How Sandra Lee may profit from lax state property assessment system in selling home

Tax Watch columnist David McKay Wilson looks at how the assessment on Sandra Lee’s home can help her sell the property she calls Lily Pond. 

New York’s lax laws on real estate revaluation, which have seen scant reform under Gov. Andrew Cuomo, will benefit his partner, Sandra Lee, as she tries to sell the Westchester home they’ve lived in for $2 million.

A $2 million house in New Castle’s well-regarded Chappaqua school district comes with  a property-tax bill of about $58,000 — if it were assessed at its market value.

But Lee and Cuomo pay $38,000 in taxes on the 12-room Bittersweet Lane house because its taxable value is just $1.3 million.

Under New York law, you can grieve your assessment if it’s higher than you think your house is worth. But there are only two ways that New Castle Assessor Joshua Herman can raise the assessment at 4 Bittersweet Lane, and neither are in play.

  • He could obtain Town Board approval to conduct a town-wide revaluation of all real estate or,
  • Lee would have to obtain a permit for home improvements.

New Castle, like many Westchester municipalities, has not updated its assessment rolls in decades.

The town’s last revaluation was conducted 41 years ago, so Herman must use the imperfect state “equalization rate” to bring the outdated assessments to what should be full value.

There is no appetite for revaluation among New Castle’s Town Board members or their opponents in this year’s town election, a Tax Watch survey found.

And Cuomo, whose Department of Taxation and Finance oversees implementation of the state’s Real Property Tax law and has a thick manual of rules that must be followed, maintains his administration has nothing to do with the work of local assessors or the laws under which they work.

New York and New Jersey are among 19 states that don’t require periodic revaluation. Connecticut revalues real estate every five years and Massachusetts does so every three years.

Bittersweet value

If Lee’s house sells for $2 million — or even $1.6 million — the purchaser won’t have to pay property taxes on what the system is designed to base the tax upon: it’s fair market value. If it sells for $1.6 million, the purchaser’s taxable value would still be just 83 percent of its market value — with lower taxes to incentivize the sale.

When Lee bought the house for $1.2 million in 2008, its taxable value was $1.7 million. The town assessor at the time agreed to lower the assessment to reflect the sales price. Then Lee undertook substantial renovations, according to numerous published reports. But she did not obtain building permits.

At the same time, the Great Recession depressed property values throughout the region, and the taxable value dipped to $936,000 — even though Lee had redone the kitchen and reconfigured the interior spaces.

Less than a month after the Tax Watch report was published, Lee rebuffed then-Assessor Phil Platz when he asked to conduct an inspection of the improvements. Nevertheless, he added a finished basement, and increased the assessment by 29 percent to its current level. Lee never appealed the increase.

“I haven’t heard them talk about it, ever,” said Galef. “We end up with unfair taxation.”

Cuomo insists his office could do nothing to remedy the inequity, said senior adviser Rich Azzopardi, who added that the governor would not share in any profit from the home sale, even though they have shared home expenses there for a decade.

“This is a home rule state and assessments are a local issue,” wrote Azzopardi.

Savior of taxpayers?

Cuomo has billed himself as the savior of suburban taxpayers, with his embrace of the property tax cap. He has also attacked President Donald Trump’s 2017 tax bill, which capped the deductibility of state and local taxes and, in turn,  has depressed values on Chappaqua homes, real estate professional say.

But Cuomo’s administration has shown no interest in bringing tax fairness to New York with mandatory periodic revaluations, said Assemblywoman Sandy Galef, D-Ossining, who chairs the Assembly Committee on Real Property Taxation.

That came as a surprise to Ramapo Assessor Scott Shedler, vice president of the New York State Assessors Association.

“The state set all the rules, which we have to follow,” he said.

Since 2011, Galef has sponsored bills to require periodic revaluation, without any success. Her 2019 bill would require one every four years, starting in 2023. The bill was passed out of Galef’s committee in February, but never made it to the Assembly floor for a vote. Galef couldn’t find a Senate sponsor this year.

“There’s a concern for requiring communities to spend money,” Galef said.

Recent revaluations

Several municipalities, however, have conducted revaluations recently. They include Ossining, Mamaroneck, Greenburgh, North Salem, Carmel and Scarsdale.

New Castle Supervisor Rob Greenstein, who is not running for re-election, said he’d support revaluation if every Westchester municipality would do it, with the state of New York picking up the tab. He said a review of New Castle’s current assessments have found them well within acceptance under New York state guidelines.

Seeking to replace Greenstein is Democrat-turned Republican James Smith, who cited the “hassle” involved in bringing New Castle’s assessments into the 21st century.

“There is a short to medium-term hassle and drag on towns that revalue — it is almost always a confusing process to residents,” he wrote. “In a soft and changing Westchester County real estate market, people are moving out of the county, so we do not need to contribute to the uncertainty that comes with the revaluation process.”

Democrat Ivy Pool, a Town Board member running for supervisor, said New Castle homeowners don’t need another source of property-tax concern as they deal with the volatile housing market, and the loss of SALT deductions.

“A reassessment would be an unwelcome source of stress for residents already burdened with higher taxes,” Pool said.

I asked her about the stress felt by homeowners with fair assessments who are burdened by paying the taxes that owners of under-assessed homes, like Sandra Lee, should be paying.

“I appreciate the equity argument, but I maintain that now is not the right time for a massive, expensive revaluation, given the fluctuation in property values,” she said.

A Tax Watch review of 230 single-family home sales in New Castle in 2018 found that 47 were assessed at values that were more than 10 percent below their sales prices, while 27 were more than 10 percent above their assessed values.

Grieving assessments

Under New York’s law, those who are over-assessed can seek a reduction each spring by filing a grievance with the town’s Board of Assessment Review, which heard the complaints Tuesday. It was a day that revealed the softness in the market for high-end Chappaqua homes.

Among them was Christina Zhang, who argued that the home at 117 Random Farms that she recently bought for $960,000 should not be taxed as if it was worth $1.2 million.

The property was valued for $1.6 million in 2018 when the individual Zhang purchased it from had bought it for $1.2 million.

The board also heard from Chris Roberta, who purchased the home at 8 Bretton Ridge for $875,000 in 2018. Its taxable value was $1.1 million.

The Board of Assessment review will rule on the grievances of Zhang and Roberta in September. And don’t expect the buyers of Lee’s home to appear in Town Hall, asking that their assessment be raised.

Published by USA Today Network.

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