NoCostNoRisk**NoEffort**But taxpayers pay millions to cover the refunds

SUFFOLK’S GRIEVANCE TOTAL NOW ON PAR WITH NASSAU’S A4-7

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The Jailhouse InterviewA2-3

$2.50 | SUNDAY, APRIL 25, 2010 | NASSAU EDITION

APPEALING YOUR ASSESSMENT

****SPORTS FINAL

Are you disputing your taxes? Tell us at newsday.com

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politics

in SuffolkHomeowners filing grievancesnow comparable to Nassauneighbors for the first time

Tax

BY ELIZABETH MOOREelizabeth.moore@newsday.com

Nassau homeowners fed up with assess-ments, here’s a news flash: They’re just asmad in Suffolk now.

Last year, for the first time ever, Suffolkhomeowners went to court to fight theirtaxes in roughly the same numbers as inNassau, where unrest over tax billshelped drive the Democrats from powerlast fall.

Excluding cases against village and cityassessors, the picture is more striking:Suffolk’s 10 town assessors had to defend36,092 court cases, far more than the28,445 filed against Nassau County.

As a result, last year about the sameshare of homeowners — 8 percent —wound up in court against Suffolk’s towns

as against Nassau County, Newsdayhas found.

challenges

It’s theonlyno-losedealinAmerica.”— Mark Lewis, whose 20-year-old

tax-grievance business in Centereachsaw a 50 percent spike in cases in

2008 and 2009.

THEASSESSMENTMESS

soarUntil recently, Nassau generat-ed more than 80 percent of allcourt challenges to home tax as-sessments in the state. But plum-meting home values and hightaxes have driven Suffolk’sstressed homeowners to turn tothe same tactic long used bytheir neighbors to the west: taxgrievances.

“The economy is in such ter-rible shape that people are hav-ing trouble affording gasoline,affording their mortgage pay-ments, affording food. This isone avenue that a resident cancontrol some of their expens-es,” said James Ryan, the Townof Brookhaven’s assessor,whose office handled 12,300court challenges last year, themost in Suffolk. He’s bracingfor another wave this month:May 18 is Suffolk’s deadline tofile tax grievances.

Across Suffolk, the pace ofcourt filings varies, from 1 per-cent of Shelter Island’s homes to9.1 percent of Brookhaven’s to11.1 percent of Huntington’s.

Countywide, assessment re-ductions will cost $90.4 millionthis year. Whatever refunds atown has to pay are collectedfrom other taxpayers: A sepa-rate “NYS Real Property TaxLaw” line on every town tax bill

lists the cost. This year, it aver-aged $162, the county said.

State law also assures that as-sessments can only be lowered,never raised, on appeal.

“It’s the only no-lose deal inAmerica,” said Mark Lewis,whose 20-year-old Centereachtax-grievance business saw a 50percent spike in cases in 2008and 2009. Using bulk-mailingand database management tech-niques, his staff of 31 handled14,800 tax challenges last year.

The do-it-yourself methodSome homeowners, such as

Dominic Serrano of Smith-town, still opt for the do-it-yourself approach.

“I’m not a greedy person —I’m a veteran, I’m a good Ameri-can . . . I believe in paying taxes,”he told a hearing officer at a Cen-tral Islip courthouse session thiswinter. But a house identical tohis had sold for about 75 percentof what the tax man said Serra-no’s was worth, he said. Smith-town agreed to knock about 20percent off his assessment, sav-ing him $2,000 in taxes.

The surge in Suffolk’s case-load comes as state assessmentofficials find Nassau’s residen-tial tax roll more accurate thanfor any Suffolk town save Shel-

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11%

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HUNTINGTONTown with the

highest percentage offiled grievances

162

Assessment rules encourageresidents to take on county

%GROWING ANGER

Percentage ofSuffolk homes goingto court to fight their

tax bills

WHAT YOU PAYAverage amount

homeowners shell outto pay for the tax

readjustments

quick fact Brookhaven handled the most assessment grievances in Suffolk — 12,300

$

BY ELIZABETH MOOREelizabeth.moore@newsday.com

Seven years after Nassaubegan court-ordered, annualreassessments to correct a taxroll that had favored thewealthiest, officials say it’sbeen transformed into one ofthe fairest big rolls in the state.

So why did more than onein every four Nassau residentsgrieve their taxes this year?

County Executive EdwardMangano, who won an upsetvictory last fall after a cam-paign that tapped voter angerover taxes, says Nassau’s as-sessment system “is broken,does not work and is not fairto taxpayers.”

But many assessment ex-perts say the factors drivingNassau’s residential grievanceepidemic are sky-high taxes,rules rigged to generate moregrievances, and a homegrowncottage industry of tax-chal-lenge companies that have be-come so efficient that they canturn a profit by shaving just afew points off your tax bill.

With the grievance compa-nies ready to do the work andtaking a fee only if they win,and with state and local lawstipped in your favor, appealingtaxes requires no effort, car-ries no risk and costs you noth-ing — at least not directly.

Experts say that’s why Nas-sau homeowners, who hadgained a national reputationby filing 59,256 tax grievancesa decade ago, are filing evenmore challenges now thanthey did before the reassess-ment; 99,632 homeowners ap-pealed their taxes this year.

“It’s not because assess-ments are bad, it’s becausetaxes are so high,” said Lee Kyr-iacou, the state’s top assess-

ment official from 2007through 2009 as director of thestate Office of Real PropertyServices.

Nassau also is the only juris-diction in New York State inwhich you can win a reduc-tion in taxes without provid-ing any proof they were un-fair, he said.

“I have lived in this housefor 42 years and I don’t haveany idea what the marketvalue is,” said Massapequaresident James Stubenrauch,who has allowed a grievancefirm to appeal his taxes foreach of the past 15 years —and won five times.

But every year, tax ratesacross Nassau must be in-creased to compensate for therevenue lost from the home-owners who have successful-ly grieved their assessments,county Assessor Ted Jankows-ki Jr. showed in a report tothe county last spring.

Residential errors accountfor roughly $15 million to $20million of the tax refunds thecounty pays each year, andthe county spends perhaps an-other $11 million in adminis-trative expenses to addressthose grievances, Jankowskiestimated.

An average of 1 in 4 appealsto Nassau’s Assessment Re-view Commission have won re-ductions over the past fiveyears; of those rejected, a small-er number go on to court, and35 percent of those win a reduc-tion. The proportion, however,varies year to year.

The decades-long record ofinequities in Nassau’s tax sys-tem has bred a lack of publicconfidence that is hard toshake and continues to drive

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ter Island. Shelter Island also en-joys the county’s lowest rate oftax challenges, Newsday found.

But Nassau Assessor Ted Jan-kowski Jr. doesn’t believe anissue with the fairness of Suf-folk’s roll is the main cause ofthe trend. “I think it’s an indica-tion of the amount of tax repre-sentation firms that are outthere (in Suffolk now),” he said.

A multimillion-dollar cottageindustry of grievance represen-tatives has flourished in Nassaufor years by charging home-owners a cut, usually 50 per-cent, of their first year’s tax sav-ings. That industry, which han-dles 90 percent of the grievanc-es against Nassau, has morphedinto an Islandwide phenome-non. The vast majority of Suf-folk grievances now are filed bythese firms, officials say.

Mailboxes bulge with offersSo Suffolk homeowners this

spring have found their mailbox-es stuffed with the kind of mes-sages that used to be a lot morefamiliar across the county line:

“Did your property taxes goup again this year? . . . 8 out of10 qualify for a tax grievance! . . .ACT NOW! . . . If we find thatyou are paying your fair share ofproperty taxes, there is absolute-

ly NO COST TO YOU!”Powering the volume are new

computer services that deliverautomated comparable home ap-praisals over the Internet, whichmakes physical visits to a homeunnecessary, and rapid-firecourt hearings that typically re-solve a case in four minutes orless. Indeed, the Town of Brook-haven often settles its grievanc-es over the phone.

All of that makes the processcheap enough to be profitablefor the tax-rep firms.

“If you don’t win you don’tpay — I’d sign up, wouldn’tyou?” said Gregory Hild, Smith-town’s assessor. “Everybodywants to lower their taxes.They have no idea if they arefairly assessed.”

Lewis is facing competitionfrom a slew of new companiesformed largely from the wreck-age of the real estate industry— lawyers, accountants, bro-kers and newbies who havehung out shingles in the lastyear or two. At one recent hear-ing, Smithtown’s representa-tive had to show his adversaryhow to fill out forms.

That’s keeping officials onthe run. “My office is very hec-tic,” Ryan said. “We’ve seen ashift in our workload moving

from being out assessing to de-fending the assessments.”

Lewis believes the surge inchallenges will begin to subsidethis year. But what bothersJudge Daniel Loughlin, who haspresided over thousands ofcases as a small-claims hearingofficer, is an illusion at the heartof the matter: There’s no suchthing as a “correct” assessment.

Appraisal valuations varyAsk any three top appraisers

what your home is worth, andthey’ll offer three differentnumbers, likely to vary by upto 10 percent. But Long Island’staxes are so high, tax-challengefirms can make a profit on a re-duction of as little as 5 percent.

“I don’t think that spread canbe refined,” Loughlin said. “Noone is going to come out with anumber that is perfect. . . . It’snot a science, and these compa-nies can live off the difference.”

But reducing the volume ofchallenges is not something Suf-folk’s administrative judge, H.Patrick Leis, would support,however much work they havecreated for the courts. “I thinkit’s a positive for the people. Itgives them an opportunity togrieve something,” Leis said. “Ev-erything is dumped on them.”

SUFFOLKNUMBERS Inside

the protestsin Nassau

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grievances, said Deputy Coun-ty Executive Patrick Foye. Nas-sau has contributed to thoseperceptions, he said, with slop-py property records such asthose that miscounted plumb-ing fixtures in Mangano’s homeand others detailed by News-day, though those errorsamounted to less than 3 per-cent of the roll. “The residen-tial roll could do with signifi-cant improvements,” he said.

But Jankowski argued in hisMay 2009 report that “financialand political players,” includ-ing the tax-challenge firms,have fueled public mistrust ofthe system “to make money orscore political points.” Electedofficials at every level haveused the assessor’s office as ascapegoat for high propertytaxes, he said then.

The amount of Nassau’s ap-peals is “rather unique” nation-ally, said Massachusetts ap-praiser John Ryan, a formerNew York tax official and con-sulting former trustee of theWashington, D.C.-based Ap-praisal Foundation, a nonprofitthat promotes professional ap-praisal standards. “You have asystem which encourages con-stant appeals.”

Here are some reasons why:

High taxes +no “correct” values

There is no such thing as a“correct” value for a home,Foye said. “It’s just a fallacy,”he said. “Ask any three apprais-ers what your home is worth,and you’ll get three differentanswers.”

The best appraisers, hesaid, will deliver values likelyto vary by up to 10 percent.

Winning reductions of lessthan 1 percent is not unheardof. More than four out of fivereductions won by Nassauhomeowners in recent yearshave been for less than 10 per-cent, Jankowski found, an ob-servation echoed by tax-chal-lenge attorney Fred Perry.

“When we started this pro-cess, many people could be 30percent overassessed, 25 per-cent,” Perry said. “The rollhas changed favorably in theaggregate over time.”

But taxes are so high in Nas-sau that a 10-percent variationin values means you could

argue that you are paying$1,000 to $1,500 more thanneighbors with comparablehomes — or $1,000 to $1,500less.

And in Nassau, those whosuspect they may be on thehigh side lose nothing bygoing for the savings.

A grievance costs nothing;even a court challenge carries afee of just $30. And New Yorkimposes no minimum standardfor the amount an assessmentmust be off to win an appeal.Last month, for instance, a Nas-sau hearing officer reducedOyster Bay resident CharlesBradley’s assessed value by agrand total of $1 — resulting ina net tax savings to Bradley of$1.95. He says he sent the checkback to his tax-challenge repre-sentative in disgust.

“I don’t see any sense inthis,” Bradley said.

By comparison, in New Jer-sey, an assessment must be offby at least 15 percent before acourt can change it. Over thepast three years, combinedproperty tax protests for the en-tire state of New Jersey aver-aged just one third of NassauCounty’s tally, records show.

“It’s to discourage litigation,to save the towns some money.People get crazy about theirtaxes,” said Joseph Small, retiredpresiding judge of New Jersey’stax court. “You put the towns tothe expense of litigating it, theyhave to pay lawyers and experts,and the taxpayer only gets a fewbucks. Let sleeping dogs lie.”

You can’t loseYou face no danger of having

your assessment increasedwhen your grievance is re-viewed, thanks to a New YorkState law that allows assess-ments to be adjusted onlydownward on appeal.

In New Jersey and Connecti-cut, your home’s assessmentcan be increased during the ap-peal process if it is found to belower than comparable homes.That has had the effect of deter-ring marginal or frivolous griev-ances, experts say.

Waterbury Assessor DavidDietsch has never found a solic-itation from a residential tax-grievance firm in his mailbox.In Connecticut, it’s unheard of.“There’s not as much money inresidential appeals, so I havenot seen that here,” he said.

No proof requiredThat’s the biggest incentive

to file, Kyriacou said. Nassau’sAssessment Review Commis-sion is the only body of its kindin the state that does not re-quire applicants to submit anyevidence in support of their re-quest for a reduction.

That is partly, staff say, be-cause the county views ARC’sjob as correcting the tax rollpromptly, so taxpayers don’tneed to go on to court for a re-fund. Because it has county-wide jurisdiction to draw upthe tax roll, Nassau County isaccountable for refunding all er-roneously assessed taxes, in-cluding those paid to schools,towns and special districts.

One result of Nassau’s ap-proach is that the work in-volved in a tax reduction isshifted from applicants to thecommission, which needs astaff of 43 to evaluate the morethan 100,000 appeals annually,using a different valuing tech-nique from the assessor.

For homeowners, the processentails no risk, no effort and nocost — all they need to do is signany one of the half dozen solici-tations likely to land in theirmailbox, and let the grievancecompanies do the rest. Thatease has created a “lottery men-tality” toward appeals, saidLegis. Wayne Wink (D-Roslyn),ranking Democrat on the gov-ernment services committee.

For instance, Stubenrauch, 85,has used a tax-grievance firm tochallenge the assessments onhis three-bedroom ranch homefor the past 15 years.

“It’s an automatic renewalthing . . .,” the retired loan offic-er said. “If it turns out that my as-sessment is reasonable, thenfine, it doesn’t cost me any-thing.”

Tax-challenge industryOver that 15 years, Fred Per-

ry’s firm has won five reduc-tions for Stubenrauch, trim-ming anywhere from $3,158 toas little as $597 off his $9,000property tax bill.

In keeping with the standardpractice of tax challenge firms,Perry’s share was 50 percentof the savings in the year hisfirm won the reduction.

A sum as small as $298.50would hardly be worth the at-tention of a private attorney.

But Nassau County’s home-grown tax-challenge industry,which uses automated comput-er analysis to identify custom-ers, bulk mail to solicit themand even bulk data uploads tofile their grievances, hasturned the roughly 362,000homes on the county tax rollinto a virtual assembly line ofprofits. Those firms represent-ed 9 out of 10 filers over thepast five years, according tothe county.

Perry, who estimated in an in-terview that he can turn a profiton as little as a 5 percent reduc-tion in taxes, won $10 million inresidential assessment reduc-tions from 2005 to 2009, thecounty estimates. His and thethree other most active tax-chal-lenge firms collected $36 millionaltogether.

A sample of several thousandappeals obtained by Newsdayunder the Freedom of Informa-tion Law shows just how littlework these companies need todo at the first level of review:

Of more than 80 fields of re-quested information, just ahandful were filled in: thename of the property owner,

the parcel number and typeand a request to reduce each as-sessment by the legal maxi-mum of 25 percent.

Even in cases appealed toState Supreme Court, it’s rarefor anyone to actually visit thehome in question. Instead, repsfor the assessor and grievancefirm face off in front of a hear-

ing officer across a small con-ference table at the court-house, armed with computer-generated lists of comparablehomes. These rapid-fire infor-mal hearings, scheduled ingroups of 15, typically last twoto four minutes each; the hear-ing officer is paid $300 to de-cide each set of 15.

NASSAU from A5

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THEASSESSMENTMESS

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Grievances forced towait for court because of changes in law 36,881

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Fueled by the decline in real estate values and angerover high taxes, Suffolk homeowners last year filed morethan 36,000 court assessment challenges and began toparallel taxpayer resentment in Nassau municipalities.

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The calendar assuresrepeat filings

Over the past five years, morethan 75 percent of appeals havebeen turned down by the Assess-ment Review Commission. But aquirk of the calendar helps ex-plain why some 60 percent of allNassau grievances are repeat fil-ings, even from those who winreductions:

The ARC has 16 months to re-view tax grievances. But the as-sessor’s office is required toissue the next year’s tax roll in 12months — four months beforethe ARC has notified it of reduc-tions. So homeowners areforced to grieve again becausethe reassessment doesn’t takeARC’s corrections into account.Nassau residents’ tax grievancefiling deadline was March.

SolutionsThis last problem would be

eliminated in a single stroke ifMangano’s plan to reassess onlyevery four years becomes a reali-ty: By the time the new rollcomes out, there will have beentime for grievances to be re-solved and new values fixed.

Cutting back to reassessmentonce in four years also may calmtaxpayer nerves already frayedby the roller-coaster changes inthe value of what for most istheir biggest asset: their home.

That change, plus other im-provements not yet instituted,would gradually bring downthe rate of grievances over thenext few years, Foye predicted.

But because Mangano doesnot plan to seek limits on howoften residents can grieve their

taxes, Perry and others saythey don’t expect the practiceto abate.

Meanwhile, the legislature’sDemocratic leader, Diane Ya-tauro, worries that cutting backthe frequency of assessmentswill reverse years of progressin making them more preciseand fair, and bring bigger er-rors back into the system. An-nual reassessment is consid-ered the gold standard for thatreason, experts say.

Some local officials believefrivolous grievances wouldevaporate overnight if NewYork, like its neighbors, putsome risk back into the processby allowing assessments to beincreased as well as decreasedon appeal. Privately, they ac-knowledge there’s little politi-cal support for that.

Many in the tax-grievancebusiness contend that the highrate of grievances isn’t neces-sarily a problem at all, but an ef-ficient way for errors in the sys-tem to be corrected.

Others, such as Stubenrauch,believe the whole mess provesthat fluid, changeable homeprices are a lousy way to de-cide how much of the cost ofgovernment a resident shouldbear. It’s time to shift that bur-den to the income tax, he be-lieves.

“When our taxes weresmall it wasn’t important,”he said. “But when the taxesare so horrendously high, tobase the tax on this fuzzy ques-tionable number, you arebound to have debate all thetime . . . It’s just inherentlyfaulty.”

quick fact New York State law assures assessments can only be lowered, never raised, on appeal.The

Newsdaycoverage

Ask any three appraisers whatyour home is worth, and you’llget three different answers.”

— Nassau Deputy County Executive Patrick Foye

MARCH 21Newsdayanalysis

shows basicinformation inassessments— number ofbathrooms,plumbing

fixtures andcentral air-

conditioning —could be wrongfor thousandsof properties.

MARCH 24Nassau Legis.Fran Becker

(R-Lynbrook)says he wasoutraged bythe Newsdayfindings and

vows toask county

Legislature toinvestigate thereassessment

and itsmultimillion

dollar price tag.

APRIL 8Nassau County

ExecutiveEdward

Mangano signstwo executive

orders thatchange howhomeowners

and businessesare assessedand that isexpected tosave county

taxpayers $300million overfour years.

COMINGNEXT

MONTHReassessmentsand commercial

properties.

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