So far this year, the city has given back more than $180,000 in taxes to property owners who said they were overcharged.
They successfully argued that their property assessments, on which taxes are based, were too high. And indeed, the city has admitted most of its assessments are too high, but the thousands of property owners who never complained did not get a refund.
The situation may lead to reassessment. Schenectady City Council members said they must consider reassessing in the wake of the large number of tax refunds they’ve had to approve this year.
“Clearly something is out of whack,” said Councilman Carl Erikson, who runs the finance committee. “Understanding that it will never be perfect, you need to make an effort to make it as fair as possible.”
Assessments are intended to indicate how much each property is worth on the open market. The idea is that every owner will pay taxes based on the value of their property; those with small properties pay a smaller proportion of taxes than those with mansions.
But after the most recent reassessment in 2009, many larger owners went to court to argue their assessments were too high. Most were corporations, ranging from landlords running large apartment buildings to franchisees like Subway. The Daily Gazette also asked for, and received, a reduction last year.
Only a handful were owners of a single-family home.
On the advice of attorneys, the City Council has been settling those cases, sometimes to the tune of thousands of dollars in refunds. But if the larger owners’ assessments are too high, the smaller owners’ are too — and they’re generally not going to the trouble of hiring attorneys to fight it out in court.
Councilman Vince Riggi said that has created an unintentionally unfair taxing system.
“We’re not on a level playing field,” he said. “Obviously, the majority of people haven’t asked for relief. They’re either intimidated by the process or they’ve been turned down by the [Board of Assessment Review] and they don’t want to take the next step to [court].”
At this point, he said, the taxing system is getting more unfair “every time we grant relief” to another owner. He said reassessment is clearly necessary.
“Because we’re not granting relief to everyone in the city, I think it’s incumbent on the city to do a reassessment,” he said.
The state Office of Real Property Services has repeatedly raised the city’s equalization rate, which currently stands at 123 percent. That suggests the average property is assessed about 23 percent too high.
“Since the city did a reassessment, the value of real estate has dropped there,” said ORPS spokesman Geoff Gloak.
But Mayor Gary McCarthy noted reassessment might cost $3 million and take several years.
“We’re looking at it, but it’s not going to give people a quick fix,” he said.
And while it would redistribute the tax burden, the city would still need the same total amount of taxes it needs now, he added. That means taxpayers could wait several years only to end up with the same tax bill on a different assessment.
McCarthy questioned whether that would be worth $3 million. He’s also not sure this is the right time for a reassessment.
“You want to do it when the market is stable,” he said.
But it’s hard to predict stability years in advance.
“I think clearly the city has bottomed, and you see some improvement,” he said.
Realtor Toni Lupi-Pallotolo is hoping the city goes ahead with reassessment. She said the city’s assessments are wildly inaccurate.
“It’s so out of whack, it’s ridiculous,” she said. “That’s why it’s so hard to sell a house in Schenectady.”
She added many other nearby municipalities have the same problem.
“It’s not just Schenectady; it’s all over,” she said.
The problem is that buyers look at the sale price of a house and calculate their tax bill. Then their Realtor must tell them the assessment is actually much higher — and thus the tax bill is perhaps a third higher than their original calculation.
Lupi-Pallotolo also can’t assure buyers they’ll get a reduction in their assessment after they purchase the house. A family in Glenville bought a house for $200,000 with an assessment of $309,000, she said. When the owners grieved — an official process by which they ask for a reduction — they were told they wouldn’t get an assessment reduction but should consider themselves lucky for getting a “good deal” on their house, she said.
In Schenectady, Lupi-Pallotolo is trying to sell a house she’s sold several times in the past. Each time, she received multiple offers at the first open house. But this time, the assessment is $167,000 — much higher than the market value. No one is looking at it, she said.
“It’s because it has $7,500 in taxes,” she said, arguing the assessment — and thus the tax bill — should be much lower.
She said the real solution would be to lower taxes dramatically, “but that’s not going to happen.”
So she wants a reassessment.
“It certainly would help,” she said. “It would be a step in the right direction.”
Some council members aren’t so sure. Councilwoman Leesa Perazzo said even her house is “absolutely overassessed,” but she’s not necessarily in favor of a reassessment. She’s worried it would raise the tax rate.
If most properties are assessed too high, the tax rate would have to go up so the city could collect the same amount of revenue it collects now.
“You have to pay the bills,” she said. “I don’t think reassessment can be entered into lightly.”