Over half of Long Island towns vote to exceed the tax cap - Here’s how owners can respond - by Brad and Sean Cronin

 

 

When New York permanently adopted the 2% property tax cap more than a decade ago, many owners hoped it would finally end the relentless climb in tax bills. But in the last couple of years, that “cap” has started to look more like a speed bump. Property owners are seeing taxes increase even when an assessment stays the same, and in some situations, taxes rise even when the assessment goes down.

This year, more than half of Long Island’s 13 towns are planning to pierce the cap on property tax levy growth, following a year in which 9 of 13 towns already did so. At the same time, numerous school districts across the Island continue to seek voter approval to override their tax levy limits when they feel squeezed by rising costs.

New York’s property tax cap limits levy growth for most local governments to the lesser of 2% or the rate of inflation, with certain exceptions and technical adjustments. This cap applies to a municipality’s budget which determines the appropriate tax rate. If a town wants to exceed that limit, its board can adopt a local law overriding the cap, typically with a 60% supermajority vote of the governing body. School districts, which comprise the largest portion of all tax bills, need a 60% supermajority from voters to approve a budget that pierces the cap. 

For years, taxing authorities made every effort to avoid piercing the tax cap. Today, many municipalities are in the unenviable position of facing numerous unavoidable pressures, forcing them to reconsider. Inflation and wage increases have driven up the cost of labor, materials, and fuel, while service demands continue to grow. Even as expenses rise, residents still expect essential services to operate at a high level.

When these factors converge, local boards face the difficult choice of staying within the cap and risk service cuts, or pierce the cap and accept higher tax bills. More and more, municipalities believe they have no choice but to choose the latter.

If your town or school district pierces the cap, the tax rate will jump more than in a “normal” year. For property owners, this increase collides directly with already soaring operating expenses. Insurance, utilities, payroll, repairs, financing costs, and everything from cleaning supplies to construction materials have all become significantly more expensive.

The result is a painful equation of higher expenses plus higher rates equaling a heavier tax burden that cuts directly into net operating income (NOI) and ultimately, the value of the property.

Many owners feel there’s little they can do about this. The tax cap is a state law; town budgets and school budgets are voted on; it all feels remote. But while you can’t control the tax rate, you can challenge the part of the equation that’s specific to your property: the assessment.

A tax grievance does not attack the rate or the cap. Instead, it challenges the value of the property under the parameters of the Real Property Tax Law to ensure you are being taxed accurately and equitably. 

In today’s environment, a grievance can use the very same pressures that towns cite, such as rising expenses and changing economics, to support a lower assessed value. If expense growth is able to be documented and results in a lower NOI, all else equal, this supports a lower assessed value.

These same factors also contribute to higher risk and cap rates. Interest-rate movements, tighter lending, and sector-specific risks (office, certain retail, hospitality, etc.) justify higher capitalization rates, which again translate into a lower value at the same income. By pulling all of this together in a valuation analysis, a grievance can show that, even if tax rates need to rise to fund municipal services, your individual parcel should have its assessment reduced.

Filing and pursuing a tax grievance can reset your starting point at a more realistic value and offset some or all of a tax rate increase with a lower assessment so your overall bill is closer to what it should be.

Long Island’s experience shows the tax cap is no longer a guarantee of tame tax growth. With a majority of towns and numerous school districts willing to pierce the cap when budgets demand it, owners should assume that tax rates will continue to trend upward, not just this year but in future cycles. 

You can’t stop your municipality from voting to exceed the cap, but you can make sure your own assessment reflects today’s economic reality: higher operating expenses, changing market conditions, and the true income-producing capacity of your property.

A thoughtful, data-driven tax grievance is one of the few tools that can directly reduce your overall property tax burden in a rising rate environment. For Long Island owners of commercial properties, it’s no longer optional; it’s part of basic asset management.

Brad Cronin, Esq., and Sean Cronin, Esq., are partners at Cronin & Cronin Law Firm, PLLC, Mineola, N.Y.