The Bedford Central School District could owe as much as $500,000 in refunds to owners of homes and businesses who have won retroactive reductions in their property assessments.
It's a serious cause for concern especially when coupled with rising pension and health care costs in this tax cap environment.
Many owners of houses, condos and commercial property have filed tax certioraris, the lawsuits that challenge past and present property assessments, according to Mark Betz, Bedford's assistant superintendentfor business.
A winning lawsuit—and most tax cert challenges are successful—forces the district to refund payments from past years that are over what the settlement determines was a fair assessment.
Plus, it lowers the property's value going forward—which lowers the amount of tax revenue the district can collect from it. And that means higher tax rates across the board: Because if the total value of property goes down in the district, but the amount to be collected in taxes stays the same or goes up, the amount collected from each property per $1,000 of value has to rise.
The school district has enough in reserves (set aside in the past for this specific purpose) to cover about $400,000, said Betz. However, because there is no reserve set aside for this year, $100,000 will have to come out of this year's tax levy, from the revenue side of the annual school budget.
In a $118 million dollar spending plan, this may seem like a drop in the bucket, but it is $100,000 that won't be spent on students. Moreover, it may change the way the district crafts future budgets.
"In recent years we have taken down the amount of money in our reserves to pay for settlements—and in this year's budget, it's nothing. Now we are seeing a loss in property value and an increase in tax certs, and more immediate settlements that affect revenues. I am concerned, and the only way to offset that is to budget on the expenditure side," Betz told the Bedford school board at a recent meeting.
Due to the nature of the way disputes are settled and the number of them pouring into court, some disputes can linger over time—which lead to big payouts the year they are finally settled. Districts try to "guesstimate" the average reduction, setting aside monies for whatever petitions are in place, but can't set aside money for the current year until that year rolls around.
For example, this year the district will pay a multi-year property on Route 117 in Mount Kisco, Betz said in an interview with Patch.
"A total of $118,859 was paid from three different reserves set aside to pay tax refunds, but there will also be a refund for assessment year 2010 calculated after all condo owners pay their taxes for this year," he said. "That refund will have to be paid from a reduction of our tax levy revenue for this year as we do not yet have a reserve for this year."
Because property taxes are high and the real estate market is depressed, many property owners ask to have their assessment lowered under the "grieving" process. Fewer—but a growing number—take the next step and file a tax certiorari lawsuit.
In the Town of Bedford, the number of residents grieving their property assessments has increased in recent years—from a low of 40 in 2008 to 180 in 2011, according to Harold Girdlestone, the town's assessor, who says he receives three to four calls per day from residents wanting information on the process.
Girdlestone attributes the increase partly due to variations in assessment rates from town to town, and the method New York state uses to deal with the differences.
Each town determines its own level of property assessment based on a percentage of market value. The Bedford school district crosses five town borders so it deals with five different assessment rates.
The state sets an equalization rate based on the market value of property in each town, so that the district can tax property owners in each town on the same basis. If all towns and villages assessed property for tax purposes based on 100 percent of market value, equalization rates would not be needed. The fight over revaluation has gone on in Westchester County for years.
Girdlestone doesn't like New York's new equalization rate for Bedford. "Based on assessments, the state feels our market did not decline, but I don't think that's accurate in the marketplace," said Girdlestone. "We may have to challenge that going forward."
The district plans to convene a meeting of its five overlapping town assessors in March to discuss ways to control the shift in tax rates among the municipalities in the school district and to identify ways to educate the public about it all. They are assessors from Mount Kisco, Bedford, New Castle, Pound Ridge and North Castle.
The district has also expressed concern in the past that there may be particular national corporations that routinely file for property reassessments as a way to save money without understanding how it impacts local school budgets.
"The bottom line," Betz told the board of education, "is we need to find ways to increase non-tax revenues and get support for programs, and to seek greater effieciencies and shared services."