New York City is losing an estimated $173 million in tax revenue due to lax oversight of changes in property ownership from tax exempt entities to for-profit institutions and individuals, according to a report entitled New York City Uncollected Millions, issued by District Council 37 ASCME AFL-CIO. The report states that many property exemptions are issued in error.
Making matters worse, the report notes that the MTA and the city of New York fail to collect property taxes on thousands of cell phone towers and billboards to the tune of approximately $49 mllion.
By way of startling examples of inefficiencies in the system, there are some strip clubs that are getting industrial exemptions and parking lots that are getting religious exemptions.
In total, it is estimated that over $500 million in potential tax receipts for New York City is being lost due to negligence and lack of oversight.
Tax assessors at the Department of Finance oversee the valuation of over 1 million properties in New York City. Historically, the assessors would go out and do field studies to ensure compliance with the tax laws and appropriate classification of properties.
Fran Schloss, President of Assessors, Appraisers and Housing Development Specialists for Local 1757, has stated that compliance is no longer verified through an assessor’s field inspection. This is partly due to staff cuts in the Finance Department.
Last year, the New York Post had reported that the city allows $13.5 billion in property tax breaks. Some of these tax breaks are permanent while others run for long periods of time, such as 25 years in the case of tax abatements for co-ops and condominiums. A review of the whole property tax process is warranted, especially in light of the impact of the financial crisis on the city’s finances.
There are some small business owners who will tell you that they are being increasingly gorged by the tax bite in New York City and inundated in red tape and paperwork. These could be some of the reasons for non-compliance with the city’s real estate reporting requirements. But it is up to the city to enforce its own rules.
The inefficiency in this realm of government is just a snapshot of the broader problems in our bureaucracy that are costing taxpayers billions of dollars that could be better spent on needed services. It takes commitment on the part of our elected officials, unions and the population at large to build a strong New York. Sound policies on both the revenue and spending side of the equation are key to the city’s success.