DOF Publishes FY 2020 Tentative Assessment Roll
On Jan. 15, the New York City Department of Finance (DOF) announced the publication of the tentative property assessment roll for fiscal year (FY) 2020, which shows the total market value of all New York City properties for the upcoming year at about $1.323 trillion, an increase of $72 billion, or 5.8 percent from the 2019 fiscal year. At this time, the DOF sends each owner a Notice of Property Value, which is the tentative assessment for the next fiscal year conveying the market value of the lot, including improvements, the actual assessed value of the lot, and, most important, the value upon which the lot will be taxed for the upcoming fiscal year.
The roll reflects total citywide construction activity at around $13.8 billion in new Market Value. In particular, rental apartments account for $4.9 billion or 35.5 percent of citywide construction activity. Collectively, Manhattan, Brooklyn, and Queens make up 95.6 percent of all construction activity for rental apartments. In Brooklyn and Queens, market value growth due to construction exceeds market force growth for rentals.
The release of the tentative assessment roll marks the beginning of the time period in which property owners can examine and challenge their property values before the roll is finalized in May. The assessed values in the final roll, along with the tax rates and any exemptions or abatements, are used to calculate property taxes for the fiscal year that starts on July 1, 2019.
Values for Class 2 Properties
The total market value for Class 2 properties, which include rental apartment buildings, rose by $20.3 billion or 6.6 percent to $329.9 billion citywide. About 64.5 percent of the increase, or $13.1 billion, is due to market forces, with the remainder coming from other factors, such as new construction and physical improvement, which accounts for 33.9 percent of the increase. The total assessed value for Class 2 properties increased 10.7 percent to $97.7 billion. For Tax Class 2, Brooklyn has the greatest increase in market value, up 8.8 percent, and the greatest increase in assessed value, up 17 percent.
Class 2 rentals saw a market value increase of 7.3 percent. Of this increase, new construction and renovations of rentals accounted for 59 percent of the increase, or $4.9 billion, in new Market Value. For Class 2 rentals, Brooklyn has the greatest increase in market value, totaling 12.6 percent and the greatest increase in assessed value, up 20.1 percent.
Values for Class 4 Properties
The total market value for Class 4 commercial properties increased $14.5 billion, or 4.6 percent, to $326.8 billion. Market forces accounted for 72.2 percent, or $10.4 billion, of the increase, with the remainder coming from other factors. The total assessed value for Class 4 increased 8.1 percent. Class 4 office buildings and retail saw an assessed value increase of 8.1 percent and 9.0 percent, respectively. For Tax Class 4, Staten Island has the greatest increase in market value, up 16.4 percent.
Market values for FY 2020 in Class 2 and 4 properties are based on calendar year 2017 income and expense data provided by property owners. This data is trended to reflect current market conditions, as well as mortgage and bond interest rates, which are used to determine income capitalization rates.
Permitted Valuation Approach
Most NYC commercial property is comprised of Tax Class 2 properties and Class 4 properties. Class 2 consists of buildings with more than three residential units, and Class 4 properties include nonresidential commercial property other than utility buildings. For tax assessment purposes, the market value of each commercial property is determined using the income capitalization approach.
For income-producing commercial properties, the actual income and expenses reported by the owner are used to determine the property’s net operating income. For mixed-use property, each category of income must be separately stated—for example, gross residential income must be separated from gross office income. All income derived from the property must be disclosed.
Similarly, in determining net revenue, expenses directly related to the operation of the property that are to be deducted from the gross revenue must be separately stated. Non-operational expenses, such as mortgage interest, depreciation, and corporate income tax, are not considered. Although the entire cost of a capital improvement can’t be deducted in the year of expenditure, a reasonable reserve may be treated as a deduction for one or more years.
After determining net operating income, a capitalization rate (often called the cap rate) is applied. In simple terms, the cap rate is the annual rate of return expected by an investor in the property. The cap rate varies based on the use, condition, and location of a particular commercial property. Arithmetically, the cap rate is the net operating income divided by the market value of a property expressed as a percentage. In many cases, the success of an appeal hinges on the cap rate applicable to the property.
Important Dates and Information for Property Owners
The NYC real property tax assessment and appeal procedure is calendar driven. With the release of the tentative assessment roll, property owners will now have an opportunity to examine and challenge these values before the assessment roll is finalized in May.
Owners who believe that the DOF has incorrect property information, such as the wrong number of units or square footage, may file a Request to Update with the DOF. These forms are posted at www.nyc.gov/finance. The deadline for correcting property errors with DOF this year is April 2 for all property classes. Filing a Request to Update with the DOF, however, isn’t a substitute for challenging the assessed value with the Tax Commission.
All properties are valued by law according to the property’s condition on the taxable status date of Jan. 5. Owners who want to challenge their properties’ Assessed Values can do so with the New York City Tax Commission, an independent city agency. This year, the absolute deadline for filing a challenge to a property’s assessment for Class 2 and Class 4 properties is March 1, 2019, and owners who don’t file a tax appeal by March 1 lose any right to contest assessments for the ensuing July 1, 2019, through June 30, 2020, tax year. Forms to file a challenge are available on the Tax Commission’s website at www.nyc.gov/html/taxcomm.
The final assessment roll will include any changes based on the decisions made by the New York City Tax Commission, as well as new information the DOF gathers about abatements, exemptions, and other adjustments. In June, the DOF will use the final roll to generate property tax bills for FY 2019.
The DOF and the Tax Commission will conduct joint outreach sessions in February to answer questions from the public about their property assessments and what to do if recipients believe they aren’t correct. The outreach session schedule is as follows:
Morning Sessions (10 a.m. – 12 p.m.)
- Feb. 5, 2019 — Bronx: Bronx Borough Hall, 851 Grand Concourse, Rotunda
- Feb. 6, 2019 — Manhattan: David N. Dinkins Municipal Bldg., One Centre St., North Mezzanine
- Feb. 7, 2019 — Brooklyn: Brooklyn Borough Hall, 209 Joralemon St.
- Feb. 12, 2019 — Queens: Queens Borough Hall, 120-55 Queens Blvd., Atrium/Rotunda
- Feb. 14, 2019 — Staten Island: Staten Island Borough Hall, 10 Richmond Terrace, Room 125
Evening Sessions (5 p.m. – 7 p.m.)
- Feb. 13, 2019 — Manhattan: David N. Dinkins Municipal Building, 1 Centre St., North Mezzanine
- Feb. 19, 2019— Brooklyn: Brooklyn Borough Hall, 209 Joralemon St.
- Feb. 20, 2019 — Queens: Queens Borough Hall, 120-55 Queens Blvd., Atrium/Rotunda
- Feb. 21, 2019 — Bronx: Bronx Borough Hall, 851 Grand Concourse, Rotunda
- Feb. 25, 2019 — Staten Island: Staten Island Borough Hall, 10 Richmond Terrace, Room 125
NYC Tax Commission Hearings
Between March and October, the NYC Tax Commission conducts hearings with property owners who have challenged their Tentative Assessments or their representatives to consider whether an assessment should be reduced. At such hearings, information and documentation supporting a property owner’s appeal may be presented. Hearing Officers typically render decisions within weeks of a hearing.
If the property owner accepts a NYC Tax Commission offer to reduce the assessment, the appeals process is concluded, the reduction is effective as of July 1, and the property owner may apply for a refund of any tax overpayment.
If the NYC Tax Commission doesn’t extend an offer to reduce the assessment, or if an owner doesn’t accept the offer and believes that a greater reduction is warranted, the tax appeal for the current year may be continued by filing an Article 7 petition in New York Supreme Court on or before Oct. 24 within the tax year to which the assessment applies.