Taxed off: Tax-free properties mean you pay more
- The number of completely untaxed properties owned by government and non-profits jumped 22 percent since 1999.
The state of New York is home to 5.7 million parcels of property worth an estimated $2.8 trillion — with a ‘t.’
But when property-tax bills go out each year, nearly a third of that value — about $866 billion — never gets billed.
Over the past six months, the USA Today Network combed through 17 years of extensive state data on property-tax exemptions at the county, municipal and school district level, examining trends and challenges presented by the state’s patchwork system of granting and enforcing tax breaks.
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The numbers show alarming growth in the number of completely untaxed properties owned by government and non-profits — from 179,420 in 1999 to 219,602 last year, a 22 percent jump.
The value of those properties, meanwhile, has more than doubled to $567 billion from $276 billion over the same time period, according to the data from the state Department of Taxation and Finance.
It’s the average taxpayer who ultimately pays the price.
2015 NYS Property Tax Exemptions
With fewer properties on the tax rolls, those who do pay are left to pick up the slack for public schools, police and fire departments, trash pickup and all the other community services that local governments provide.
"If you're really concerned about property taxes, this is only exacerbating the problem," said Gerry Geist, executive director of the state Association of Towns and a former town board member in North Castle, in Westchester County. "When you take properties off the tax rolls, who is going to make up the difference? The homeowners."
Tax breaks galore
There are 175 different ways to qualify for at least a partial property-tax exemption in New York, ranging from putting solar panels on your house to being a member of the clergy to hosting an NBA and NHL team for at least 10 years in New York City — a tax break carved out specifically for Madison Square Garden.
Properties that are completely exempt include most government and school facilities, non-profit hospitals and certain charities, including religious groups. Partial exemptions are granted to many homeowners, veterans, clergy and others.
More than 3.3 million of all parcels in New York — about 58 percent — received at least a partial exemption in 2015.
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Add it all up and about $866 billion in property is exempt from school, county and municipal taxes. The state, though, reimburses schools for the tax on about $162 billion of property value through the STAR exemption available to most homeowners, according to state data.
A large portion of the land is tax-free, government-owned property.
In all, $227 billion is owned by local governments and schools. The state, meanwhile, owns about $87 billion of tax-exempt property, with another $56 billion owned by the federal government and foreign countries.
Uneven spread
The exemptions are spread unevenly throughout the state. And a higher level of tax-free property often correlates to higher taxes for those who pay.
Take the city of Binghamton, where about 34 percent of the property value is exempt from city-level tax, according to the state data.
The city tax rate there was $24.90 per $1,000 of full home value in 2015, according to the Empire Center, an Albany-based think tank.
In the town of Binghamton, which borders the city to the south, about 5 percent of property value was exempt from town taxes last year.
The town’s tax rate is far lower: About $4.70 per $1,000, according to the Empire Center.
For some municipalities, a single tax-free property eats up much of their rolls.
In the town of Romulus in Seneca County, the state’s Five Points Correctional Facility doesn’t pay taxes and is worth an estimated $397,436 — about 55 percent of the town’s total property value.
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Overall, about 80 percent of the town’s property is exempt, one of the highest rates in the state.
“You have to play the cards that you’re dealt,” said John Sheppard, Seneca County manager. “But help is on the way.”
The “help,” Sheppard said, is the del Lago Resort & Casino, which will open in the county next year. The new casino, one of four private casinos approved in New York, will be required to make significant payments to the municipal governments within the county.
Who’s at fault?
When it comes to property-tax breaks, New York’s Constitution puts the power in the state Legislature’s hands.
Lawmakers have the ability to pass general laws granting or clawing back tax exemptions, as long as property “used exclusively for religious, educational or charitable purposes” remains tax-free.
State law takes it a step further, exempting non-profits that exist for “religious, charitable, hospital, education, or moral or mental improvement of men, women or children purposes.” But the terms in the law aren’t defined, leaving the courts to interpret them.
Municipal and school officials say the system is stacked against them.
They have long raised concern over abuse, particularly when it comes to charities with unclear missions or massive amounts of land. And the rise in the number of tax-free properties, they say, is untenable.
Many assessors, who oversee the property-tax rolls, are forced to give in if a non-profit threatens legal action to fight for an exemption the assessor is wary of granting.
“You’re paying legal fees,” said Teri Ross, president of the New York State Assessors Association. “Unless you have a good chance of winning and it’s a multimillion-dollar property, it’s better to cut your losses.”
When they do take a dispute to court, they often lose.
Courts have repeatedly ruled against local governments that try to challenge an exemption claimed by non-profits.
In 1991, the town of Fremont in Sullivan County tried to deny a religious exemption to the Foundation for a Course In Miracles, a group that offered seminars based on a series of books it believes were spiritually dictated by Jesus. The group, which owned 95 acres in the Catskills, did not have a church or clergy. It did not identify with a religious denomination. And it didn’t conduct religious services.
But the state Appellate Division’s Third Department ruled against the town, finding that a religious group doesn't have to be confined to a church or house of worship and can follow religious principles "subject to its own interpretation."
The ruling set a legal precedent making it difficult for assessors to reject a request for a religious exemption. The foundation has since sold the property.
"As long as there is a law, we felt we were entitled," Ken Wapnick of the foundation told the Times Herald-Record in 2003.
Years of talk
At various points over the decades, lawmakers have taken notice. But action has rarely followed.
In 2003, for example, the state Senate’s Housing and Local Government committees traveled the state, hosting hearings on property-tax exemptions and the problems they cause. The results were definitive.
The committees issued a report lambasting the state’s broad rules for enforcing the system, urging the Legislature to act.
The report warned of “correspondingly higher property taxes” if exemptions continued to grow.
“We have reached a point in this state, where our communities — our taxpayers — can no longer afford to see exemptions as a runaway train, out of control, the engineer asleep at the wheel unaware of the dynamics in motion,” the report read. “The New York State Legislature is that engineer.”
A pair of senators — John Bonacic, R-Mt. Hope, and Betty Little, R-Queensbury, — introduced a package of bills that year, including one that would clarify which charities qualify for a full property-tax exemption.
Thirteen years later, four of those bills are still pending.
Little, in an interview this month, said their effort got “mixed reviews,” particularly from those in the non-profit sector.
“There wasn’t a lot of support in the Legislature for it, so it didn’t really go very far,” she said.
Groups like the Roman Catholic Church, the YMCA and Boy Scouts of America have regularly lobbied against narrowing property-tax exemptions for non-profits, arguing it would hurt charities as they seek to help people in the community.
Kyle Stewart, executive director of the Alliance of New York State YMCAs, said the economic impact of Ys and their camps outweigh the cost of the tax breaks. Charities are often called on to "provide services that maybe government is not currently providing," he said.
"We are actually lessening the burden that government might otherwise incur by providing services to people and fulfilling our mission every day," Stewart said. "The idea of chipping away at that partnership that has proven to be successful is something that is always a concern for us.
"By being required to pay property taxes, we would not be able to serve the same number of kids and families that we currently can."
Efforts to repeal a full property-tax exemption for Madison Square Garden in Manhattan have similarly gone nowhere.
The tax break, which the New York City Independent Budget Office estimated saved the arena owners approximately $54 million in 2015 alone, was granted by the state Legislature in 1982 when the Madison Square Garden Co. suggested its costs could push the New York Rangers and New York Knicks out of the arena.
Most arenas and stadiums across the state — including the Buffalo Bills' New Era Field, assessed at $315 million — are tax exempt because they are publicly owned. Madison Square Garden, however, is privately owned.
“With the advent of its own cable television network, more intensive use of the facility to generate advertising revenue, and construction of new luxury boxes and club seating areas with higher ticket prices, the Garden is now, by all accounts, a highly profitably enterprise,” George Sweeting, deputy director of the Independent Budget Office, said at a 2014 hearing.
National perspective
There is no comprehensive data for property-tax exemptions on the federal level, with the 50 states and Washington, D.C., having disparate policies on if they track total exemptions, how they track them, how they assess properties and what they designate as an exemption.
There are few “apples to apples” comparisons because some states may exempt properties that other states don’t, or may not include government properties as parcels when tallying numbers locally.
In New York, about 5 percent of parcels are wholly exempt — with those properties worth about $576 billion, according to the Tax Department.
In all, about 31 percent of New York property was exempt from the tax rolls in 2015, which includes both full exemptions and the value of partial exemptions.
Florida, one of the few large states that tracks the data similarly to New York, had about 33 percent of its property value exempt when looking at the full market value.
All 50 states and the District of Columbia exempt government-owned and religious organizations, according to policies tracked by the Lincoln Institute of Land Policy.
What to do
Some municipal groups, meanwhile, have shifted their focus to smaller reforms.
Peter Baynes, executive director of the New York Conference of Mayors, said his group has raised the idea of allowing local governments to impose some sort of payment if a particular college, prison or other tax-exempt property chews up a certain percentage of a municipality’s tax base.
Cities like Syracuse and Ithaca have negotiated payment plans with Crouse Hospital and Cornell University, respectively, which cover a portion of the property taxes they would pay if they weren’t exempt.
“Tax exemptions have become a political third rail for lawmakers,” Baynes said. “We’re focusing on the big properties, and hoping to find ways they can contribute.”
Still, the number of bills introduced each year in the Legislature that would expand property-tax exemptions far outpace the number that seek to rein them in.
Each year, the state Assembly’s Real Property Taxation Committee gets flooded with requests from non-profits seeking retroactive exemptions, often because they missed a deadline to file for one.
Last year, the Legislature approved about 20 of them.
Assemblywoman Sandra Galef, an Ossining Democrat who chairs the committee, said she’s developed a reputation as a “tough chair” because she only allows such requests if the local assessor signs off on them.
“Whatever I do for one community, I do it for another,” Galef said. “When somebody comes to me with a bill, I try and say: 'If this is good for this community, is it good for the rest of the state?'”
The state Association of Towns wants the Legislature to take it a step further: They've called on lawmakers to pass a "uniform, well-defined approach" to such bills.
"It is essential that the cumulative, long-term impact of real property-tax exemptions be addressed in New York," the association wrote in a resolution distributed to state lawmakers this year.
Jon Campbell is a correspondent for the USA Today Network's Albany Bureau. Staff writers Mark Lungariello and Jorge Fitz-Gibbon of The Journal News contributed to this report.