What You Need to Know About Commercial Property Taxes on Long Island
Living and working on Long Island, it may feel like you pay some of the highest taxes in the Country. The truth? You do. According to the Tax Foundation, New York State collects the 4th highest state & local taxes per capita in the Country. NY State also ranks 47th out of 50 for the highest property taxes and 49th out of 50 for business tax climate in the US. Out of the 3,143 counties in the United States, Nassau County ranks 2nd and Suffolk County ranks 8th in order of highest median property taxes.
In Nassau County, taxes can be as high as $12-$13 per square foot for a retail building. The property tax bill alone in Nassau is close to what other businesses pay in rent in other suburban areas of the country. Tax rates on Long Island on market-rate new apartment buildings are so high, they almost can’t be built without some level of property tax incentives.
Why are Long Island property taxes so high?
It’s important to look back at the history of the region to trace the origins of the socio-economic factors that led to where we are today. Levittown, in Nassau County, was America’s first suburb. Named after the firm Levitt & Sons Inc, it was a planned hamlet created to suit the needs of returning World War II veterans and their growing families. Built in the late 40s / early 50s, it set off a trend of mass-produced suburbs that offered modern conveniences and instant community. The combination of the cost savings from mass production, lower rates through the G.I. Bill, and the ability to quickly build these homes (sometimes 30 a day), meant that these neighborhoods were booming.
The mass expansion of suburban development across Long Island since the 1950s has meant that we now have communities and infrastructure that are over 70 years old. The history and charm of these towns have great appeal, but these older communities leave many legacy costs that newly built communities in other areas of the country do not have to absorb.
Where do property tax funds go?
The money collected through property taxes goes to a variety of local services. They fund schools, road maintenance, garbage collection, police and fire, libraries, parks, water, and other essential services. The taxes collected annually from property owners bring in the most substantial portion of income for the municipalities.
The legacy costs of older neighborhoods in Nassau and Suffolk County also include pension funds for teachers, police officers, firefighters, and other public employees. This workforce from the 60s, 70s, and 80s is now at retirement age and many of these pension plans receive funding through a share of property taxes.
School funding is also a large proportion of what makes Long Island taxes as high as they are. There is a return on investment, however, in that Nassau and Suffolk County school districts are regularly ranked among the best in the country. A 2023 ranking at Niche.com ranks Great Neck Public Schools at #3, Jericho School District #4, Syosset Central School District at #5, and Roslyn School District at #6, out of the best school districts in America.
Nassau County Guaranty
Another element that affects taxes in Nassau County, is a “County Guaranty” provision that requires the County to pay for the costs of refunds, cancellations, or credits of taxes or other levies.
This means that although the County only receives a percentage of every dollar collected in property taxes for its budgetary spending, the full amount of the refund or credit has to be funded by Nassau County. If there is a property tax reduction case that takes several years to close, the County is bonded to pay the full tax refund for all the years, even though it only received a percentage of the payments. Nassau County, therefore, has to set higher tax rates to pay the bonds. The debt service on the bonds used to pay the cost of this guarantee can add up to hundreds of millions of dollars a year.
Loss of Defense Industry
For many years this level of taxation was cushioned by the robust presence of the defense industry in the area. Long Island was known as the “cradle of aviation” and was the center of manufacturing for military and civilian aircraft. The Grumman Corporation (now known as Northrup Grumman) one of the world’s largest weapons and aerospace manufacturers, was founded on Long Island. During World War II Grumman built all American Navy aircraft and moved on to build Stealth bombers, the Apollo Lunar Module, ballistic missiles, radars, and land and sea aircraft. In the 1990s it was bought by Northrup Aircraft to create Northrup Grumman. The company occupied over 600 acres in Bethpage and leased a 6,000-acre facility in Calverton from the US Navy. They had a large presence across both Suffolk and Nassau counties.
The property taxes generated by the military industry offset the high tax rates so they weren’t felt as much by homeowners and other commercial property owners. When Northrup Grumman moved away from most of its Long Island properties in the late 1990s, along with the loss of other aerospace companies over the years like Republic Aerospace and Sperry Gyroscope, it had a damaging impact on Long Island’s property tax income.
All of these factors add up to some of the highest property tax rates in the United States. These legacy costs are now shouldered by the current property owners.
How are commercial property taxes calculated?
The calculation for the tax levied on commercial properties is determined by multiplying the taxable value of the property (assigned through the assessment) by the tax rate for that property class, which is set by the local municipality. 9 of the 13 towns on Long Island tax commercial and residential properties at the same rate. Hempstead, North Hempstead, Oyster Bay, and Islip tax commercial properties at a higher rate than residential.
When your property assessment is higher, you will pay a larger property tax bill. When the assessed value of your property is lower, you pay less in property tax. They are intrinsically linked, which is why you need to lower your assessment if you want to reduce your property taxes.
Tax Cap Law
It’s important to note that New York State’s 2011 Tax Cap Law states that the property taxes levied by local taxing municipalities and school districts cannot increase by more than 2% or the rate of inflation, whichever is lower. This law applies to all local governments including counties, cities, towns, villages and fire districts, and school districts in New York State, except NYC.
Before this law, the average school tax increase was 3-6% a year. After the Tax Cap was implemented, the rate of increase has been between .1%-2%. This can make a big difference, especially on larger tax bills. So although Long Island counties still pay some of the highest taxes in the country, the rate of increase has slowed.
So how can you lower your commercial property taxes?
1 – You can’t control the tax rate that the municipality sets. However, you can file to challenge or grieve your property assessment, in a process known as tax certiorari.
2 – You need to check the assessed valuation on your commercial property every year, well in advance of the grievance deadline. You can check your assessment at the NYS Department of Taxation and Finance. NY Grievance Filing Deadlines are available here.
3 – Reach out to us for a free consultation. We can review and let you know if your valuation is fair and ensure you are not being overcharged. We can also let you know if you are eligible for any tax exemptions.
4 – If we find that you are over-assessed and are likely paying too much for your property taxes, we can begin the tax certiorari process to challenge your assessment and lower your taxes.
5 – You should grieve your taxes every year. Even if the grievance was denied in a previous year, many factors change which can affect the valuation of your property. If you do not file by the deadline for that year, you will lose your chance to appeal. You do not want to miss this opportunity to lower your assessment.
Realty Tax Challenge (RTC) has been helping commercial real estate owners grieve their Long Island, NY property taxes for over 25 years. We are valuation experts and have extensive experience with the changes in the real estate sector over the decades in Nassau and Suffolk County. We understand the local trends and the tax laws that affect your valuation. When you work with RTC, you can be assured you are leveraging our expertise to save you the most money on your property taxes.