Nassau tax firms benefit from Mangano’s appeals reform program
Nassau County Executive Edward Mangano made no secret of the fact that two members of the panel he set up in 2010 to propose changes to the county’s property tax system owned businesses that stood to benefit mightily if the recommendations tilted in their favor.
They were owners of two of the county’s most politically connected residential tax-appeal firms and since 2009 they and five other firms specializing in representing homeowners have poured at least $1.8 million largely into Mangano’s campaign fund, other Republican committees and a political action committee they created.
What they got in the wake of the panel’s suggestions was a windfall.
Appeal firms — those representing homeowners as well as those representing commercial clients — have earned, conservatively, $502 million in fees since Mangano upended the tax system, largely following the committee’s recommendations, a data analysis by Newsday found. According to the analysis, that’s an estimated $167 million more than they stood to bring in under the old system, which some of the residential firm owners said was putting them out of business.
The involvement of the companies in shaping the program was among the early, defining moments in the protracted, politically infused overhaul of a system that apportions $6 billion in taxes annually, the effects of which have emerged in an 18-month Newsday investigation.
In saving the county between $115 million and $299 million since 2010, depending upon various factors analyzed by Newsday, the program shifted $1.7 billion in taxes over six years from those who successfully appealed their taxes to those who didn’t, including more than $790 million from owners of properties the county valued at $1 million or more before their reassessments.
It also benefited several of Mangano’s supporters — none more so than the tax firms, whose burgeoning profits were embedded in the program’s essential strategy. In a nutshell, this involved offering steeply reduced assessments on the great majority of appealed properties as an inducement to quickly settle tens of thousands of challenges every year. This would allow the county to slash the number of lengthy grievances that ended in budget-busting tax refunds being paid to victorious property owners. The firms have helped property owners appeal hundreds of thousands of times since 2010, winning far more cases than they ever have before and taking a solid piece of the action in the process.
Appealing was so advantageous, the Newsday investigation has revealed, that the typical owner of a home, condo or business who appealed is paying only $466 more in property taxes than in 2010, a 5 percent increase, while the typical nonappellant is paying $2,748 more, a 35.7 percent increase.
How much your tax payment changed largely depended on…
SOURCE: Newsday analysis of the change in the median tax bills of appealed and unappealed properties between the 2010-11 and 2016-17 tax years.
A look at how this occurred and who benefited reveals a sea change in the arcane bureaucracy surrounding Nassau’s property assessment system and a tax world turned upside down.
The dozens of tax-appeal firms that make up possibly the largest such industry in the country went from losing 63.1 percent of their challenges to winning 78.1 percent. Vilified for years as the cause of the avalanche of appeals that had come close to bankrupting the county, they morphed into the agents of reform, welcomed in the corridors of power.
Contentious court hearings where the county did battle with the firms and their clients have been replaced by confidential, closed negotiations that reach a blanket reduction in the assessment rates used to settle appeals.
With a lengthy assessment freeze replacing the annual assessment updates that, according to studies conducted by Newsday and state and local officials, had been keeping the tax rolls accurate, a third of the county employees associated with the process were let go. Hired to handle a grievance backlog was an appraisal firm tied to at least $542,700 in political contributions made since 2006 — nearly two-thirds of them to Mangano’s election fund and other Republican committees. Meanwhile, the firing of the workers and all nine members of the Assessment Review Commission, the initial arbiter of the claims, resulted in labor disputes, lawsuits and more than $600,000 in settlement costs.
Although voters approved a referendum in 2008 mandating minimum educational and professional requirements for the county assessor, less than three years later Mangano selected an “acting assessor” who lacked those credentials. He is a Republican who had once explored running for the job, and he still serves in an acting capacity.
Slipping into history in the process was the county’s effort to make the system fair and nondiscriminatory in accordance with a court-approved settlement order it signed in 2000. The agreement came after a study by the U.S. Justice Department determined that homeowners in predominantly minority areas of the county such as Freeport and Roosevelt were taxed at rates far higher than those who lived elsewhere. Newsday’s investigation determined the disparities have returned to the levels they were at before the county implemented the court-supervised reforms.
Mangano points to savings
Rather than being motivated by political concerns, Mangano said that his mission has been to target the county’s enormous cost of property tax refunds and clean up a contentious, poorly functioning system that needlessly cost taxpayers millions of dollars a year.
Under state law unique to Nassau, if a property owner wins a grievance after paying a tax bill, the county has to refund not only the money that it collected but also the money collected by all the nearly 300 school districts, towns and other authorities that rely on its assessments. Mangano said that means only 17 cents of every dollar it refunds are for the county’s own obligation.
The county had borrowed more than $1 billion to pay for refunds by the time he entered office in 2010.
“When you don’t settle it costs you 600 percent more. So, I definitely stand behind settling tax grievances,” Mangano said. “Not to do so would cost taxpayers significantly more money.”
Mangano said his reforms have saved $20 million to $30 million a year and the tax firms, which used to be paid the refunds directly by the county, were not pleased with the overhaul because they now have to bill thousands of homeowners each year for their services.
“I made it harder for them to get paid, because there is no refund,” Mangano said. “I don’t think any of those firms were happy with my reform, but they understood that I meant business.”
Beyond that, he said his biggest vision for reform was thwarted by an unsuccessful challenge to the state law known as the “county guaranty,” which requires it to shoulder the full refund burden, and the lack of action by the State Legislature on that and other legislative initiatives.
“I welcome anybody in the state who wants to help us pass bills that will correct the system,” Mangano said.
Nothing to lose in filing
Nassau’s property tax system is famously one of the most problematic and contentious in the country and when Mangano made it a piñata during his 2009 campaign he captured a surge of public disgruntlement.
Nassau County homeowners’ property tax bills have long been among the highest of any county in the nation, according to U.S. Census Bureau data. Its disproportionate weighting of the tax burden to minority homeowners was so extreme that the county agreed to make deep reforms and meet high standards for accuracy and fairness in response to the 1997 lawsuit that won U.S. Justice Department support.
And the industry of tax firms that blanketed homeowners with invitations to appeal was supported by peculiarities of law that make New York virtually unique. There is no fee for filing a challenge. Homeowners are not required to provide supporting evidence. Grievance officials are not permitted to raise assessments even when their investigations show that’s what’s warranted.
In other words, there’s nothing to lose in filing a grievance. Even the fees paid to the tax firms are usually contingent on winning, something that is always a possibility when it’s easy to appeal negative decisions in court and appraisers are seldom in exact agreement over a property’s value.
But since the county guaranty was passed in 1948 in exchange for Nassau taking on assessment duties normally delegated to towns, there has been plenty for the county to lose, motivating it to build up a vigorous grievance system that was being pushed to its limits at the time of Mangano’s election.
To counter any illegitimate expense and maintain assessment accuracy, the county employed 225 people in its assessment department along with several others in the County Attorney’s Office. At the Assessment Review Commission, 47 more workers independently appraised properties filing appeals, which would be decided by its commissioners.
They were all kept busy as the number of challenges soared in the midst of a robust housing market that drove up values, a crash that undid them, and the annual assessment adjustments that were made to comply with the court settlement.
Property owners flocked to the appeal firms and challenges nearly doubled from 64,575 in 2003 to 127,479 three years later. They also voted to bring more professionalism to the assessment department by supporting a 2008 referendum that replaced the election of a county assessor with an appointed position that could only be held by someone who met a defined set of professional standards and would be shielded from the politics of elected office.
To this position, then-County Executive Thomas Suozzi, a Democrat, appointed Ted Jankowski, who had 28 years of experience and had successfully led Boston through its first reassessment in 38 years. Suozzi ordered a review of the system and in a May 2009 report Jankowski put much of the blame for the costly refunds on the tax firms, accusing them of overwhelming the system with frivolous claims for clients misled by firm mailers claiming thousands of assessments were substantially inaccurate.
The firms filed 92 percent of the more than 130,000 claims annually submitted in the three years before Mangano took office. If the Assessment Review Commission didn’t offer a reduction to their liking, they tried again with the courts. Most of the claims were found to be without merit. Only 36.9 percent resulted in a reduction, according to a Newsday review of the grievances. Cases settled by the commission were reduced by 10.1 percent on average. Homeowner appeals heard in small claims court resulted in just a 6.2 percent reduction on average.
Shalom Maidenbaum, who operates a group of companies that file about 21 percent of all claims made each year, bemoaned what he described as the Suozzi administration’s aggressive, anti-taxpayer tactics. He said it was rare for homeowners to get meaningful reviews of their cases and that if the county had acted efficiently it could have resolved the cases well before refunds would become necessary.
Speaking as much about those days as he is about criticism today, Maidenbaum said the bloated budgets of Nassau governments are the reason taxpayers find unfairness in the system.
“To blame taxpayer representatives for the present state of affairs is to miss the point entirely,” Maidenbaum said. “One may as well blame accountants for the perceived unfairness present in the income tax system.”
Maidenbaum told Newsday in 2015 the Suozzi-era policies were going to put him out of business.
“It wasn’t a fear,” he said. “It was a reality.”
A plan develops
On his first day in office, Mangano started his overhaul. He signed an executive order creating an assessment review team that would research solutions to the property tax refund problem and whether the county should adopt an assessment freeze that would hold values steady for a limited number of years.
Mangano’s review team was divided into two groups, one focused on residential property and the numerous appeals filed for them and the other on commercial property. It was the residential members’ recommendations that would most come to benefit appeal firms.
The seven largest residential firms formed a political action committee, Committee for Fair Property Taxes, just a couple months before Mangano was elected. As of November 2016, the seven firms, their officers and the committee had since 2006 contributed $1.8 million to various political organizations, including $330,300 directly to Mangano’s campaign and $1.3 million to other Republican committees, according to state campaign finance records. At a time when Suozzi was building his war chest — 2006 to 2009 — his campaign received $9,000 in donations connected to the firms.
More than a quarter of the contributions were tied to Maidenbaum, who said in a past Newsday interview he doesn’t focus on one political party but supports candidates who support the taxpayer.
“In America, you speak up if you have something on your mind or feel that you’re being unjustly targeted,” Maidenbaum said.
Mangano selected Maidenbaum for the review team. Also selected was Paola Orsini, who heads the seventh-largest residential firm, Re-Assessment and Evaluation Services, is a member of the Nassau County Republican Party Committee and is treasurer of the Committee for Fair Property Taxes. Similarly to Maidenbaum, Newsday found no contributions tied to Orsini to Suozzi’s political committee in state campaign finance records dating to 2006. She did contribute $11,500 to Mangano’s campaign, though.
The other residential team members had less assessment experience but were Republican donors, including William B. Wise, Village of Westbury trustee and then-commissioner of claims, who chaired it, and Garden City homeowner Robert Orosz, who had successfully challenged his home’s assessment.
Maidenbaum’s business partner, Ilyse Gellar Sternberg, said “we believe Mr. Maidenbaum was recommended and selected based on his high level of expertise.”
North Hempstead Receiver of Taxes Charles Berman, a Democrat who held several positions in the assessment department during the Suozzi years, said the decision to place tax firm representatives on the panel was “tantamount to asking the wolf to guard the hen house.”
“They basically wrote a report, you know, analyzing and stressing four or five things that came to pass,” Berman said. “Those are the things that have created the situation that we’re in today.”
In their toughly worded November 2010 report, the residential team members said the county should “stop blaming the taxpayers and their representatives” and reassign resources spent defending cases in court to resolving them before they ended up in court, even if a private appraisal firm was needed to assist. It said the county could resolve cases more quickly by settling them all using lower, negotiated levels of assessment.
The premise that the county was defending large numbers of inaccurate assessments was questionable. The county had been assessing homes at the fraction of 0.25 percent, which gives a $100,000 property an assessment of $250. Tax firms argued the county had actually been assessing vast numbers of properties at lower rates, and that their clients were being unfairly discriminated against and should be assessed at lower rates than 0.25 percent. But state studies had supported the county’s rate for years, and as a result even when tax firms appealed their cases in court most hearing officers sided with the county on the issue.
Maidenbaum argued in court that several of his clients were assessed at a higher rate than other properties using his own expert in 2006, but the case failed when his expert’s analysis was rejected in state Supreme Court. He tried again four years later, and that lawsuit was resolved when Mangano took the reform team’s recommendations, hiring an outside contractor to set up his Tax Grievance Negotiation and Settlement Program. Through the program, officials have agreed to lower assessment rates each year and use them in resolving all appeals, including those not filed with the help of a firm.
Assessment Review Commission Chairwoman Robin Laveman said under the old system, rates were debated constantly and resulted in uneven results.
“That process was a disaster,” she said.
One reason the county refused before this to negotiate a lower rate for all those who appealed was that it would have led to an enormous number of properties obtaining a reduction, leaving those that had not filed a grievance over-assessed. That’s exactly what has happened.
The freeze resulted in the assessments of unappealed properties being stuck at the assessments in place when the freeze began in 2012, while those who successfully appealed were assessed at the lower, negotiated rates. The most recent tax bills were affected by a 0.17 percent rate, which is 32 percent lower than 0.25 percent.
But, in contrast to the public record of the most mundane decision of the County Legislature, exactly how the negotiation of lower assessment rates used by the commission occurs remains a bit of a mystery, despite the enormous effect they have on the distribution of the tax burden. County officials have not disclosed what all the rates are, who specifically negotiates them or how the determinations are arrived at. In response to a request under the state’s public records law for any records relating to the negotiation or setting of the rates, the officials said that no such records exist.
County Attorney Carnell Foskey then recently said in an emailed statement that records do exist, but they will not be disclosed.
“The analysis and conclusions of these studies and this information are part of the attorney client work process,” he said, adding that neither side of the negotiations wants the strengths or weaknesses of their analyses exposed.
Ultimately, Newsday determined what the rates were by reviewing court cases and interviewing various small tax-appeal firm attorneys, who sometimes learn what the rates are only when the county settles their cases.
In a striking reversal of past practice, of the 858,647 claims filed since the settlement program began, 78.1 percent of them resulted in a reduction, almost all awarded without court hearings.
This has been a boon for the tax firms. They have won 526,695 claims in the past five years, compared with 292,062 claims they won in the five years before the program began.
Firms mainly handling residential claims, like Maidenbaum’s and Orsini’s, charge their clients from 40 percent to 50 percent of the first year of tax savings they obtain from a reduction, while firms primarily handling commercial property claims charge between 15 percent and 33 percent.
Using the average of those rates — 45 percent for residential firms and 24 percent for commercial firms — Newsday conservatively estimates the firms will make $502 million for appeals filed in the first six years of the program, and that this is about $167 million more than they would have made without it, assuming they did not go out of business.
Aside from the extra revenue, the firms also saw a sharp drop in their costs. Unlike appeals resolved by the commission, which often settles them without ever meeting face-to-face with challengers, court cases require taxpayers or their representatives to appear before a hearing officer, which makes them more costly. The number of court cases filed dropped from 313,980 in the five years before the overhaul to 132,183 in the past five.
Sternberg, of the Maidenbaum firms, said the drop in court hearings hasn’t just benefited tax firms, but also “the county, the courts, as well as the taxpayers themselves who no longer need to wait to get their money back.”
Mangano signed an executive order enacting his other major initiative — the assessment freeze — even before the residential and commercial reform team members had finished their reports.
It hardly mattered. Only the residential members were cautionary about a freeze, warning in their report that without one critical provision such a measure could be unconstitutional or lead to inequity. That provision was enormously beneficial to the tax firms: The team insisted that appeals be allowed to continue during the freeze. Mangano agreed.
The freeze locked in the reductions property owners achieved, allowing them to benefit each subsequent year. The now-$1.7 billion tax shift grew by $405 million last year, and continues to surge as the freeze stretches on.
Mangano advocated a two-year freeze during his 2009 campaign, but that turned into a four-year one in his executive order. Because of delays attributed to the massive damage caused by superstorm Sandy, it is now projected to last seven.
Implementing the plan
With the freeze in place and assessment challenges being resolved before they went to court, Mangano eliminated dozens of employees who were involved in the old process of deeply reviewing all challenges.
Nearly a third of the workforce of the Assessment Department, Assessment Review Commission and the County Attorney’s Office had been laid off by Mangano’s second year in office.
County officials brought in Standard Valuation Services, a longtime county appraisal contractor, to set up and run the settlement program in its first year. The firm is owned by Matthew L. Smith, and he, his employees and their family members as well as other firms Smith operates have contributed at least $542,700 to political candidates since 2006, including at least $339,700 to Republican committees, according to state campaign finance records. They contributed at least $133,400 to Mangano’s campaign committee and only $22,500 to Suozzi’s.
Smith said his firm has done business with the county for 20 years under multiple administrations, and his political contributions are often tied to golf outings and other events he and his employees attend as a gesture to those he does business with, both Democrats and Republicans. He said he also contributed to Suozzi, whom he has known for decades, before 2006 when the state began keeping local officials’ campaign finance records.
“The reason I get these contracts — and I’ve worked with Nassau County from the 1990s and my family has worked with Nassau County since the 1960s — is because we can do the job and we have the expertise,” Smith said, adding that his firm is the largest on Long Island. “To me, I don’t consider us as political.”
Smith’s firm was hired without competitive bidding and without a contract being approved by the county legislature, even though county law requires each. The county legislature approved the $2.4 million contract in July 2011, seven months after Smith’s firm began the work.
“It’s unacceptably late,” the legislature’s presiding officer, Peter Schmitt (R-Massapequa), was quoted as saying at the time. “We’ve been put in a corner with this contract and I don’t like it.”
Then-County Attorney John Ciampoli said at the time the county needed to move fast in order to settle claims and that Smith’s company was the only one capable of doing the work. He said the work was exempt from legislative oversight because Smith was serving as an expert witness in court appeals, including the case filed by Maidenbaum’s firm.
Smith said settling the 60,000 cases he worked on in that first year of the program required his staff to work seven days a week in order to meet the county’s deadline for resolving them. He said his firm was not involved with the negotiation of rates.
“This was a nutty time,” Smith said. “We really worked around the clock.”
Acting assessor appointed
To run the smaller assessment department, Mangano did not name the sort of credentialed assessor voters supported in the 2008 referendum that ended the practice of electing a county assessor, but fellow Republican James Davis. He had considered a run for assessor before the referendum, but didn’t muster enough support, according to a Newsday report at the time. There were questions about how long Jankowski, the Suozzi appointee, would last in the new administration and they were answered when he was fired after failing to catch an error made years before he was appointed that resulted in the county legislative building being taxed — a $1.3 million gaffe.
As a result of the referendum, the county charter requires an appointed assessor to have a degree from a two-year college and two years of full-time appraisal experience or a degree from a four-year college and one year of full-time appraisal experience. It also requires the assessor to be certified by the International Association of Assessing Officers, the main professional society, in one of five fields and to obtain state certification, which has similar minimum requirements.
Mangano got around these requirements by naming Davis “acting assessor,” which did not require legislative approval. Had he been appointed, his term would have been for three years. He has now served for six years.
Davis had worked in the Assessment Department for 23 years when he was named to the position. He held the title of Deputy Assessor, but the position did not entail appraising property, according to Jankowski and the last elected assessor, Harvey Levinson. His employment applications, which Newsday obtained from the Nassau County Civil Service Commission, show he took accounting classes at Nassau County Community College in the 1990s, but had not continued them or graduated as of 2004. The International Association of Assessing Officers said it has no record of him being a member.
Referring to a lawsuit brought by commercial property owners, Davis said in a statement emailed Jan. 24 that he could not comment on his qualifications at this time.
“However,” he said, “it is important to note that I have 23 years of experience working in the assessment office, including the exemptions unit, field unit and administrative office.”
County spokesman Brian Nevin said in an earlier emailed statement that the County Charter’s qualifications fail to recognize Davis’ many years of Nassau government experience, and that he was named to the position after a nationwide search.
“Under Mr. Davis’s leadership in the department,” Nevin said, “Nassau has successfully implemented assessment reforms which have saved taxpayers tens of millions of dollars while addressing systematic problems that have plagued County finances for decades.”
Labor dispute settlement
Eliminating a third of the county assessment staff triggered one of two employment disputes resulting from Mangano’s reforms. The assessment workers’ union accused the administration of privatizing work the contract defined as theirs.
The full details of the labor dispute’s settlement, which did not occur until June 2016, are confidential, but the deal included a $381,579 settlement, according to the resolution approving it. Union president Jerry Laricchiuta did not respond to multiple requests for comment.
The other faceoff resulted in a county loss in court and what appears to be a payout of at least $295,000 after Mangano prematurely ended the terms of the entire board of the Assessment Review Commission.
One month before Mangano took office, Suozzi appointed five Democrats to fill two vacancies and replace two Democrats and a commissioner not registered with a political party. He also reappointed a commissioner for whom no voter registration could be found. Mangano fired them all, and two Republicans and an Independence Party member, as well, in order to bring in his team.
Three of the dismissed commissioners sued and the state’s top court, the Court of Appeals, eventually ruled they should be reinstated, but the county refused. The matter was settled for undisclosed terms in July 2014, but Newsday tracked down county records of three payments made to the dismissed commissioners totaling $295,500.
According to the commission’s website, the panel now consists of five members, including two members of the Nassau County Republican Party Committee, two more Republicans and the chairwoman, Laveman, an Independence Party member married to a longtime Republican donor.
“I am personally registered to vote as an Independent,” Laveman said in an emailed statement. “Anyone who knows me (and even my relationship to my husband) would know and understand the [importance] of this independence to me—both political and otherwise.”
According to state law, the commission should have nine members with no more than six registered in the same political party.
One reason Mangano gave for the dismissals was the high cost of the prior commissioners’ salaries. Three full-time commissioners made up to $130,000 a year while a stipend of $20,000 was given to the other six part-timers. Laveman was paid $100,000 in 2015 for full-time work running the department, while the other commissioners were paid $15,000.
“Politics plays no role here,” Laveman said, adding that the commission “functions perfectly fine despite vacancies which have saved taxpayers tens of thousands of dollars.”
Dolores Sedacca, one of the Democratic commissioners who sued after being dismissed by Mangano, said she would never have supported the settlement program, which she said amounted to handing out tax breaks to obtain votes for re-election.
“I would be completely against everything that was going on,” Sedacca said.
The future of assessments
Mangano was re-elected in 2013 by a far larger margin than in his first campaign. He defeated Suozzi again by 49,315 votes, compared with his 386-vote margin four years earlier.
All the while, the county executive has promoted the $20 million to $30 million annual savings from the settlement program. This, he said, is the most consequential result of his program.
Newsday estimates the reforms have cut costs through the end of this year by between $115 million and $299 million, depending upon whether factors like inflation and the effects of a new commercial tax program are included. The $115 million is less than the $167 million in additional income Newsday conservatively estimates the tax firms have earned in fees from taxpayers since the reforms began.
Newsday’s estimates break down to between $14 million and $37 million per year — more than Mangano estimated on the high end and less than he estimated on the low end.
One reason the savings haven’t been greater is that tax firms handling commercial appeals, which account for just 10 percent of grievances but 70 percent of refunds, have continued to appeal their cases in court, just as they did during the Suozzi years.
By implementing the commercial tax program, the county could significantly reduce its refund burden by essentially charging the cost of commercial property refunds to all commercial property owners. It is also moving forward with its first update of assessments for changes in real estate market values since the freeze began. The initiative will set assessments at their full market value and do away with rates altogether, something numerous critics have pushed for decades. But it requires state legislation.
The project will cover thousands of properties as it updates data for new assessments. It is expected to be complete in time for late 2019 and early 2020 tax bills.
The cost of the contract was significant at $3.8 million, and it emerged at a time when pay-to-play politics was shaking the county after the indictment of then-State Senate Majority Leader Dean Skelos (R-Rockville Centre) on allegations he pressured the county to award a contract to a firm paying his son.
The county had attracted two bids for the reassessment work, one of them from Smith, who was awarded the contract even though his bid was $2 million higher than that of his competitor, Michael Haberman Associates. Newsday tied Haberman’s firm to at least $93,000 in political contributions, three-quarters of it to Democratic committees. Smith said the disparity came because his submission covered a scope of work that exceeded his competitor’s, an assertion backed up in bid documents.
Nonetheless, the contract was pulled at the last minute off a May 2015 county legislature agenda and the contract was eventually split between Smith and Haberman. Smith said it would have been better to award the contract to one firm, instead of having two firms working separately on the project.
Mangano said Smith’s firm has been awarded numerous contracts under prior administrations and that he is not involved in county bidding processes at all.
“The county executive does not take part in that,” he said. “Period.”
With Celeste Hadrick and Daniel Wheaton
Inside Newsday’s analysis of tax-appeal firms’ revenue
To establish how much more revenue tax-appeal firms took in after County Executive Edward Mangano implemented his assessment reforms, Newsday undertook a two-part analysis. It established an estimate of how much revenue the firms took in during the six years since the program began, and what the firms would have earned had the program not been implemented. The difference amounted to a conservative estimate of how much in additional revenue the firms earned under the reforms.
Tax firms have two main revenue streams: fees they charge to property owners who received a refund and fees charged for property owners whose tax bills were reduced without the need for a refund. The fees are charged as a percentage of first-year tax savings coming off any assessment reduction. To conservatively estimate these fees, Newsday used the average of the range of rates typically charged by the two major types of firms, 45 percent for those primarily handling residential cases and 24 percent for those primarily handling commercial claims.
To establish the revenue the firms took in after the program was implemented, Newsday first used a method similar to what the tax firms use to recalculate what the tax bills of those who appealed would have been if they had not appealed. By comparing those recalculated bills to what they ended up paying, savings were determined. Fees were then charged against those savings. Tax firms’ fees were also charged against refunds taxpayers have already been paid and to those the county projects it will pay out in the future. The total was $502 million.
As a comparison, Newsday prepared a similar estimate of how much firms would have made before Mangano’s reforms using savings amounts listed in an Assessment Review Commission report for the 2006-07 tax year, the most recent data available for a comparison and one that preceded the tumultuous years of the Great Recession. Multiplied by six to produce a comparison to the six-year program, the total was $335 million, $167 million less than Newsday estimated was generated under Mangano’s reforms.
Newsday also estimated how much the reforms have saved the county. The reforms both cut the costs of refunds and the cost of operating the three county departments involved in the assessment process. Mangano estimated his overhaul saved the county $20 million to $30 million annually primarily due to a reduction in refunds.
A range of estimates for what all of the cuts saved the county were generated, and they varied depending upon whether an inflation adjustment was used or whether savings expected from a recently implemented commercial property tax refund program are fully realized. The program could lead to significant savings for the county, but there are strong indications it will be challenged in court, putting a cloud over whether those savings will be realized.
To produce the estimates, Newsday used figures in county financial reports to compare what was spent or budgeted from 2010 to 2017 to what was spent in 2009, the year before Mangano took office. Property tax refund data was used to compare what refunds the county has paid or estimates it will pay for appeals filed for tax year 2008-09 to every year through 2016-17. Refunds for 2016-17 were estimated at 2015-16 levels. To make them comparable to the eight years of Mangano’s administration, the 2009 costs were either multiplied by eight or adjusted for inflation by up to 12 percent using a regional Consumer Price Index (for workforce costs) or 24 percent using the growth in the countywide tax levy (for refund costs). This table identifies the range of savings depending on whether the various factors were included or not. See the full methodology here.
Design: Matthew Cassella Chart: Tim Healy Production: Saba Ali