Lever ers t s to R o Refor orm the P he Prop operty T Tax - - PowerPoint PPT Presentation

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Lever ers t s to R o Refor orm the P he Prop operty T Tax Presentation to the NYC Advisory Commission on Property Tax Reform September 4, 2018 New York City Council Finance Division What D Do We Mean by Levers? Tax = Base x

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SLIDE 1

Lever ers t s to R

  • Refor
  • rm

the P he Prop

  • perty T

Tax

New York City Council Finance Division

Presentation to the NYC Advisory Commission on Property Tax Reform September 4, 2018

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SLIDE 2

What D Do We Mean by “Levers”?

Levers can shape and adjust that equation to achieve a goal:

  • Transparency
  • Fairness
  • Simpler
  • Revenue Neutrality

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Tax = Base x Rate

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SLIDE 3

Lever ers s Availa lable le at Ever ery St Step ep of

  • f the

e Process ss

Classification Value Adjustments to Value Tax Rate Adjustments to Bill Billing

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SLIDE 4
  • Property classification is an organizational lever
  • One way to allow for differing treatments of property
  • Relationship between Classes?
  • NYC has 4 Classes based on use and/or size
  • Classes developed in late 1970s/ early 1980s
  • Different rates, assessment rules, valuation methodologies, etc
  • However, all classes are tightly tied together through class share/tax

rate system

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Classification

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SLIDE 5
  • Define the Base
  • What are we taxing?
  • What do we mean by value?
  • Value the Base
  • Methodology, data limits, legal restrictions
  • Minimize Inaccuracies
  • Improve methodology, data, etc
  • Reporting, monitoring, data analysis
  • Appeals Process

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Value

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SLIDE 6
  • Value Can be Adjusted to Meet a Policy Goal
  • Assessment Rules
  • Endemic to property, no owner action required
  • Fractional Assessments
  • Assessment Growth Limits
  • Caps for Small Residential Property
  • Phase-ins for All Others except Utility Property
  • No limits on physical improvements
  • Exemptions
  • Require action by owner & must meet a set of criteria
  • Often to provide relief, encourage development, or address policy failure

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Adjustments to Value

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SLIDE 7
  • Should Properties Be Taxed at the Same Rate?
  • Variations by types of property?
  • Variations to meet a policy goal?
  • How Are Rates Determined?
  • Current System
  • City can adjust overall levy; currently at 12.283% × taxable value
  • Different, inter-related rates for each of 4 classes based on formula
  • Each class pays a specified share of the levy, regardless of

exemptions or assessment limits

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Tax Rate

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SLIDE 8

9% 11% 13% 15% 17% 19% 21% 2009* 2010 2011 2012 2013 2014 2015 2016 2017 2018

NYC Property Tax Rates By Class & Fiscal Year

Curren ent System

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Class 1 Class 2 Class 3 Class 4

*Rate for second half of Fiscal 2009

The overall rate has been unchanged through this period.

Tax Rate

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SLIDE 9

Class Rate = Total Levy x Class Share / Class Taxable Value

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Revenue neutral so no change In assessment rules & exemptions, so no change

LEVER

Curren ent System: Rate D e Deter ermination

Tax Rate

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SLIDE 10
  • Each Class’s Share is Based on Share Paid in Fiscal 1991
  • Shares Are Updated to Reflect Market Value Changes Since Then
  • Shares Cannot Increase By More than 5% Over the Prior Year*
  • That limit is often lowered by the State at request of the City
  • Limit applies only to changes due to market forces

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Curren ent System: Class Shares D Determination

Tax Rate

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SLIDE 11
  • City & State enact a new tax program to encourage owners to add a

second story to 1 story, single family homes

  • Provides a tax exemption equal to increase in assessment caused by

construction

  • So market value increases, but taxable assessed value will not change
  • Assume all other changes have been incorporated in tax rate system:

what’s the impact of this program?

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Curren ent System: Illustrative Case S Study

Tax Rate

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SLIDE 12

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Class Rate = Total Levy x Class Share / Class Taxable Value

1.No change in class taxable value, since we exempted it

  • 2. No change in total levy, since there’s no change in taxable value
  • 3. Class 1 share goes up, due to an increase market value
  • 4. Therefore, Class 1 rate goes up
  • 5. Class share in other classes falls (since Class 1 is a greater share)
  • 6. Therefore, rates in other classes fall

Curren ent System: Illustrative C Case Study udy, c cont’d. d.

Tax Rate

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SLIDE 13
  • Abatements are very similar to exemptions:
  • Abatements reduce final bill, rather than taxable value
  • Difference may be useful in clarity and targeting
  • But, exist outside of tax rate structure & does not impact them

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Class Rate = Total Levy x Class Share / Class Taxable Value

No Impact from Abatements

Adjustments to Bill

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SLIDE 14
  • Communication
  • Notice of Property Values & Appeals Process
  • How Much Information is Too Much?
  • Collections
  • Tax Bills & Timing
  • Structure of Payments

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Billing

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SLIDE 15

Conside derations i in U Using a Lever

  • Interaction with Other Levers
  • Clarity of Purpose & Measurability
  • Targeting vs Transparency
  • Legal vs Economic Incidence
  • Equity: Horizontal vs Vertical vs

Transitional

  • Other Taxes

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Classification Value Adjustments to Value Tax Rate Adjustments to Bill Billing

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SLIDE 16

Qu Ques estion

  • ns?

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