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Home | K&S Blog | PENSION REFORM IN NEW YORK AND NEW JERSEY AND YOUR REAL ESTATE TAXES: IS THERE ANY WAY EXCEPT UP, UP, UP?
PENSION REFORM IN NEW YORK AND NEW JERSEY AND YOUR REAL ESTATE TAXES: IS THERE ANY WAY EXCEPT UP, UP, UP?

02/02/2012

   I am going to discuss an issue that affects all commercial property owners in the New York and New Jersey markets.  Indeed, it emphasizes the spendthrift spending habits of our local politicians in both states and their extraordinary fealty to local labor unions, municipal and otherwise.  The problem is that our politicians’ overwhelming generosity to municipal and other labor unions will eventually bankrupt New York State.  At a minimum, these spendthrifts will continue to cause real estate taxes to soar.

   Much of the material in this article relies upon the January 16, 2012 issue of Crain’s New York Business, more specifically, the opinion piece entitled, “Pension Reform Is Highest Priority.”

   The reason this issue is important to real estate investors is because New York City, and to a lesser extent New York State, have been relying on real estate taxes to a great extent, to pay for the budget gaps of the last several years.  In 2009, New York State’s local tax burden was the third highest in the country at $43 per $1,000 of personal income.  This is 40% above the national average.  Pension costs alone were at $12 per $1,000 of personal income   This is more than 70% above the national average and the second highest in the United States.  New Yorkers pay $574 a year, per person, in taxes for public employee pensions.  This is more than twice the national average.

   New York City’s pension costs were $2.4 billion in 2004 and are expected to reach $8.6 billion by 2014.  In 2014 they will amount to 40% of total payroll and 12½ % of total revenues earned by New York City.

   New York State pension costs are also expected to increase from $454 million in 2004 to $2 billion in 2014.

   What does all this mean to you, the typical real estate investor?

   If you own a property in New York City, the compound increases in the real estate tax bill for the past five years have averaged 15% for a typical multi-family or office building.  Those increases have been imposed upon us, during a period of significant reductions in market value, across the board, for most office buildings and many classes of multi-family buildings.

   When you combine the real estate taxes with the 80% increase in water and sewer rates over the past six years in New York City, many property owners have been crushed by the spiraling City taxes imposed against their assets.  People feel hopeless against the Government bureaucracy.  But that attitude must end.

   The runaway pension costs for City and State employees bears a great deal of the blame for the runaway spending by our state and local governments.

   So what is a lonely real estate operator to do?!
•    Write your local councilman, assemblyman and/or state senator and tell them to promote the new package of reduced pension benefits for new employees (in New York State).
•    Write an article or letter, with the information in this article, and send it to twenty friends and vendors in the real estate industry.
A new reasonable package of pension benefits for new employees would bring New York’s budget down to a more reasonable level.  That, in turn, would reduce government spending by billions of dollars over the coming years.
   You have to fight for what is right.  It is simply wrong to soak the public at large, and real estate investors, specifically, to pay for New York State’s profligate ways.

   If we unite together, our voices will be heard in the halls of our legislation.  The time to act is now.
 
 
 

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