Sep 19


Assessing Buffalo’s property reassessment

The politics behind the timing of the release of revised tax bills, and how much developer tax breaks are costing the city
News and analysis by Geoff Kelly, Investigative Post's political reporter

If you’re a homeowner in the City of Buffalo, you received a love letter from City Hall this month: your new property value assessment and an estimate of your new tax bill in 2020.

Rarely have residents demonstrated so much interest in their neighbors’ mail: Whose values went up? Whose went down? By how much? How did the value of my house go up but my taxes go down? Who determined these numbers and how?

It is the first citywide reevaluation of city properties since 2001, a period in which real estate values in some city neighborhoods have doubled or even tripled, while others have crept slowly upward. Some property values have even fallen.

There has been ample media coverage of the matter. But here are a few things you might not have heard or read elsewhere.

Those numbers are old

First, know this: The new assessments are based on three-year-old data.

The city decided in 2014 to commission a citywide reassessment. In May 2015, the Common Council approved a contract for the firm Emminger, Newton, Pigeon & Magyar to do the job. The firm completed its data collection — property inventories, comparable sales, building permits reflecting improvements since the last assessment, etc. — in August 2016.

So the new assessments could have been ready to roll out in your 2017 tax bill. 

(Which, if accompanied by an increase in tax revenue for the city — not a given, as I’ll explain below — could have come in handy, given the budget imbalances plaguing city government for the past decade.) 

But that didn’t happen. While no one wanted to say so on the record, sources in and out of City Hall say the reassessment was delayed because there was a mayoral election in 2017. There’s no way Mayor Byron Brown wanted to be out on the campaign trail defending raised assessments and higher tax bills, while his opponent, Comptroller Mark Schroeder — a fierce critic of Brown’s financial management — fomented a taxpayer revolt.

So the can got kicked down the road.

Next, it was the Common Council. With elections looming in 2019, Council members wanted the same political coverage the mayor had enjoyed. The result: another kick of the can, propelling it just past this June’s Democratic primary.

So those brand-new assessments are, in a sense, already out of date. That’s why, as far as the State of New York is concerned, the new citywide reassessment reflects 90 percent of the city’s true market value. If the data were fresh, that number — what’s called an equalization rate — would be 100 percent.

What’s an equalization rate?

An equalization rate is a tool that state and county governments use to level the playing field between municipalities that assess their taxable property at different rates. 

It’s basically a percentage. To calculate it, you take the total property value assessment a municipality uses for tax purposes — for all the properties it contains — and divide it by the actual fair market value of that property, as determined annually by the State of New York.

That number matters. The state and the counties use the equalization rate to figure out how to distribute money — school taxes, sales tax, various forms of aid — across multiple governing bodies. The state wants that number to be as close to 100 percent as possible. Before the new numbers were released, the state pegged Buffalo’s assessment at 64 percent of the city’s true market value.

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Some governments stay on top of it: Clarence is at 100 percent, for example, and Amherst is at 95 percent. Some do not: Elma is assessed at 4.1 percent of its true market value, according to the state, probably because its elected officials fear the political repercussions of raising assessments, even if doing so would not result automatically in the town collecting more taxes. When it comes to discussions about property values and taxes, nuance is quickly lost: Owners simply bristle at the possibility of paying more. 

That’s especially true in Republican redoubts like Elma and Marilla. But, as the hand-wringing of the last three weeks has demonstrated, it’s true where Democrats abide, too. That’s why the mayor and then the Council delayed Buffalo’s reassessment for three years. 

That delay led the city to extend the private firm’s contract for three years, too, to justify the delay: The firm was working on the rollout, we were told. 

Maybe so, or maybe that was just busy work, a fig leaf covering the politics behind the three-year wait. Three years in which city officials put off answering the overarching question …

Is the city going to raise taxes?

Maybe. The city probably should, because it’s broke

But the city can only raise the total amount of property taxes it collects — the tax levy — by 2 percent each year, under state law. 

(The Common Council could vote by supermajority to break the state-imposed cap on property tax increases, but that won’t happen for the same political reasons that caused a three-year delay in the release of reassessment data: citizens bearing torches and pitchforks.) 

The city expects to collect $139.5 million in property taxes this budget year. A 2 percent increase in the tax levy would raise the city’s tax levy by $2.8 million. Not enough to plug recent, recurring budget deficits, but at least it’d be a start.

So, if the city’s tax levy can only change incrementally, what does it mean that some property values have doubled or tripled?

In theory, it means the burden of paying that tax levy will be more fairly distributed. 

If your house is in the Elmwood Village, Allentown or certain parts of the West Side, you’re going to pay more taxes next year, because your property value now constitutes a greater percentage of the city’s overall value — and thus should contribute correspondingly more to the tax levy.

If you live in the University or Lovejoy districts, your property’s value has probably been relatively static, maybe even declined a bit. That means in recent years you’ve been paying a greater share of the city’s tax levy than you should. Your house has been overvalued, relative to the rest of the city. So your taxes might decrease as a result of the citywide reassessment.

That’s the theory. But, of course, reality is messy and confusing. 

Many homeowners say the “comparable sales” used to reassess their properties make little sense. And the assessors weren’t always working from an accurate “property inventory” — the description of a property and its amenities that determine its baseline value. For example, my partner and I were surprised to learn we had an extra bedroom somewhere in the house, and a 1.5-car garage.

But there are other factors at play, too, that belie the fairness the citywide reassessment is meant to impart.

Achieving true equity

The Sept. 10 meeting of the Common Council’s Finance Committee allowed housing activists a forum for airing some of their grievances with the reassessment process.

John Washington of PUSH Buffalo is concerned for poor and elderly homeowners on fixed incomes, who he and his fellow activists insist cannot afford even a modest increase in taxes.

“The reality is the increase of taxes is not in relation to the quality of the housing or an actual assessment of the value of a home,” Washington told the Finance Committee. “It’s really about market speculation.”

That is, Washington argued, a property’s worth should be determined by its inventory and condition, rather than by the price a real estate agent might ask for it.

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If a poor homeowner in a neighborhood with rising values cannot afford higher taxes, he or she can, of course, cash out: sell the house and hope to find somewhere less expensive to live. That’s not easy, however, and it has the effect of aggravating economic homogeneity in city neighborhoods: The rich live with the rich, the poor live with the poor.

“This issue does have the potential to essentially, you know, wipe out low- and middle-income home ownership in certain neighborhoods in this city,” Washington said. “And to me that’s just unacceptable, considering our richest and largest developers and some of the largest landowners in the city are not paying a dime.”

And there Washington puts his finger on another rankling issue: the city’s abundance of tax-exempt property.

Last year, pre-reassessment, that total market value of real estate in the City of Buffalo was about $15.6 billion. Of that, $6.7 billion — almost 43 percent — was exempt from taxes. The reassessment will have changed those figures, but not by too much.

In New York State, only Syracuse has a higher percentage of tax-exempt property.

Much of that tax-exempt real estate comprises government buildings and properties belonging to churches, hospitals, schools, and other nonprofit organizations. Those tend to be concentrated in the city, and to consume city services without contributing to the tax base that pays for them.

And let’s not forget the Seneca Buffalo Creek Casino. When the city sold that property to the Seneca Nation, it was removed from the tax rolls.

A significant portion of tax-exempt property — about $800 million, according to a study by Buffalo’s control board — is the result of tax incentives granted to projects in the name of “economic development.” Washington cited as an example the city’s scandalous application of the 485-a tax-exemption program, which, he said, allows some of the “most valuable, and should be most taxable, properties in the city to not pay their fair share.”

According to the city’s 2018 Comprehensive Annual Financial Report, tax exemptions granted to developers through a variety of programs, some local and some state, totaled $17.8 million. (This assumes the projects would have been completed without tax exemptions.) The city collected $7.5 million in payments in lieu of taxes on those projects.

So the city left $10.3 million on the table in 2018. Coincidentally, that’s the approximate amount of the 2018-19 budget deficit the city must plug with reserves.

What happens next?

For those who want to learn more about and possibly challenge their new assessments, the city has set up an informal review process, followed by a formal appeal process. Then, if all that fails to satisfy, there are the courts. Real estate attorneys in town expect a bumper crop of new business in the next couple years.

Western New York’s state lawmakers are ushering through legislation that would offer income-based tax relief to homeowners in the Fruit Belt, whose property values and potential tax burden have risen dramatically because of the growth of the Buffalo Niagara Medical Campus. 

Finance Committee Chairman Richard Fontana hopes the proposed Fruit Belt exemption can be applied across the city, to other neighborhoods where the city’s purported renaissance has raised property values without providing new jobs or raising incomes. 

Fontana’s Lovejoy District is one of those neighborhoods. He cast a protest vote against last year’s city budget in part, he says, because of the delay in implementing the reassessment. He felt his constituents were paying a greater percentage of the tax levy than they should.

At the Sept. 10 Finance Committee meeting, Fontana and his fellow Council members agreed to a request made by Washington and other housing activists present: The Council will host a community meeting to hear from residents about the citywide reassessment in the near future. 

In the meantime, those activist groups — who call themselves the Buffalo Property Tax Coalition — are hosting a town hall meeting on Thursday, Sept. 19 at 6 p.m., at the Central Library downtown. All are welcome. Bring your love letter from the city.