Real Property Tax Scandal

By Scott Stringer

Many New Yorkers who filed their local income tax may be surprised to learn that all the money they just gave New York City pays for only a tenth of the budget. The property tax, the largest source of city funds, provides about twice as much. It generates some nine billion dollars a year in revenue for public schools, police, sanitation and other vital services.

With services being cut across the board due to the economic slump and tragic events of September 11, and with the attacks on the World Trade Center having created a $200 million decline in the city's tax rolls, money from honest collection of taxes is needed more than ever.

Few ordinary New Yorkers enjoy writing checks to the Internal Revenue Service or state government, but most do so. This is why they have a right to be shocked and disheartened when they learn that others have not ž that the tax system has not been fair.

In February, federal prosecutors uncovered a conspiracy in the city's Finance Department that allegedly been going on for as long as 35 years. Some 18 current and former city tax assessors accepted millions of dollars in bribes to improperly reduce the tax rates on at least 500 properties. The corruption cost the city as much as $1 billion. The assessors currently await trial on federal racketeering, bribery and mail fraud charges.

The fact that a ring of corruption could have been systematically cheating the city for more than three decades adds to the gravity of the crime.

As the new chair of the New York state assembly's Real Property Taxation Committee, I held a hearing last month to investigate how this corruption could have gone on for so long. I wanted to gather recommendations on how to make sure citizens can once again have faith in their tax system.

One thing is clear: There had been a lack of coordination and understanding between the different parts of the city's real property tax system.

And, as shocked as we may be by the magnitude of the scandal, over the years, those involved in the tax system had raised a number of red flags. Some had pointed to the lack of comprehensive training and certification for assessors, as well as the absence of city oversight.

Honest tax assessors have tried to call attention to various problems, said one witness, Mathew Joseph, president of the tax assessors union. In 2001, he said, assessors asked the City Council to alter their duties and bring greater accountability to the system. The measure was never voted on.

Now that the scandal has emerged, experts offer a number of suggestions to ensure that we never see this kind of corruption again.

Some measures have already been taken. City Finance Commissioner Martha Stark said she has fired 15 current assessors charged in the scandal, reassigned two supervisors, and ordered a reassessment of the properties involved. Now she will review the whole property tax assessment system in order, she said, to regain "the public's trust in the integrity of the assessment process."

Speaking from the assessors standpoint, Joseph urged that assessors be required to pass a test and be better trained and paid than they are currently. And he called for, once again, requiring assessors to swear to the integrity of the tax roll. When that requirement was eliminated, he said, the city saw "a decline in the accuracy and quality of the tax roll."

As the department's plans for reforming the property tax system evolve, the City Council will hold hearings on them, said David Weprin, chair of the City Council Finance Committee. The council, he noted, "has experience in working with the administration and law enforcement in rooting out corruption in industries such as the Fulton Fish market and the garbage carting industry."

As important as these suggestions may be, they still leave the city cheated out of hundreds of millions of dollars. Federal prosecutors are using the forfeiture provisions of U.S. law to recover the ill-gotten gains from the assessors accused of taking bribes, much like property used in the committing of a drug crime can be seized. However, it remains unclear whether New York City can ask the federal government to hand over any money it collects from the defendants. And what about the money the city would have gotten if the assessments had been honest in the first place?

That is why I have introduced the real property tax recovery bill (A.10434), which would allow New York City to recoup tax revenue lost due to assessors criminal conduct. The amount recovered would be what the property owner would have paid in real property taxes if the assessor had made a legal and proper assessment.

The bill calls for a two-pronged approach. A property owner's liability for back taxes would be limited to six years if the owner was not involved in any criminal conduct but the property was under-assessed due to corruption. However, liability would be unlimited if the owner were involved in the criminality.

Despite years of controversy, little change has been made to our system of real property taxes and how we set and collect them. The recently exposed scandal must spur us to finally revamp the system so it will work efficiently and honestly for all those New York citizens who pay their taxes and rely on tax revenues to provide them with the services they need.

Scott Stringer is a member of the New York State assembly, representing the 67th Assembly District on Manhattan's Upper West Side.

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