Equalization rates role in the market - by John Rynne

In a perfect world assessed values are equivalent to the market value of the real estate. All municipalities reassess periodically to maintain the relationship of the assessed value being equal to market value. This legal precedent was set temporarily in 1975 by a court decision that mandated that assessments be valued at full market value. This was known as the Hellerstein v Assessor of Town of Islip. However, the New York State legislature realized in a market where there is appreciation or depreciation, it would be cumbersome and expensive for the 1,100+/- assessing districts to complete assessment revaluation in a constantly changing market with millions of individual parcels. In addition, panic usually prevails in a municipality when a reassessment is announced. Just in the past 10 years a number of reassessments were stopped by public outcry. Not too long ago the Town of Brighton, Town of Amherst and numerous others were canceled or stopped. A “rule of thumb” is that 33% of property owners pay less taxes, 33% have no tax increase but 33% pay more taxes as a result of a reassessment. Thus, a vast majority of 67% are not harmed by a reassessment.

Pauline Hellerstein owned some real estate on Fire Island in the Town of Islip in the late 1960s and the early 1970s. She rejected the premise that her assessment was based upon a fractional assessment not full market value. Fire Island is a seashore area in the southern central sector of Long Island. She prevailed in that landmark case. However, the legislature repealed the part of the Real Property Tax Law in which the NYS Court of Appeals relied upon in the Hellerstein decision. In the early 1980s the legislature passed a new law which allows all real property to be assessed at less than market value as long as it is done uniformly with every property in the assessing unit. In a perfect world, the equalization rate would be 100% which means the assessed value is the same as market value. If a property sold for $900,000 and the assessed value was $900,000 the equalization rate is 100%. Because of equalization rates New York State has a system which reasonably is uniform given the vast differences between real estate markets in the state; especially Upstate v Downstate.

With equalization rates it’s possible to keep some type of uniformity. As an example, the current equalization rate in the Town of Islip on Long Island is 6.68% while in the upstate City of Rochester it is 96%. Thus, the assessed value for a property that sold in the Town of Islip for $2 million would be assessed at $133,600 ($2 million x 6.68%). The $2 million property in Rochester would have an assessed value of $1.92 million ($2 million x 96%). The tax rate for the City of Rochester is much lower than the Town of Islip. The tax rates are higher in jurisdictions with low equalization rates and lower in jurisdictions with high equalization rates. It’s fair because the municipality establishes a budget and divides the total assessed values normally by $1,000 which results in a tax rate.

A common problem with fractional assessments is that the public often gets confused. As an example, if the equalization rate is 50%, a property owner may be comfortable with an assessment of $500,000 if after a recent independent appraisal, the property was valued at $750,000. In that case, property owners perceive that they are getting a break. However, the actual equalized assessment was $1 million ($500,000/50%). It’s been my experience that most property owners in this situation aren’t aware of it. Even the astute property owners are caught in this trap because the equalization rates can decrease rapidly. As an example in the upstate Town of Greece, the equalization rate was 100% for the years 2017 through 2021 then it dropped precipitously during the next four years: 86%, 75.12%, 68% and currently 61%. That means the $500,000 assessment in 2021 was equalized at $500,000 ($500,000/100%). However, the $500,000 assessed value equalized in 2025 at $819,672 ($500,000/61%) or a 63.93% increase in the equalized assessment.

Throughout New York State there are some large differences in equalization rates. However, the way the system is set up statewide comparisons can easily be made. Using this system there can be some large discrepancies between market value and the assessed value as is shown in the examples above. However, the equalization rate’s role in the New York State real estate market is functional and working.

John Rynne, MAI, SRA-president and owner of Rynne, Murphy & Associates, Inc., Rochester, N.Y.