What's in a Name - Condo vs. Townhouse

Two new housing developments recently caught my eye: The Reserve, in Brighton, a 327-unit complex off Clinton Avenue on the Erie Canal; and Kilbourn Place, in Pittsford, a 41-unit development sandwiched between East Avenue and 490. I was particularly interested in checking out the Reserve, since an ad in the July 26 Democrat & Chronicle promised that “IN A MILLION YEARS, YOUR TAX RATE WILL NEVER CHANGE….Not only does the Reserve beat other communities in price and amenities, but also your taxes are low and stay that way forever.” Really???

I did a bit of googling about condominium property taxation, and found that New York has a soft spot for condos – according to Real Property Law 339-y, condos aren’t valued based on their market value, as individual residences are. Instead, the entire complex is valued as a single entity on an income or cost basis, similar to an apartment building, and then that valuation is apportioned to the individual units. The result is that a condo’s assessed value is often a small fraction of its market value. Still, I didn’t understand how a condo would have a different tax rate than other residential properties. As it turns out from two visits to the Brighton Assessor’s Office, it doesn’t…

First, though, I trundled off to visit both properties.

Kilbourn Place

According to the saleswoman, the units are not condominiums (which are not allowed in Pittsford) but townhouses, so there is no special valuation, and will have the same tax rate as other residents (appr. 3.5%) and assessment valuation methodology. A quick estimate, based on the unit plans, is that the total sales value of this property will be in the neighborhood of $22.5 million, thus generating around $790,000 in additional taxes, although probably less because of STAR exemptions, so perhaps more like $745,000. School taxes are 72% of the total tax, so this development should add about $500,000 in revenue for Pittsford schools – a drop in the bucket of the total school budget of $47.4 million, but at about 1%, it should help mitigate the lower tax cap for next year (although the developer’s goal is only to complete phase 1 in 1.5 years, so not all of the revenue will be realized immediately). Oh, and the unit I visited was lovely, and the windows did a fine job of blocking out the highway noise (although I’m not sure the bedrooms of the units closest to the highway would be that quiet).

The Reserve

The layout of City Gate in the Reserve's
sales office*

The total estimated sales value of this complex is $180 million. But because they will be assessed as condos, instead of generating around $7 million in taxes, at Brighton’s current tax rate of about 4%, the developer, Costello & Sons, estimates the complex will pay only “$2.5 million in school taxes, $539,000 in town taxes, and $197,000 to Brighton Fire & Ambulance annually.” This implies an assessed value of around $81 million, less than half of its market value. Costello & Sons probably didn’t estimate any STAR exemptions, so the tax collections might be even less. Still, this is a marginal increase over Brighton’s total assessed value for 2014 of $2.6 billion. Again, if all else were equal (i.e., if other properties weren’t leaving the tax rolls because they’ve become tax-exempt), the additional tax revenue from this development should reduce the need for the town to break the tax cap (as voters allowed Brighton to do this year).

I showed the salesman at the Reserve the D&C ad and he acted as if he’d never seen it, and couldn’t really explain it. I then called their main number and chatted with a salesman named Tyler, who assured me that because of New York’s condo tax law, there is a tax break for any residences with common walls, and the tax rate would be between 1.3-1.5% and never increase. Again, I was incredulous.

Brighton Assessor’s Office

The Assessor’s Office hadn’t seen the ad either, but they weren’t surprised at the misleading information, and said they’d spoken with the Reserve’s representatives and would do so again. They assured me that there is only one residential tax rate, and that there is no reason Reserve residents should expect that rate not to fluctuate. They did confirm that the assessed value is likely to be significantly below market value, and acknowledged that this favoritism for condos means that other residents end up picking up the difference. Condo residents like to justify this reduced value based on the association fees they must pay, and the fact that the complex owns the common areas. As a current homeowner and a former condo owner in NJ, I find this reasoning specious. The condo fees equate to the regular maintenance expenses a homeowner has (landscaping, building repair) and the fact that the residents don’t have personally responsibility for anything outside their walls is a draw, not a drawback, for people who choose to live in condos. There have been attempts to rectify this valuation (see http://www.stopthetaxshift.org/local-taxation/35-restriction-on-assessments-for-condominiums-and-cooperatives) but they have so far met with no success.

Time will tell whether these developments are tax-positive/neutral/negative for our towns. I suspect that Kilbourn will have fewer families with children (so not a proportionate use of the Pittsford schools), and perhaps fewer full-time residents (this development screams Naturally Occurring Retirement Community, and if the retirees choose to shield their income by living 6 months plus a day in Florida, they’ll use even fewer local services).

High property taxes are a huge issue in Monroe County, as evidenced by the Greens Townhomes’ ad: Pittsford address with low Henrietta taxes.

If you’re as annoyed as I am by the condo tax break, write to your New York representatives and urge them to eliminate this inequity. Otherwise, maybe think about moving to the Reserve, to lower your taxes significantly!

* I was so excited that REI was coming to Rochester I emailed them to thank them. Their Customer Service department replied that it “wasn't able to confirm that (they) are opening a new store in Rochester, NY.” Hm...