tentially take the biggest hit are luxury condo developers.
Related, a leading firm in that arena, for example, benefits from one of the biggest gripes about the property tax system: that many high-end condos and co-ops are assessed far below their market value. At the firm’s Time Warner Center, the full-floor penthouse that Russian financier Andrey Vavilov sold to an unidentified buyer for $50.9 million in 2015 receives a roughly 40 percent discount on its tax bill compared to the median tax rate.
For taxation purposes, the city determined the “market value” of the TWC penthouse to be $3.8 million in 2015, and the annual tax bill for the unit that year was $212,504 — 0.42 percent of the purchase price. By comparison, the median effective tax rate for condos across the city in 2015 was 0.68 percent for buildings with 10 or more units, per the city’s Independent Budget Office.
If TENNY’s lawsuit is successful, Related’s luxury condos would likely become more expensive to own. A spokesperson for the firm declined to comment.
“Everyone always assumes that real estate is one giant, tightly organized machine,” said Lombino of Two Trees. “But a rental developer’s interests are very different from a condo developer’s interests, which are very different from a commercial developer’s interests.
“We have both multifamily and commercial,” he added. “And we have no idea where it’s going to end up. Probably some of our properties will be taxed higher and some properties will be taxed lower.”
Going to bat
The two people spearheading TENNY’s legal battle are Stark and Jonathan Lippman — a partner at Latham Watkins and former head of the state appeals court. Latham Watkins, which ranked as the world’s highest-grossing law firm in 2017, is representing the coalition in its lawsuit.
Stark had done research on property taxes during the late stages of Bloomberg’s third and final term, before REBNY abandoned its plans to sue the city. But sources said Douglas Durst was one of the key figures who led the trade group’s effort years ago, and that he has played an instrumental role this time around.
“It’s a collaboration,” said the Durst Organization’s spokesperson, Jordan Barowitz. “We’re happy to play that role.”
But the playing field has changed under Mayor Bill de Blasio, and Durst and his allies are less concerned about antagonizing City Hall this time around.
“I think Douglas has been the leader of this because it’s a hot-button issue and there are [a lot of other] people who don’t want to offend the mayor,” said Jeff Gural, who co-chaired the Property Tax Fairness Coalition with Stephen Green in the early 1990s. That group fought unsuccessfully to change taxes for the city’s Class B office buildings.
The brains behind TENNY have their fingerprints all over the coalition’s supporting groups, including the Black Institute, where Stark is a board member, and the Citizens Housing and Planning Council, where Durst is a board member. But most of the supporting organizations have sat on the sidelines while Stark and Lippman drum up public support and Durst works behind the scenes.
Carol Kellermann, president of the Citizens Budget Commission, said she learned of the lawsuit when Barowitz brought it to her attention. But beyond giving a nod of support to the group, she said, CBC has been mostly hands-off.
“We agreed with the points that they’re making,” she said. “If a lawsuit catalyzes everybody to get their act together to make changes, we endorse the idea. [But] we’re just observers. We’re not participating in the meetings.”
Likewise, none of TENNY’s supporting members are listed as plaintiffs in the case — a point the city highlighted when it filed its motion to dismiss the lawsuit on July 7. City lawyers said the complaint used a legal exception called “organizational standing” and was invalid because there was no proof that TENNY’s members suffered any harm.
When the group responded in court, it only had affidavits of single-family homeowners and one commercial landlord who owns a small building on Third Avenue.
“There is no reason to list individual members in the lawsuit,” a spokesperson for TENNY told TRD by email. “Our members have been very public and [have] spoken at press conferences and in media. The city won’t and can’t defend the system on the merits, so they’re grasping at straws.”
A Pandora’s box?
As the la
新上海贵族宝贝论坛 wsuit works its way through the legal system, Stark and Lippman have been meeting with City Council members and the five borough presidents to gain political backing for their case.
Brooklyn Council Member Jumaane Williams, one of the five city lawmakers in favor of the suit, said he thinks TENNY is taking the right approach by not offering solutions at this stage and instead focusing on identifying the problems. He said his concerns about the motives of the group’s supporters in the NYC real estate industry are outweighed by the need to fix a broken system.
“They’re not altruistic groups, and I know they’re interested in something that benefits their businesses,” Williams told TRD. “But I have to look at things on the merits, and there seems to be a lot.”
Staten Island Borough President James Oddo said he supports the idea of property tax reform but declined to submit an amicus brief supporting the lawsuit due to concerns that his constituents will end up paying more. He argued that any injustices in the city’s property tax system fixed by the lawsuit could ultimately be offset by shifting more of the burden onto single-family homeowners.
“It’s a Hobson’s choice to be stuck between the status quo and the potential of opening a Pandora’s box that might lead to even higher property taxes,” Oddo said. “But that’s where we’re at.”
Manhattan Borough President Gale Brewer said she thinks those who are unfairly targeted by the city’s property tax are middle-class co-op and condo owners and renters in multifamily buildings — due to the higher taxes their landlords pay. But she said there are no clear solutions as to how to shift the burden.
“If you have an increase on the commercial side, the next thing you know the small stores are going to see the increase,” she said. “People say push it onto Con Ed, but you know what Con Ed’s going to do? Push it right back onto the consumer. Manhattan can’t be the cash cow.”
Others suggested that there could be potential fixes to the property system that don’t exist in the current framework. A means test, for example, could ensure that middle-class homeowners don’t see
their taxes go up. But no one professed to have the intricate understanding of the laws required to opine on what solutions would fit inside the current rules.
The biggest issue with talking about what reform would look like, sources said, is that few people — aside from Stark — know the intricacies of the city’s property tax well enough to offer up real solutions.
“I think the problem is that a lot of people just don’t understand the system,” said Frank Ricci, director of government affairs for the landlord group the Rent Stabilization Association, which supports TENNY. “So they don’t even know what to push for.”
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