Nassau County Must Stop Paying School Tax Refunds

An adaptation of the following viewpoint piece
appeared in Newsday on May 30, 2002

By Howard S. Weitzman
Nassau County Comptroller

The serious financial challenges facing Nassau County are exacerbated by a provision of state law that compels the county to pay 100% of real estate tax refunds even though it receives less than 25% of the taxes upon which the awards are based.

Nassau County has more than $2.8 billion in debt outstanding, the highest county per capita debt level in New York State. More than one-third of that amount represents monies borrowed to pay refunds for over-assessed real estate. Because the county portion of real estate taxes is less than 25% of the more than $1 billion in bonded debt outstanding for tax refunds and interest on successful tax assessment challenges, less than $250 million represents refunds on taxes actually received by the county. The balance of the taxes upon which these refunds are based went primarily to school districts, with a small portion going to Nassau's towns and the City of Long Beach.

This system has wreaked financial havoc on the county. Nassau County's arcane real estate tax laws must be put on the same footing as other New York counties. The state legislature must eliminate the provision of state law that holds school districts and localities in Nassau County harmless when it comes to real estate tax refunds.

Allocating the burden to pay real estate tax refunds among the taxing entities that benefited from the taxes is the inherently fair thing to do. Since the county is currently paying for all real estate tax refunds, county taxpayers are footing the bill for school districts that are rich in commercial property. While the preponderance of claims are filed on behalf of homeowners, 87% of the monies refunded go to commercial property owners. This system works to the benefit of taxpayers in school districts with large commercial tax bases and to the disadvantage of those in school districts with little commercial property.

While it is imperative that we end the county's guarantee to refund monies it never received, school district officials are understandably concerned about the impact such a change in state law might have on their districts' budget-planning processes. Nassau County government officials must work with the school districts to ensure as smooth and seamless a transition as possible.

The state legislature should consider enacting reform legislation under which school districts would only be liable for paying their portion of the refunds that stem from successful challenges under the new assessment system, which will be based on current market values. Along with other technical legislative changes sought by the Suozzi administration, this should result in considerably fewer tax grievances being filed. Nassau County's school districts should not be held liable for their portion of the backlog of real estate tax refunds due under the current assessment system; the county should continue to pay those claims, along with accrued interest.

Paying out more than $100 million a year in tax refund claims and interest undermined Nassau County's finances. Ending the county's guarantee to refund monies it never received, and having the public entities that originally collected the taxes pay the refunds, is equitable and essential. What is needed is the political will to make it happen.