Navigating the maze of tax certioraris and a quest for fair legislation

Simply put, it is a forgone conclusion that Orangetown taxpayers will not only be paying Wyeth Pharmaceuticals back for claimed previous over charges on property and school taxes but for estimated future over charges.

However Orangetown Tax Assessor, Brian Kenney, is taking some proactive steps in order to reduce the amount Wyeth can claim by initiating settlement as soon as possible.

Last week in conjunction with the town attorney's office, upon their request Orangetown passed a resolution to join with the Nanuet Union Free School District to approve the retention of the appraisal consultant firm, "Albert Valuation Group, to prepare a preliminary appraisal review and report consisting of the current inventory of improvements to the Wyeth Holdings Corporation property (as of March 2, 2006 taxable status date) and to consult with the Town and School District (Phase 1) at a fee not to exceed $24,000, and to prepare an abbreviated preliminary draft appraisal report (Phase II) at a price not to exceed $12,000, with the School District and Town equally sharing the costs."

The cooperation is a far cry from the law suits and counter suits of five years ago. At that time, former Orangetown Town Attorney Jim Riley, former Councilman Bob Bergman (presently Rockland County's Commissioner of Finance) and Tax Assessor Brian Kenny devised an ag agreement which term ended in 2004.

In it $6M was refunded to Wyeth from Orangetown, (which is two years behind in payments of about $1M each) Rockland County and Pearl River School District as part of a complex ruling of gives and takes which ended 14 years of litigation with a 20 year settlement ending in 2005.

In plain figures in the last few years it has come to Wyeth paying Orangetown $5M a year in property taxes and Orangetown paying back about $1M, plus legal and professional costs in the thousands.

In the case of the Nanuet Union Free School District, which made an independent settlement, Wyeth paid; $16,699,382 for 2006, $15,311,284 for 2005, $13,864,174 for 2004 and $12,952,531 for 2003. This amounted to approximately one third of the school district's levy.

So far, under the agreements, Nanuet has made one payment of $122,964.90 as a refund of partial construction of exempt property. But for this year alone the school district has expended $14,100 in fees in defense of the assessment and said it was a deal killer to make settlements for future years.

In Wyeth's defense, the assessment expert hired jointly by Nanuet and Orangetown also refuses to deal with future years as it's not possible to determine the value of what additional structures that Wyeth will choose to build. As to what they have built in the last couple of years that might cause the assessment to change was not forthcoming from the giant pharmaceutical company.

Be that as it may Wyeth is again gearing up for further tax certioraris and has filed petitions for tax certiorari refunds for each year since the initial agreement. They are already claiming millions of dollars in refunds.

While the whole tax certiorari process might seem unfair to the average homeowner and small business owner, Wyeth is far from a culprit, or the only one, as it takes advantage of a complex state law.

A multi million dollar tax certiorari settlement got closed out in 2004 with Blue Hill having its assessment reduced by $12M costing the Pearl River School district upwards of $17 M.

Other businesses in Orangetown which have claimed over assessments in past years include: The Pearl River Hilton, Verizon, Manhattan Woods Golf Course, Chromalloy, United Water and the Pearl River Industrial Terminal.

While these organizations have been welcomed with open arms and eager palms to be filled with ratables, it's a common practice for big businesses to not only sue for over assessment of past years but to wait a few years so that the rate of over assessment grows larger.

The result is that instead of residents and small business owners paying less because of the presence of rateables, they are consistently paying not only their own property and school taxes, but must pay for future short falls not even assessed because the assumption is that commercial property will not appreciate at the same rate as residential property.

Explained by Kenney, it comes down to businesses taking advantage of one of the elements the State Office of Real Property Service uses in determining property valuation called 'the equalization rate'.

In order to find some sort of fair solution, Kenney has been petitioning State Senator Thomas Morahan, as well as legislators from Westchester, Orange, Suffolk and Sullivan Counties to initiate legislation such that residents don't have to pay out millions a year because of the complicated valuation formula.

In an article Kenny wrote for the IAO Journal, VOL. 45, No.2 July 2004 (Institute of Assessing Officers of the New York State Assessors' Association, Inc.), he said that in Orangetown the formula shows that the bulk of increasing values are on the residential side but in surveying this, actual sale figures of commercial properties are not used.

What's been happening in Orangetown is that residential property has been appreciating from six to 17 percent a year since the mid 90s while commercial property, mostly office and warehouse space, has not gone up in price.

So again, in very simplified terms, instead of determining the equalization rate by comparing commercial property to commercial property, commercial properties, which generally depreciate are compared to appreciating residential properties in assessing taxes.

Before the case is even a gleam in the big business's attorney's eye, they've already won because by law, in levying taxes, towns and school districts must use the artificial equalization which leaves them open for tax certiorari law suits. This, said Kenney, causes wide "spread disruption, especially for school districts that are liable for large refunds, and the residential taxpayers who ultimately pay these refunds."

Nanuet School Superintendent Mark McNeill said, "The equalization rate has a dramatic impact on the District's (and the Town's) finances. Because of the equalization rate decreases, a higher value must be established in order to justify an assessment. It is unfair to residents because as the value of their homes rises (at least on paper) they must pay a higher percentage of the taxes in the District. Even though most businesses are thriving, the burden of paying taxes is shifting to residents."

Kenney, in his article, again offered a solution of amendments to the different areas of law which govern the equalization formula.

Without going into the complexities of the Homestead Act, and other determining factors, an over simplistic explanation would be to start comparing apples to apples and oranges to oranges, that is to include the selling prices of like properties to like properties instead of comparing residential market values to commercial market values to reach equalization values.

Commenting on Kenney's actions, Orangetown Supervisor Thom Kleiner said the town is doing its best to prevent a Mirant Bowline type situation, such as that which caused such a jump in school and property taxes in North Rockland, by anticipating what a judge might decide and keeping it out of court.

Ron Levine, press secretary for State Senator Morahan said "Mr. Kenney's proposals on the tax laws are being reviewed however the issue is very complex."

Wendy Kouba, Wyeth's spokesperson was sent a list of questions concerning this issue and returned this statement.

"Wyeth has filed a property tax appeal in Orangetown because we believe our Pearl River property has been over-assessed. We are asking the Court to set Wyeth's assessment at levels consistent with its fair share of the tax burden in the municipality. We hope to resolve this matter soon."

Meanwhile, while some Orangetown residents beg town officials to bring in more rateables to ease the tax burden, others are wondering that it might be a good idea to think of not what big business will bring to Orangetown, but what Orangetown will have to pay big business.