While the city’s economy is showing signs of life, the real estate community knows all too well that property values remain far below what they were at the height of the market more than two years ago. It’s estimated that on a per-square-foot basis, property values have fallen by 38 percent compared with the pre-crash days of 2008.
But, as Robert Knakal notes in this week’s Commercial Observer, the city has raised assessed values by 26.4 percent over the same period. That’s bad enough, but as Mr. Knakal notes, it’s only getting worse–the city’s Department of Finance recently increased by 3.75 percent the projected market value of the city’s million-plus properties. That can mean only one thing: Even more tax hikes for property owners.
Real estate taxes and fees now account for about half of all revenue in the city treasury. Politicians in recent years have been quick to slap property owners with higher taxes and fees rather than implement unpopular spending cuts or search for new sources of revenue. But there comes a time when would-be investors are going to do the math and decide to spend their money elsewhere. Mr. Knakal believes that time is now, and we agree.
Nobody is suggesting that property owners pay any less than their fair share of taxes. That said, investors clearly are beginning to believe that the city has strayed far from accepted notions of equity. Stories abound of building owners hit with a doubling or tripling of the assessed value of their properties, even though rents remained about the same and no major improvements were undertaken.
It is interesting to note that real estate taxes were stable during the 1990s–not coincidentally, one of the city’s greatest boom times ever. But in the aftermath of the dot-com bust and 9/11, City Hall began raising real estate taxes in double-digit increments. That pattern repeated itself after the crash of 2008.
These increases are unsustainable and unfair. Yes, times are tough, but they demand creativity and, yes, painful cuts in spending. The city can no longer expect property owners to foot the bill for inefficient government.