Introduction to Tax Breaks
With a 40% break on what they’d normally owe the city in property tax, the owners of a luxury emporium at 20 Hudson Yards seem to have a good deal. But that hasn’t stopped them from filing appeals against the city claiming that they’re hugely overtaxed.
The Problem of Assessment Challenges
Over the eight years running through February of the current fiscal year, owners of 60 New York City commercial properties that already received large property tax breaks — mostly in high-profile locales like Hudson Yards, Times Square or downtown Brooklyn — also sought to lower their taxes by challenging the city’s valuation of their holdings. Forty of those properties were awarded assessment cuts totaling nearly $2 billion, city Tax Commission records show.
Example of 20 Hudson Yards
20 Hudson Yards, a shopping mall for the ultra-wealthy — Tiffany, Cartier, Piaget, Bulgari and Patek-Philippe have glittering stores there — is a prime example. Built by real estate giants Related Companies and Oxford Properties Group, the property, run by a joint venture called ERY Retail Podium, LLC, received a total of $78 million in city property tax breaks from 2020 to 2024, records show. At the same time, the Tax Commission has awarded cuts in the property’s assessed value that total $467 million, which would normally be worth about $50 million in property tax.
Partners Face Off
Real estate leaders and city and state economic development officials say that but for tax breaks, groundbreaking developments such as Hudson Yards or the Times Square revitalization would not have occurred. City and state agencies grant tax relief to spur what they say are job-producing public-private “partnerships.”
The Role of Tax Commission
The computer-generated, cookie-cutter lawsuits, filed by a small group of law firms specializing in this area, typically claim shoot-for-the-moon reductions of 50% and even 75% in the assessed valuations. Property owners file hundreds of such lawsuits each year, appealing the Tax Commission’s decisions on their assessment challenges.
Luxury brands graced the Hudson Yards mall, Nov. 28, 2021. Credit: Leonard Zhukovsky/Shutterstock.com
Overtaxed Commission
While property tax revenue is crucial to the city’s budget, the Tax Commission, which provides an independent forum for assessment challenges, is hard-pressed to keep up with some 57,000 appeals a year with a staff of fewer than 50.
The Challenge of Handling Appeals
One of the top-level supervising assessors had retired early in 2024, and based on “city hiring policy” he hadn’t yet been able to fill the spot. Likewise, he was down two people on his IT staff, and also a clerical associate. He’d been relying on two part-time college assistants to sort and file the 57,000-plus applications, which are submitted on paper, and then pull and re-shelve the paperwork before and after hearings.
Examples of Tax Breaks
The 4 Times Square skyscraper, Dec. 8, 2023. Credit: Alex Krales/ THE CITY
The 5 Times Square skyscraper, Dec. 8, 2023. Credit: Alex Krales/THE CITY
Conclusion
New York State’s constitution gives property owners the right to challenge their assessments, and New York City’s lucrative tax break programs do not ask developers to waive their right to challenge their tax assessments in the future. This has led to a situation where developers who have already received tax breaks are still able to appeal their assessments and receive further reductions in their property tax liabilities.
FAQs
Q: What is the Tax Commission and what is its role?
A: The Tax Commission is an independent agency that provides a forum for property owners to challenge their assessments. It handles over 57,000 appeals a year with a staff of fewer than 50.
Q: How do tax breaks work in New York City?
A: Tax breaks are granted to developers to spur job-producing public-private “partnerships.” They can take the form of reduced property tax rates or payments in lieu of taxes (PILOTs).
Q: Can developers who have already received tax breaks still appeal their assessments?
A: Yes, developers who have already received tax breaks can still appeal their assessments and receive further reductions in their property tax liabilities.
Q: What is the impact of tax breaks on the city’s budget?
A: Tax breaks reduce the amount of property tax revenue that the city receives, which can impact the city’s ability to fund public services and infrastructure.
