Authorizes the use of class tax rates in certain assessing units; repealer

Summary of provisions:

Section 1 of the bill would amend Real Property Tax Law ("RPTL") § 1902 by adding a new subdivision 5 to provide that no new Approved Assessing Units ("AAU") will be certified under RPTL Article 19 after December 31, 2010.

Section 2 of the bill would amend RPTL § 1903 by adding a new subdivi- sion 11 to permit existing AAUs to opt into the new RPTL Article 19-A (created by section.3 of the bill), rather than continuing to operate under RPTL Article 19.

Section 3 of the bill would create a new Article 19-A in the RPTL to govern the use of class tax rates by assessing units that conduct reval- uations on and after January 1, 2011. Like RPTI, Article 19, the new RPTL Article 19-A would authorize distinctions between the "homestead" (mostly residential) and "non-homestead" (mostly commercial) classes for purposes of real property taxation, but it would be considerably simpler to administer and understand. The new RPTL Article 19-A contains the following provisions:

* RPTL § 1911 establishes definitions for RPTL Article 19-A, including definitions of "homestead class" and "non-homestead class," which would be the same as they are under RPTL Article 19, except that the homestead class would also include co-operative apartments and could be further expanded at local option to include either (1) apartment buildings or (2) business property within a locally-designated area, or both.

* RPTL § 1912 provides that any assessing unit that is doing a revalu- ation at 100% of value may apply to the State Board of Real Property Services ("SBRPS") for certification of its revaluation as "homestead- compliant." Upon receiving such certification, the governing body of the assessing unit may direct its assessor to classify each parcel of prop- erty as either homestead or non-homestead, as appropriate.

* RPTL § 1913 authorizes the governing body of such homestead-compliant assessing unit to impose its taxes using a different tax rate for each class of property, School districts and villages which use the assessing roll for the levy of their taxes may opt to impose such class tax rates as well. Under RPTL § 1913, the class tax rates would be set at the discretion of the governing body, subject to the constraints that (1) the non-homestead class tax rate could be no more than 25% higher than

the homestead class tax rate, subject to a 10 to 20 year phase-in of that limitation if the "baseline differential" is greater than 25%, and (2) in no - case could the homestead class tax rate be higher than the non-homestead class tax rate.

* RPTL § 1914, requires an assessing unit to complete a homestead-com- pliant revaluation at least once every 4 years, in order to remain in the program established by RPTL Article 19-A. Under RPTL §1914, if such a revaluation is not undertaken, the assessing unit and the school districts and villages associated with it would lose their ability to establish class tax rates.

* RPTL § 1915 provides that the governing body of a homestead assessing unit may adopt.a resolution terminating its status as a homestead assessing unit, the effect of which would be to make inapplicable to such assessing unit and the municipal corporations which levy taxes upon its assessment roll the provisions of RPTL Article 19-A.

* RPTL § 1916 provides that a copy of any local law or resolution adopted pursuant to RPTL Article 19-A must be filed with the SBRPS with- in 30 days after such adoption.

* RPTL § 1917 provides that all property in a homestead assessing unit must be assessed as required by RPTL § 305(2).

* RPTL § 1918 provides that an assessing unit that has been certified as an AAU under RPTL Article 19 would have the option to move into the new RPTL Article 19-A program, without having to complete a new revaluation as a condition for entry. Ilan assessing unit does so, however, it would be required to conduct a homestead-compliant revaluation no later than its fourth year under RPTL Article 19-A, and at least once every four years thereafter in order to remain in the program.

Sections 4 through 11 of the bill would make the necessary conforming changes to various other provisions of the RPTL.

Section 12 of the bill would make it effective January 1, 2011, provided that (1) an application for certification of a revaluation as home- stead-compliant pursuant to RPTL § 1912, as added by this bill, may be submitted and approved prior to such date; and (2) a resolution to become a homestead assessing unit pursuant to RPTL § 1912, as added by this bill, may be adopted prior to such date.

Existing law: RPTL Article 19 provides that an assessing unit (other than New York City and Nassau County) may become an AAU by completing a revaluation which meets the standards established by the SBRPS. RPTL 1903 authorizes an AAU to establish different tax rates for the home- stead and non-homestead classes. The AAU, however, has no discretion in setting class tax rates. Rather, RPTL Article 19 prescribes the use of an elaborately detailed formula to determine class rates.

This formula is difficult to understand; its key elements are base proportions, base percentages, class equalization rates, current percentages, current base proportions, and adjusted base proportions. The basic concept underpinning the formula is twofold: (1) it preserves the de facto class tax shares that existed prior to the revaluation, so that taxes will not shift from one class to another as a result of the revaluation, and (2) it requires the post-revaluation tax shares to be indexed to market changes, so that the disparity between the classes does not grow any wider.

Adding to the complexity of Article 19 is the fact that it applies not only at the AAU level but also at the "portion" level. Thus, a parallel set of complicated calculations must be performed for school districts, some villages and selected special districts which are wholly contained within the AAU. Yet another set of calculations must be performed for certain partially contained school districts and villages which qualify as "eligible split tax districts."

Legislative history: A similar bill (S.7579) was introduced at the request of the SBRPS in 2007-08. Whereas the 2007 bill would have mandated existing AAUs to switch to the new program, this bill would provide existing AAUs the option to switch to the new RPTL Article 19-A program.

Statement in support: The hallmarks of a sound tax system are simplici- ty and transparency. RPTL Article 19 has neither of these attributes. It provides for the application of class tax rates that are derived from an arcane mathematical formula. This bill would enact a new RPTL Article 19-A that would maintain the homestead and non-homestead class construct. The new RPTL Article 19-A, however, would provide local governments and their property taxpayers with a straightforward and comprehensible method for public officials to determine class tax rates. Under the new RPTL Article 19-A, class tax rates would be determined in open public policymaking, subject to public scrutiny.

Budget implications: This bill would require assessing units to conduct revaluations in order to become homestead assessing units under RPTL Article 19-A. The municipal decision to seek homestead assessing unit status under RPTL Article 19-A, however, would be entirely voluntary. The bill, therefore, does not mandate any cost on local governments. The Office of Real Property Services ("ORPS") may need to devote resources to support these additional revaluations, but such support is part of its core mission and can be accomplished within its existing budget, To the extent the program induces existing AAUs to leave RPTL Article 19 and become homestead assessing units pursuant to RPTL Article 19-A, this bill would produce modest savings for ORPS, which would no longer be required to establish class equalization rates for such AAUs and to review their adjusted base proportions.

Effective date: This bill would take effect on January 1, 2011.