New Rochelle’s Tax Base

With home values skyrocketing and new construction filling the downtown, why has New Rochelle’s overall tax base continued to decline? This is among the most common and important questions posed by taxpayers. The City’s Finance Commissioner, Howard Rattner, recently drafted a memorandum discussing this subject. The memo cuts through a complicated issue in a clear fashion, so I have chosen to reproduce its contents in full for you. The facts make a strong case for County, regional, or local revaluation. Here is Commissioner Rattner’s memo, with supporting documentation:

Equalization Rate

The New York State Board of Real Property Services (“Board”) calculates the Equalization Rate (ER) by comparing the ratio of assessed valuation of all properties in New Rochelle to their market values. Increasing market values (particularly in the residential sector in recent years) and generally unchanging assessments have produced declining ER’s. The ER is used in certiorari cases to determine the assessed valuation of a commercial property. It is also used in certain exemption calculations (STAR, veterans), in the apportionment of County Tax levies and as a uniform percentage of value.

Residential Assessment Ratio

Similar to the ER, the Board calculates the Residential Assessment Ratio (RAR) by comparing sales of residential properties during the previous year to assessed valuations. Again, as sales prices increase and assessed valuations remain stagnant, our RAR has likewise declined over the years. The RAR is used by the City’s Board of Assessment Review annually in adjudicating assessment grievances filed by residential property owners.

Special Franchise Assessments

The Board is responsible for determining special franchise assessments. These assessments include the value of property situated on or under public streets and other public places (e.g., infrastructure owned by Con Edison, United Water, Verizon, Cablevision et al). The Board utilizes the most current Equalization Rates to determine special franchise valuations. Over the past five years, the City’s assessment roll has declined by almost $5 million for reductions to special franchise assessments. The ensuing tax burden is thus shifted from the special franchises to other property owners in New Rochelle.

NYS Equalization Rates for New Rochelle (Down 51% Over 5 Years)

1998 7.59%
1999 6.57%
2000 5.98%
2001 5.45%
2002 4.02%
2003 3.75%

A property having a market value of $1 million in 1998 would be fairly assessed at $75,900. To maintain that assessment and avoid a certiorari reduction, the property would need to be worth $2,024,000 today.

NYS Residential Assessment Ratio for New Rochelle (Down 50% Over 5 Years)

City of New Rochelle

1999 6.44
2000 5.71
2001 4.90
2002 4.16
2003 3.69
2004 3.21 (tentative)

A residential property having a market value of $300,000 in 1999 would be fairly assessed at $19,320. To maintain that assessment, the property would need to be worth $602,000 today.

Conclusion

The City last conducted a full revaluation in the mid-1950’s. The development of the City since that time culminated in an assessment roll of almost $400 million by the late 1980’s. Since then, the City has experienced a one-way revaluation where successful challenges to assessments have produced a 25% reduction of the roll to its present level of about $300 million. These challenges have cost New Rochelle taxpayers over $50 million in certiorari refunds plus associated legal and appraisal costs. Until such time that the City embarks upon a comprehensive revaluation of its properties — whether it be on a county-wide, regional or city-wide basis — the roll will continue to deteriorate, we will continue to spend millions of dollars on certiorari expenses and the property tax burden will increasingly shift to New Rochelle home owners.