Excerpt from The New York Post by Jennifer Gould Keil
New York City’s method of assessing property values is so out of whack that the buyer of the most expensive apartment ever sold — a $100 million duplex overlooking Central Park — pays taxes as if the place were worth just $6.5 million.
With controversial tax breaks granted to the One57 condo tower, the total property tax bill for the spectacular penthouse is just $17,268, an effective rate of 0.017 percent of its sale price.
By contrast, the owner of a nearby condo at 224 E. 52nd St. that recently sold for $1.02 million is paying an effective rate of 2.38 percent, or $24,279, according to data compiled for The Post by the Revaluate.com real-estate information website. And even without the “421a” tax abatement for 157 W. 57th St., the bill would be $376,472, for an effective rate of just 0.376 percent.
The figures, which Revaluate CEO Max Galka called “unbelievable,” show that the owners of the city’s 10 most expensive apartments pay effective rates that are a mere fraction of those paid on less-pricey properties.
Beneficiaries of the discrepancy include casino magnate Steve Wynn, entertainment mogul David Geffen and Ekaterina Rybolovleva, the socialite daughter of Russian oligarch Dmitry Rybolovlev.
Experts blamed the situation on the city’s complicated method of assessing the “market value” of condos and co-op apartments. The off-the-mark assessment formula is primarily based on the income, per square foot, that’s generated by neighboring rental apartments.
“It’s a big problem,” said George Sweeting, deputy director of the city’s Independent Budget Office. “It creates major inequities in the tax system. The city has been asked to submit a plan to Albany since 1996 but no one ever has,” he added.
The state law governing property assessments went into effect in 1981. Critics found its flaws almost immediately, and legislation passed in 1996 required that the city come up with a new method — to no avail.
“The city uses an antiquated system to evaluate residential property that is completely out of date,” said Edward Mermelstein, a founding partner at the law firm Rheem Bell and Mermelstein. “New York City’s residential real estate has increased substantially in the last 15 years, and the system has not caught up.”
“This is a serious problem that [Mayor Bill] de Blasio needs to figure out,” he added. Galka said that while the city values apartments at about 20 percent of their actual worth, the top 10 are valued at between just 3 and 6.8 percent of their sales prices, generating just $935,000 in taxes this fiscal year.
If those apartments were taxed at the national effective rate of 1.29 percent of sale prices, the city would pocket nearly $9 million, Galka said.
In a prepared statement, de Blasio spokesman Wiley Norvell said: “These inequities have been built into the tax system over decades, and they won’t be solved easily or quickly.”
“Any solution would require tax-law changes in Albany, and the impact of those changes on the lives of New Yorkers would have to be taken into account,” Norvell added.