projects property tax revenue to increase at more than three times the rate of total city revenues between now and the 2012 fiscal year.
We have managed thus far to break the nationwide trend of crashing housing markets. But New York City cannot avoid the revenue implications of a recession on Wall Street. It is unclear whether this is a sign of the tenacity of the city market or if this market is just a stubborn house of cards.
In the meantime, we at City Hall would be best served doing as little as possible to rock the financial boat of mortgage holders, lest foreclosing properties drive down markets, leaving tax assessments and revenues to follow.
Clearly, these long-term consequences would far outweigh the short-term revenues realized by raising property taxes in an unstable market.
This is an extreme scenario, perhaps, but not improbable given the experience of other municipalities throughout the country. So let's not be pound foolish in our attempt to be penny wise. Rather than hack away at last year's tax cut, let's look inward and trim the budget down to size.
Mr. Bloomberg already has begun to do so and Ms. Quinn has made additional suggestions for the Council's budget response on how to do so while minimizing impact on services. These efforts are laudable.
Nobody likes cutting city services, but it is incumbent upon the government to take this responsibility and hold itself accountable for a balanced budget rather than to look again to taxpayers to bail it out. Simply put, we can and we must reduce spending.
When revenue projections damper, we must proceed with caution when we discuss where it is appropriate to lower the city's bucket. We've gone to homeowners. Again and again. Let's do our part to avoid putting them in a position where they must choose between paying their mortgage and paying their taxes.
Mr. Felder, who represents the 44th district of the New York City Council, is the chairman of the council's Governmental Operations Committee and previously worked for the city's Department of Finance. Mr. Vacca is a council member of the 13th council district representing the northeast Bronx.