Relates to establishing a new classification for properties held in condominium and cooperative form for assessment purposes

Section 2 extends assessment caps of 8 percent in any one year and 30 percent in any five years to all class 2 properties. This section also imposes such caps on class 5 properties with less than 11 residential units.

Sections 3 to 24 make conforming changes through various consolidated laws, the administrative code of the City of new York and the new York City Charter to accommodate properties now designated as class 5.

Section 25 provides that the act takes effect on the first January next succeeding the date on which it shall become a law and shall apply to assessment rolls prepared occurring after such date.

Justification

This bill extends to all co-ops and condos the caps on property tax assessments currently enjoyed by co-ops and condos with 10 units or less. Currently, co-ops and condos with more than 10 units have changes in market value phased into assessed value over 5 years. While this provides some modicum of protection, recent valuations changes have shown that it is not enough. With the implementation of this bill, all co-ops and condos will see the growth in the assessments capped at 8 percent in any one year, and 30 percent in any 5 years (8/30 cap).

By providing assessment caps, this bill would bring co-ops and condos a step closer towards equity in taxation with class 1 (1 to 3 family) properties which already enjoy assessment caps.

Section 581 of the New York State Real Property Tax Law requires that co-ops and condos be valued as if they were rental apartments and this further complicated the already complex requirement of mass appraisals of all property in New York City. As a result, there are times, such as Fiscal Year 2012, where assessment for co-ops and condos can jump dramatically to reflect corrections and updated data.

Under the current class share system of tax rates used in New York City, each class has its own tax rate. These rates are mostly a function of the overall tax rate and the relationship between each class's market and assessed value growth rates. Basically, this means that having two large groups in the same class but with different assessment growth controls raises the risk that the tax burden will shift from one group to another. The separating of the two groups with

the new class 5 takes advantage of the class share system to avoid that potential problem. Accordingly, this bill also moves all residential properties not classified as class 1 or 2 (i.e., rental properties) into a new class 5, making class 2 just residential co-ops and condos. This is done to prevent any distortions in the tax rate that can be caused by extending the 8/30 caps to the co-ops and condos but not the rentals.

The bill also updates the legal structures of various tax programs and initiatives to reflect the new classifications of property. Properties in classes 1, 3, and 4 would be unaffected by this bill.

Prior legislative history

2013-2014: A.3010/S.2993

Fiscal impact

On average, the fiscal impact for New York City is expected to be minimal. As the legislation changes the way assessment growth of co-ops and condos is calculated, the revenue growth pattern will look different going forward. In some years, the bill will be revenue positive, but this will be balanced by other years where it will be revenue negative. In the near term, the bill is more likely to be revenue positive.

This bill will have no fiscal impact at the State level.

Effective date

First January next succeeding the date on which the bill is passed and shall apply to assessment rolls prepared after that date.