Op-ed column: Owners can appeal assessments based on purchase price

Excessive, unfair assessments reduce the value of all properties, both owner-occupied and investor-o

Ron DiDonna, an informed state-certified appraiser, was quoted in The Daily Gazette on March 12 as saying “What are keeping . . . properties from increasing in value are the exorbitant tax rates and excessive assessments in the city of Schenectady.”

As was recently reported, the city of Schenectady continues to have the highest-taxed property in the Capital Region.

Less well-known are the excessive assessments received by recent buyers. Homes purchased from 2004-2008 are assessed differently and at a higher rate than those purchased before then. As the result of the recent citywide reassessment, recent buyers’ property taxes were typically increased between 20 percent and 150 percent; longer-term owners ended up paying lower taxes or only had small increases.

It appears that the assessor’s methodology during the revaluation was to simply use purchase price as the basis for setting new assessed values for recently purchased properties. This resulted in nearly identical properties being assessed differently, simply because one sold recently and the other did not.

Back on May 31, 1989, the Gazette reported that the “city had stopped its five-year policy of reassessing properties based on their current sales prices, popularly known as the ‘Welcome Stranger’ method because of Supreme Court decisions which said it was illegal.”

End run

Yet in 2009, with the assessment methodology employed for recent purchasers, the assessor seems to have attempted an end-run around the “Welcome Stranger” decision.

In a small claims court challenge brought that year, Jeff and Karen Mallia, owners of 9 Washington Avenue in the Stockade, argued that the city in its reassessment treated recently purchased properties differently from those last sold prior to 2004.

As proof, the Mallias showed that a nearly identical house next door was purchased prior to 2004 for $228,000, with an assessment at the time of $109,000. The citywide reassessment increased the assessment of that house to only $139,000, well below its pre-2004 purchase price and fair-market value. As a result, real estate taxes for that house in 2010 were reduced by over 20 percent.

Meanwhile, the Mallias’ house was purchased in 2008 for $279,900, and at the time was assessed at $110,000. At reassessment, it was increased to $272,100 and its taxes were increased by over 40 percent. The city’s sole argument was that the purchase price was the best indication of value.

Court ruling

The court agreed with the Mallias that purchase price is only one indication of value and reduced their assessment substantially. It found that the city had used an overreliance on purchase price for recent purchasers’ property without similar considerations for longer-term owners, and that had created a fundamental unfairness in the assessment roll to the detriment of recent purchasers.

The decision reportedly caused consternation in the city Law Department because it is an argument that all recent purchasers can use in their assessment tax appeals. The city chose not to appeal the judgment.

Since the reassessment took effect, there have been very few sales. In the Stockade section, the only sales have been of properties last sold before 2004. It is interesting to note, that with the exception of a bankruptcy fire sale, the average sales price ran around 49 percent above the property’s 2009 assessed value.

Why is this important to all Schenectady taxpayers? Excessive, unfair assessments reduce the value of all properties, both owner-occupied and investor-owned, and the expectation of an unfair and excessive assessment after purchase destroys the market for future sales and investment.

Contributing to failure

Mayor Stratton states that “The city recognizes that as a municipality we have a significant stake in the success of our investment property owners.” To the contrary, the use of discriminatory assessment, which is accompanied by large unfair tax increases and a significant reduction in income and investment value, is a major contributor to the investment property owners’ failure.

The assessor has considerable autonomy in determining new assessments, with the city government having little or no influence. He has been very aggressive in his reassessment efforts regarding recent buyers.

The recent appeal judgment gives some hope to recent buyers that they may be able to get their excessive tax increases adjusted equitably if they are willing to pursue their claims in court.

Robin White lives in Chatham and owns properties in Schenectady.

Categories: Opinion

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