Real Estate

Real Estate: STAR tax savings are stagnant

BARBARAELLEN KOCH PHOTO | Riverhead Town assessor Mason Haas points to the STAR exemption line on a current tax bill.

Thanks to the state’s financial troubles, the STAR school tax abatement program won’t shine so bright next year.

As schools, towns and other taxing entities labor to comply with the state law limiting property tax increases to no more than 2 percent a year, property owners are about to become familiar with another state 2 percent rule. In this case, the amount spent by the state through its STAR program to offset local school taxes also cannot rise by more than 2 percent a year.

Although the percentage limits on tax increases and tax reductions are the same, the practical result is a widening of the gap between what property owners pay in school taxes and the amount offset by the state’s contribution.

“The state dropped what they would have had to pay and passed it on to the taxpayer,” said Riverhead Assessor Mason Haas. “People have tight budgets and now they have to reach into their pocket even more.”

There are two parts to the STAR (State School Tax Relief) program. Under basic STAR, homeowners with annual incomes below $500,000 get a break on their school taxes. The enhanced STAR provides twice as much help for income-eligible seniors 65 and older. The tax breaks apply to primary residences only, not summer or seasonal homes.

Once homeowners are enrolled in basic STAR, they don’t need to reapply unless they move. Seniors under enhanced STAR must show annual proof of income.

The deadline for applying for the STAR program for the 2011-12 school year is March 1.

Tax abatements vary by school district, although the dollar amount is the same for all taxpayers within a district. For example, under basic STAR, the state will pick up $717 of a Riverhead homeowner’s school tax next year. Without the 2 percent limit in place, that amount would have been $892.61, a difference of $175.61, said Mr. Haas.

Riverhead residents in the Shoreham-Wading River district will face the same situation. They will get a tax break of $909; it would have been $1,173.66 without the cap, a difference of $264.66. On the eastern side of town, for Riverheaders who live in the Mattituck-Cutchogue District — which extends west to Herricks Lane — the tax break is $98.57 less.

The story is the same for those receiving enhanced STAR benefits. In Riverhead, the tax break will be $351.11 lower than it would have been without the cap; in Shoreham-Wading River, $527.83 lower; and for Riverhead residents in the Mattituck-Cutchogue district, $197.31 lower.

Taxpayers in Southold’s five mainland school districts fare no better.

In Mattituck, for example, the school tax on a home assessed at $6,000 increased $119 this year, but with the STAR 2 percent cap, the amount offset by the program rose just $11, said Southold Assessor Kevin Webster.

“It’s basic math,” he said. “You end up paying $108 more. If you had a net increase in school taxes of more than $100 a year over 10 years, that’s a big amount.”

An amount the state would not come close to covering.

The STAR program works by reducing a property’s taxable value by a fixed amount. Four years ago the reduction in all local school districts was $579, which then fell to $537, and fell again to $502 before rising to $529 last year, said Mr. Webster.

“It’s gone all over the place,” he said.

Simple multiplication is used to determine a home’s school taxes. The assessment — lowered by the STAR contribution — is multiplied by the tax rate set by each individual school system. Since no two local school tax rates are the same, the STAR savings vary, in some cases dramatically.

According to the state Department of Taxation and Finance, this year Greenport residents received a $436 basic STAR break, $872 for those in the enhanced program.

In Mattituck-Cutchogue, the numbers are $540 and $1,080 respectively; $240 and $479 in New Suffolk; $249 and $497 in Oysterponds; and $501 and $1,003 in the Southold district.

In general, taxpayers in school districts with the highest tax rates receive a proportionately larger STAR offset. The average house in Mattituck pays about $4,850 in annual school taxes, while the bill for a similarly valued home in New Suffolk is just $1,632.

“If people want the cap removed, they definitely have to contact their state Senate and Assembly representatives and ask them to work with the governor to eliminate it,” said Mr. Haas.

The state would not have trimmed the STAR offset had lawmakers not faced the unpleasant task of closing a $10 billion budget gap, said Drew Biondo, spokesman for state Senator Kenneth LaValle.

This year the state will spend about $3.3 billion on the STAR program, he added. Without the 2 percent cap, that figure would have risen by $125 million.

“The cap was enacted with the thinking that it would be revisited in this budget cycle,” Mr. Biondo said. By law, the next state budget is required to be in place by April 1, a deadline lawmakers don’t always make.

The spokesman said Mr. LaValle is committed to finding savings elsewhere, as the state did when it partially rolled back the highly unpopular MTA payroll tax, in an effort to fully fund the STAR program.

“That’s the thinking that will go toward closing this gap,” Mr. Biondo said.

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Staff writer Jennifer Gustavson contributed to this report.