BILL NUMBER: S2094

SPONSOR: PALUMBO
 
TITLE OF BILL:

An act authorizing the town of Southampton, county of Suffolk, to enact
by a local law a homestead exemption and cap on assessment increases for
real property tax purposes

 
PURPOSE:

Authorizes the town of Southampton, county of Suffolk, to enact a home-
stead exemption and cap on assessment increases for real property tax
purposes.

 
SUMMARY OF PROVISIONS:

Section 1. Authorizes the town of Southampton, county of Suffolk to
enact by local law a homestead exemption from real property taxation.
Eligibility for such exemption shall be the same as for the basic school
tax relief (STAR) exemption pursuant to subdivision 3 of section 425 of
the real property tax law. The exemption shall be uniform for all eligi-
              

ble real property and shall not exceed $50,000 in full assessed value.

Section 2. In addition to the homestead exemption provided for in
section one of this act, the town of Southampton also may enact a local
law to cap the amount the value of a property may increase for tax
purposes, due solely to market trend adjustments at 5% in a given year.
The full value would be reset upon property transfer.

Section 3. Effective date.

 
JUSTIFICATION:

Property taxes are the primary funding source for most local services
including police, fire, ambulance, libraries, roads and schools.  Indi-
vidual property taxes are determined by calculating the fractional share
of the total sum to be collected based on a property's value as compared
to the full value of all taxable real property within the taxing
district. Each property is assessed a value for the land and a separate
value for any structures built upon the property. The combined total is
the "total assessed value" of the property. The basic principle is the
more a property is worth, the more it will pay in property taxes. The
total needed to be collected across the district is divided by the full
value of all properties to determine the "tax rate". The assessed value
of a property is then multiplied by the tax rate to determine the prop-
erty's taxes due for that property.

Southampton is one of the only towns on Long Island that uses a system
of "full value" assessment. The town routinely updates the assessment
rolls to account for new construction as well as changes to the real
estate market (market trend adjustment). The unique real estate market
of the east end has recently and over time seen large spikes in property
values, particularly in areas dominated by seasonal homes. Although the
goal of the town of Southampton's system is based on fairness, some
property owners have expressed concerns about the financial stress
caused by accelerating tax bills, based solely on market trend adjust-
ments to their assessed valuation. For example, a retired school teacher
bought a waterfront home in north Sea in the 1960s. She never improved
the property with any additions, swimming pools or accessory buildings.
Nonetheless, the value has increased tenfold. Recent years have seen a
yearly increase of 20% per year in property value. While the teacher is
thrilled with the tremendous return on her investment, her pension
income does not increase each year and her property taxes are now forc-
ing her to consider selling the home where she had hoped to spend her
retirement.

In 2019, the Southampton Town Board enacted a two-year freeze on market
trend adjustments to property assessments in an effort to address commu-
nity concerns about the effects of the town of Southampton's assessment
system on individuals like the teacher described in the above example.
The town board individuals like the teacher described in the above exam-
ple. The town board assembled a technical advisory committee to review
our system and make recommendations. The committee found that, in gener-
al the town of Southampton's system was better than other town's that
only assessed upon new construction. In fact, because of the town of
Southampton's system, more affluent areas of the town have been picking
up a larger and larger percentage share of the costs of funding town
operations because these areas have accelerated in value at a faster
rate than other areas of the town of Southampton. This has helped keep
property taxes low in working class communities.

Rather than abandon the town of Southampton's system, the advisory
committee recommended changes to address the particular type of problem
illustrated above. This legislation is necessary to implement two
specific fixes by I) enacting a "Homestead Exemption" reducing the
assessed value for taxation purposes of all year round home by $50,000
and 2) cap the amount the value of a property may increase for tax
purposes, due solely to market trend adjustments at 5% in a given year.
The full value would be reset upon property transfer.

 
LEGISLATIVE HISTORY:

2022 S.5984/A.6667.

 
FISCAL IMPLICATIONS:

TBD

 
EFFECTIVE DATE:
Immediately.