NYC Comptroller Weighs in the New FY2025 Budget’s Reliance on Property Taxes, and the Reauthorized Tax Lien Sale

by | Jul 12, 2024 | NYC Property Tax

We previously advised that the City Council passed the FY2025 budget with new tax rates, and reauthorized the tax lien sale on June 30, 2024. See our post here: NYC Budget 2024/2025 and Property Tax Updates | Rosenberg & Estis, P.C. (rosenbergestis.com)

The NYC Comptroller weighted in on both in his newsletter at New York by the Numbers Monthly Economic and Fiscal Outlook No. 91 – July 9, 2024 : Office of the New York City Comptroller Brad Lander (nyc.gov)

FY 2025 Adopted Budget

  • On June 30, the City Council adopted the City’s FY 2025 Budget. At $112.43 billion, it is an increase of $809 million over the Mayor’s Executive Budget proposal released in April.
    • More than half the increase came from higher projections of tax revenues—$454 million more than forecast by the Mayor’s Office of Management and Budget (OMB) in the Executive Budget. The tax forecast increase was entirely because of the release of the final FY 2025 Property Tax Roll, which was higher than previously expected. Projections for other revenue categories were unaltered.

Insight: New York City continues to balance its budget on the backs of property taxpayers. From FY2024 to FY2025, the taxable assessed value increased +4.35%, as we previously advised. Industry Update: NYC DOF Publishes Final 2024/2025 Assessment Roll | Rosenberg & Estis, P.C. (rosenbergestis.com)

Re-authorization of the NYC Enforcement Program for Property Tax, Water, and Other Charges

  • Concurrently with the adoption of the FY 2025 budget on June 30th, the New York City Council passed a local law to re-authorize an enforcement program for property tax, water, and other charges. The previous authorization had expired in 2022 and its absence appears to have contributed to an increase in property tax and water
  • The new law expands mechanisms to defer or avoid the sale of overdue charges (liens) to a City-owned trust, principally benefiting owners of 1-3 family homes and condominium apartments. Below is a summary of the main changes introduced by the legislation:
  • Liens on vacant land that is not developable (as will be defined by a Mayoral agency) were made ineligible for the lien sale program.
    • Liens on 1-3 family homes and condominiums that are otherwise eligible to be sold can be, upon the property owners’ request to the NYC Department of Finance (DOF) and subject to residency and income requirements, removed as-of-right from the lien sale program up to three times within a 36-month period.
    • The income threshold to qualify for the Property Tax and Interest Deferral (PT AID) program was indexed to of the Enhanced School Tax Relief (STAR) benefits (and therefore raised from $86,400 to the Enhanced STAR current level of $98,700). Enrollment in PT AID makes liens ineligible for sale.
    • A new type of PT AID was created allowing deferral of property taxes for the portion exceeding 10% of the owners’ income, as long as the remaining annual payment is above $1,500. This mechanism mirrors the circuit breaker proposal formulated by the Advisory Commission on Property Tax Reform in its final report.
    • The legislation allows a “voluntary in-rem” or “summary foreclosure” action for owners of Class 1 properties (other than co-ops and condos, and subject to residency, income, and other eligibility requirements) with liens that have already been sold. The essential feature of the summary foreclosure is that the owners elect to transfer the property to a housing development fund company (a “qualified preservation purchaser” or QPP, which could include community land trusts, CLTs, a type of nonprofit community development corporation, or other QPPs as defined by the City). The QPP then leases back the property for 99 years, subject to a regulatory agreement with the City’s Department of Housing Preservation and Development (HPD) setting affordability parameters for the lease payments. This mechanism could allow a prior property owner who could not afford the cost of homeownership to remain in their home as a tenant.
    • The legislation also increases communication requirements to property owners, allows for a more flexible eligibility determination for tax exemptions that would exclude liens from the sale, and requires HPD to inspect multiple dwellings (Class 2 properties) that had liens eligible to be sold at least twice over a four-year period and owe property taxes for 15% or more of their DOF value.
  • With those additional provisions in place, the legislation re-authorizes the City to sell liens for unpaid property tax, water, and other charges to a trust that is created by the City, whose only beneficiary is the City, and that is a component unit of the City government (specifically, it is included in the City’s financial statements as a business-type activity). To pay the City’s general fund for the acquisition, the trust issues bonds backed by future collections on the liens.
  • As a consequence of the re-authorization, the Mayor’s Office of Management and Budget lowered the forecast of the FY 2025 property tax delinquency rate from 2.3% to 2.0%. In the Comptroller’s office report on the Executive Budget, we made the same assumption, expecting that the program would soon be re-authorized. The City Council’s fiscal impact statement assumes a larger drop in the property tax delinquency rate and $353 million in additional tax revenues. The new authorization expires at the end of calendar year 2028.

Insight: There is no tax lien sale scheduled… yet. But we expect DOF to start preparing the lien lists for notifications to delinquent property taxpayers. NYC Property Tax Lien Sale