August 12, 2012

HOMEOWNERS AND owners of small businesses may not know it, but the District’s tax office has become a pushover. For years the office stood its ground, fighting to defend the values it assigns for tax purposes to office complexes and apartment buildings — and, by extension, defending the city’s revenue base, which depends heavily on property taxes. Outgunned by high-priced lawyers, sometimes it lost, though in recent years it fared better. But it fought.

Then something changed. As The Post reported last week, District tax officials suddenly decided that fighting to maintain the city’s revenue base was too costly or too much trouble — or something. So instead of sticking to their guns, and to their initial assessments of the worth of some large buildings, the city started caving.

This is surprising. For years Chief Financial Officer Natwar M. Gandhi sounded the alarm over downward revisions of property values made by the District’s independent tax appeals board, which he rightly said meant a “major leakage” in the District’s revenue base. He has even sought authorization for the city to fight the board’s rulings in court, a privilege until now reserved for property owners.

And the city had success. From 2009 to 2012, it was able to slash its dollar losses on appeals by 86 percent, from $2.4 billion to $326 million. At the same time, however, District officials essentially decided to give back the money they were saving. Over the same four years, the amount they knocked off property values as a result of settlements with owners jumped by more than 30-fold, from $83 million to $2.6 billion.

What is going on here? Mr. Gandhi seems to dismiss the city’s new posture, meekly noting that the amount shaved off property assessments last year — an amount equal to nearly 4 percent of the city’s total commercial base — is no big deal. Really, Mr. Gandhi?

As The Post reported, the FBI, internal auditors and others are looking into the matter. Let’s hope they get to the bottom of it.

District officials insist that the bottom line has not changed and that the total dollar reductions to the city’s value of commercial property have held more or less steady in recent years. They say that with the exception of 2011, when property values (and reductions) plummeted, the annual downward revisions to the commercial property base in response to appeals by property owners has remained between $2.3 billion and $2.9 billion.

There are problems with this argument. One is that the city’s new approach sends a loud and unsettling message to deep-pocketed developers and property owners, who will now understand that they would be foolish not to fight their initial assessments.

In addition, the city’s shift appears to have taken place without any data, projections or analysis to show whether it would save or cost money over time. And there’s reason to believe, as Mr. Gandhi once did, that giving up on assessment challenges without a fight will be costly to the city’s revenue base.

The bottom line is critical. Shaving $2.6 billion off the assessed property values means waving good-bye to $48 million in annual tax revenue. That’s more than what it would take to restore the top three priorities that Mayor Vincent C. Gray (D) wanted to include in the city’s budget, but could not, due to revenue restraints: $7 million for the homeless (lost due to federal funding cuts); $15 million for job training for welfare recipients; and $23 million to help hospitalize poor people who get sick. Nothing to sneeze at.