Wednesday, November 23, 2011

The School Property Tax Paradox

Where Is Albert Einstein When You Need Him?

“The hardest thing in the world to understand is the income tax.” — Albert Einstein, physicist

Apparently, Professor Einstein never had to deal with school taxes on Long Island. Unfortunately, we do!

This blogger attended a meeting of the local school board Tuesday evening, during which a discussion ensued (as it often does) on school budgets, past, present and future.

While the school board, and its attorney, did their best, we suppose, to explain the impact of assessments, valuations and tax rates upon the actual school property tax, confusion, and much frustration, was clearly evident.

Compound what is, on its very face, a system of taxation that would turn the heads of NASA engineers, with costs (such as transportation, insurance, utilities, salaries and pensions, to list a few) that are constantly rising and rarely contained, and you've got trouble, with a capital "T" -- which stands for "TAX."

A letter circulated at this meeting, from an attorney who handles tax grievances, attempted to explain the school tax dilemma as follows:

"It is important for property owners to understand the Level of Assessment (LOA), which is the fraction by which an assessment is converted to an equalized market value. Even though your assessment may remain the same, or even be lowered during the assessment freeze, the LOA may change. As a result, the equalized market value of your home may increase. While the assessment may currently seem accurate, a change in the LOA may mean you have a meritorious case for a reduction.

"New York State Law allows a taxpayer to challenge the LOA along with the market value, as part of the same process. The taxpayer is entitled to present evidence regarding the correct LOA at a Small Claims Assessment Review (SCAR) hearing. Statistical studies can determine whether the LOA selected by the Assessor accurately reflects the true LOA. These statistical studies rely on appraisals, actual sales data, or econometric models. Example: If a house is valued by the County at $350,000, which translates to an original assessment of 875 (350,000 x .0025 = 875), and it is proven in a SCAR hearing that the correct market value is $310,000, the owner is entitled to a reduction in assessment. If the LOA is .25%, the new assessment would be 775 (310,000 x .0025 = 775). However, if the homeowner also successfully challenges the LOA, and shows the correct LOA to be .22%, the new assessment would be even lower still at 682 (310,000 x .0022 = 682). The school tax rate is then applied. Assuming by way of example a school tax rate of 400%, thereby lowering the owner’s school taxes from $3,500 (875 x 4 = $3,500) to $3,100 (775 x 4 = $3,100), for a savings of $400 ($3,500 – $3,100 = $400) in school taxes. After successfully challenging the LOA, however the new school taxes will be $2,728 (682 x 4 = $2,728) for a total annual savings of $772 ($3,500 - $2,728 = $772). The additional savings in school taxes as a result of successfully challenging the LOA will be $372 ($3,100 - $2,728 = $372). General taxes are similarly affected."

Ah. So that's what it all means! How's that for clarity, folks? About as muddy as the Mississippi during the height of crawfish season. All of this would be quite amusing, if the implications -- and the impact upon our wallets -- weren't so serious.

Anyway, many of us -- dare I say, most of us -- left this conclave more confused (some even dazed) than before, wondering just when, and how, a system of taxation that can neither be understood nor explained, and which is, in so many instances, forcing Long Islanders out of house and home, will be reformed.

We can hardly wait until January, 2012, when the next round of Tentative Assessed Valuations come out, or for shortly thereafter, when local school boards begin to formulate -- and attempt to justify with straight faces and fingers crossed -- their proposed budgets for 2012-13.

The income tax, by comparison -- with sincere apologies to Professor Einstein -- is mere child's play!

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