New York City Tax Rebates Blocked by Mayor

Published February 1, 2009

Since 2004, owners of one- to three-family properties in New York City had received annual $400 property tax rebate checks. That has ended, with Mayor Michael R. Bloomberg (R) refusing to send out the checks, citing lack of funds.

The mayor’s November move has sparked talk of a court challenge from the City Council and upset city residents.

“There’s a matter of some dispute about whether he’s allowed to do that,” said Nicole Gelinas, a municipal policy and finance expert at the Manhattan Institute in New York City. “It’s not a good sign when there’s a large budget problem and they spend so much time arguing about 5 percent of it.”

The New York City Council has questioned the legality of the mayor’s action and at press time was planning to take him to court to force the issue.

City Has ‘No Money’

“We have no money,” Bloomberg said at a press conference announcing his decision.

“When we proposed the budget for this fiscal year, we offered strong warnings about the potential hazards ahead of us,” Bloomberg continued. “Our concern for future vulnerability prompted significant budget cuts over the past 18 months. Our earlier forecasts called for sharp decreases in revenue, but as we all know, economic conditions have since deteriorated dramatically, forcing us to lower our projections even further. The gravity of the budget situation requires us to make hard choices that will not be popular with everyone.”

Bloomberg started the rebates in 2004 to provide some relief to certain property taxpayers after a sharp increase in property taxes in 2002, Gelinas said. There was no exact formula for the amount of the rebates, but it did take some of the sting away from the earlier increase.

“But that doesn’t erase the fact that there was an increase,” Gelinas said. “This is a terrible program. They should lower the [property] tax rates for everyone. They should cut the rates permanently. This [rebate program] is a stupid idea.”

Deficit Approaches $4 Billion

According to Gelinas, the city will have an annual budget deficit of about $4 billion within a year. The rebates, which come out of the city’s general fund, cost about $256 million and represent about 5 percent of the projected deficit.

“When they’re arguing about a small portion of the deficit, it’s not a good sign that the rest of it will turn out very well,” Gelinas said. “This should have been resolved a long time ago.”

‘Mayor, Not King’

Lewis A. Fidler, a councilman from Brooklyn, said the tax rebate was due to be sent out on October 1.

“They said they had a computer glitch. I will take them at their word for that,” said Fidler. “Then it was supposed to go out at the end of the month. Then the mayor announced it wasn’t going out at all, only a month after he said it would. He doesn’t have the power to do that. He’s the mayor, not the king.”

Fidler added, “There are a lot of people who were expecting this rebate, and they had every right to expect it. Many of the people that I represent are senior citizens. They own their homes but are land-rich and cash-poor. They may have put a bill aside expecting to pay it with the $400 rebate, or they may have planned to use it to pay for something they had put on a credit card.”

Others may have planned to use the money to pay for holiday gifts or their heating bill, Fidler added. “To take this away from them after it was already supposed to be in the mail is part of [Bloomberg’s] ‘let them eat cake’ attitude.”

Tax Cut Also Scrapped

While announcing the suspension of the rebate program, Bloomberg also rescinded a planned 7 percent reduction in property taxes, announced $1.5 billion in budget cuts, and cautioned the city might need to raise its personal income tax as much as 15 percent and impose a sales tax on clothing.

Bloomberg’s announcements reversed some of the policies he had announced as part of his budget package six months earlier, including the tax rebate and property tax reduction.

Phil Britt ([email protected]) writes from South Holland, Illinois.