Editorial: The property tax swamp

01/19/2012 6:30 AM |

It’s no secret that the way real estate is taxed on Long Island to fund schools, towns, fire departments and libraries is complex, confusing, frustrating and in many cases simply unfair.

In theory, it makes perfect sense. We determine the amount those public institutions need to complete their mission and spread the burden across the community based on the value of our homes or businesses. About two-thirds of the average tax bill goes to the local school system.

The owners of higher-valued properties pay proportionately more in taxes than those with modest abodes or vacant land. But in practice, the system is awash in inequities. As reported in a story last week’s real estate section (“Why the gap in real estate taxes?”), there can be an enormous difference between property taxes levied against houses of similar proportions and amenities based on location.

There’s no single simple explanation. That taxes are extremely low in tiny New Suffolk is a function of the school district’s size and the abundance of expensive waterfront homes. The school district’s total budget is about $645,000, compared to close to $110 million in Riverhead and $37 million for Mattituck-Cutchogue. New Suffolk’s waterfront homes are taxed pretty steeply, but as seasonal residences they add no children to the school, helping to keep tax rates low for everyone else.

Riverhead is the largest of the East End districts, with the largest student population, and taxes there tend to be higher. As a rule, property taxes increase from east to west, a fact that seems lost on proponents of school system mergers. Bigger schools have bigger tax bills, period.

But there are special circumstances — for example, the Shoreham-Wading River district. Several decades ago, the district was awash in money thanks to taxes paid by the Long Island Lighting Company on the Shoreham nuclear power plant property. When the state took over the property and decommissioned the plant, that burden suddenly shifted to a community with virtually no commercial tax base — and property taxes soared.

In our reporting, we compared the tax bills of similar, although not identical, properties and found a startling difference. It came as no surprise that the most highly taxed property is in Wading River and the lowest in New Suffolk. It’s all about your neighbors. If you live in a wealthy community, you’ll likely pay less. The most glaring inequity is that affluent communities can afford better schools — and that’s at the heart of Albany’s annual school aid tussle, which pits urban against suburban and rural areas. Out here, properties may be worth more on paper, but the owners’ incomes can be quite low, especially among senior citizens.

The one undeniable truth to be taken from all this is that development raises property taxes. More people means more government services, such as police. More children mean bigger, more expensive schools. We’re not suggesting digging a moat and raising concrete walls at the town line. Some development is inevitable, and that should be regulated, not banned. In recent years some towns have come to understand the need for sound planning and some have not. In communities where the powers that be turn a blind eye to the financial impact of development, it’s the average taxpaying citizen who gets stuck with the bill.