A new New York state comptroller report revealed the assessed market value of New York City office buildings surprisingly rose this year, resulting in a slight increase in city tax revenue. The overall value of New York City office buildings increased to $204.8 billion, up from $202.3 billion in July 2020.
Based on this assessed value, NYC office owners will pay $7.6 billion in property taxes over the next fiscal year, compared to $5.8 billion collected during the pandemic-ravaged 2020 budgetary year. Property taxes are New York City’s largest revenue source, helping fund critical services like those provided by the police, fire, and sanitation departments.
The state comptroller’s findings were surprising because many policymakers nationwide are grappling with how nosediving office values will affect local budgets and property tax collections.
An immense shortfall in property tax collections in many major cities like New York may not be happening yet, but it could be on the horizon. A recent forecast by the Tax Policy Center estimated that in 47 major U.S. cities, the average city would experience a tax revenue shortfall of 2.5 to 3.5 percent by 2031 because of declining commercial property values. The forecast compared projected post-pandemic declines with an alternative where office buildings increased in value between 2022 and 2031 at the same rate as over the previous decade.
A 2.5 to 3.5 percent tax revenue shortfall may seem small, but the Tax Policy Center says it would represent hundreds of millions of dollars. Such a shortfall would force substantial tax increases or drastic spending cuts to balance city budgets, especially in at-risk cities like Boston.
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Overheard
