UNJUST TAXATION A compilation of facts and figures showing injustice and inequality of real estate taxation in the City of New York By SIG. CEDERSTROM 201 Montague Street Brooklyn 1913 Copyright, 1913, by SIG. CEDERSTROM 3 a Cc^ Unjust Taxation The enormous and continual increase of the taxes on real estate has reached a point where it demands the careful and serious consideration of everyone who pays taxes, and everyone who has the interest of our great city at heart. If it be true in the practice of medicine, that the successful treatment of disease depends, first and foremost, upon accurate diagnosis, it is no less true in the treat¬ ment of a civic disorder that, at the very outset, there be a complete understanding of the nature of the evil. Having correctly diagnosed the trouble, the next step is to apply the appropriate remedy. A physical disorder may seriously upset the individual, so civic disorder may seriously upset the body politic. No branch of our city government is more important than the Department through which the necessary revenue is raised for the maintenance of that government. This necessary function must, at all times, be performed; and no thinking citizen objects to paying his just, equitable and proper share toward the maintenance of the government. But when a point is reached where the individual is compelled to pay more than his just and reasonable proportion towards the maintenance of that government, the time is at hand when he has a just and proper complaint, and when he can justly say that a disorder exists in civic life, which demands a remedy, no matter how drastic it may be. This, in itself, might appear to some to be a simple complaint; but add to the unjust taxation a condition which discriminates against certain taxpayers; a depart¬ ment which imposes the taxation, doing so with an utter disregard of the proper methods which should be employed, and of the laws by which it should be controlled, an unjustifiable and unwarranted increase in the burden of taxation, the unfair assessment of ordinary real estate, so that other property more favored may escape taxation, add to all this a lack of ordinary courtesy that should obtain in everyday business life—and we have something of the condition which now exists in regard to the taxation of our real estate. And none will deny that a serious disorder exists in our body politic. Since the general real estate depression in the latter part of 1906, which has practically continued up to the present time, the City Budget, the Total Tax Levy and the Tax Rate have annually shown a large and steady increase. j The Department of Taxes and Assessments during the same period has annually ^increased the assessed valuation of ordinary real estate for purposes of taxation at an alarming rate. In the six years from 1906 to 1912, the increase was $1,953,166,541. The annual reports of the Department of Taxes and Assessments for the years 1907 to 1912, inclusive, fail to justify any of the annual increases in assessments on ordinary real estate, as a whole. The Tax Commissioners submit no facts that would justify the increases made for the years 1907, 1908, 1909, 1910, 1911 and - - 1912. Ample facts which would justify a reduction, however, appear in the annual reports of the Department to the Mayor, and elsewhere. That the volume of business transacted in real estate has gradually decreased since 1906, is a matter of record. Assessed valuations should not be increased beyond sane limits, upon the erro¬ neous assumption adopted by the Tax Department, that real estate, as a whole, increases annually at the rate of four or five per cent. Nor is the contention well founded that even an eight per cent, increase would be reasonable and justifiable. 1 The annual report of the Department of Taxes and Assessments, for 1909, page 22, contains the following statement: “Any consideration of the assessed value of ordinary real estate must take into account the fact that the assessment is based on the evidence of value given by sales, rentals, etc., during the preceding fifteen months. Assessments must follow the evidence of value, can¬ not precede it.” It is the purpose here to demonstrate the incorrectness of this statement, by the comparison of data and statements of the Tax Commissioners in the an¬ nual reports of 1907 to 1912, with such facts as are a matter of public record, readily accessible to the department and of which it has, or should have, full detailed data. It is a well known fact that real estate values do not increase upon a declining market. Yet, in the face of the assertion that increased assessments “must follow the evidence of value, cannot precede it” statistics show a steadily declining market. The Record and Guide shows the following figures: Boroughs of Manhattan and Bronx. Transfers of Real Estate. Number of Conveyances recorded. During the year 1906.32,040 During the year 1912.16,165 Decrease ..'.15,875 Number of mortgages recorded. During the year 1906.27,625 During the year 1912.11,734 Decrease.15,891 Aggregate amount of mortgages recorded. During the year 1906.$445,970,314 During the year 1912. 355,400,690 Decrease . $90,569,624 Borough of Brooklyn. Transfers of Real Estate. Number of Conveyances recorded. During the year 1906.46,218 During the year 1912.24,349 Decrease.21,869 Number of mortgages recorded. During the year 1906.39,420 During the year 1912.19,216 Decrease.20,204 2 Aggregate amount of mortgages recorded. During the year 1906.$162,574,512 During the year 1912. 79,063,269 Decrease .$ 83,511,243 Taxes have kept pace with the declining market,—but in the opposite direction. We have the following figures from the official report: Grand Total Budget. Year 1912 .$181,090,657 Year 1906 . 116,805,490 Increase in six years.$ 64,285,167 Total Tax Levy. Year 1912 .$150,506,057 Year 1906 . 94,098,174 Increase in six years .$ 56,407,883 The Tax Department reports tell us that all increases in assessments on ordinary real estate are easily explainable and any taxpayer can satisfy himself of the justice of such increases; witness the following:— 1907 Annual Report, Dept, of Taxes—Page 22. $377,596,542. Increase in the assessed valuation. “While the Department is endeavoring to comply with the law and assess all real property at the sum for which it will sell under ordinary circumstances, such a tremendous increase as that of this year cannot be expected to continue indefinitely; and when, through speculation, values are inflated without substantial foundation, prudence is demanded on the part of the assessors.” 1908 Annual Report, Dept, of Taxes—Page 18. $437,490,467. Increase in the assessed valuation. “The large increase in the assessed value of real estate this year is due more to the attempt to enforce the law equally throughout the City than to an actual increase in value since the last assessment was made. In ordinary years we should hardly expect an increase of more than five per cent.; whereas, the increase this year was nearly eight per cent. The increase in the assessed value of ordinary real estate exceeds the aggregate assessed value of real estate of the five States of Florida, Mississippi, Oklahoma, Oregon and Wyoming, with an area of more than eight times as great as the whole State of New York. “There are only nine states including New York, in which the assessed value of ordinary real estate exceeds the aggregate increase in the assessed value of ordinary real estate in this City for this year and last. “All the States and territories west of the Mississippi River, including Minnesota and Louisiana in the year 1902 had a total assess¬ ment for ordinary Real Estate of $5,249,072,325 and the assessment 3 of ordinary real estate in the City of New York exceeds this amount by nearly $900,000,000. The assessed value of real estate in the City of New York, not only increased rapidly in the aggregate, but at the same time increased per capita, and on the average the increase in the value of New York land amounts to $1,000 and in taxable real estate to $1,500 for every baby born.” 1909 Annual Report, Dept, of Taxes—Page 17. $115,852,260. Increase in the assessed valuation. “Because the increase in the assessed value of real estate has been nearly $500,000,000 a year for several years, it has been said that this is a normal increase. It seems hardly probable that the normal increase, without allowing for any depreciation in the value of money will exceed 4 per cent, or between two hundred and fifty or three hundred million dollars. “If the value of money continues to depreciate at the present rate, the apparent increase may ordinarily exceed this amount. The increase in population is about 3 per cent, per annum. The increase in the value of real estate would ordinarily be somewhat more than this, but not very much more. The increase in the value of improvements is about the same percentage annually, while the value of land tends to increase somewhat faster than population.” 1910 Annual Report, Dept, of Taxes—Page 13. $233,983,620. Increase in the assessed valuation. “The increase of $233,983,620 in the assessed value of ordinary real estate is probably a little below what should be the normal increase year by year. It was stated in our report last year that the normal in¬ crease should be about four per cent, per year. “This year’s increase is somewhat less than that, but it is explained on account of the depression of real estate, which has continued during the period when our assessment zvork for this roll was being made. It is hoped that conditions will be improved by the time the next year's roll is made.” NOTE. (The improvement in real estate conditions as the Tax Commis¬ sioners evidently found them the following year, exceeded anything in the history of real estate as a whole or in any of the Boroughs of New York City). 1911 Annual Report, Dept, of Taxes—Page 9. $719,989,770. Increase in the assessed valuation. “The increase of $719,989,787 in the assessed value of ordinary real estate is extraordinary, and is due to the comparatively small increases made in the years 1909 and 1910, following the depression of 1907 and 1908, and is particularly due to the very great effort made to equal¬ ize assessments throughout the City.” 4 1912 Annual Report, Dept, of Taxes—Page 12 $68,253,882. Increase in the assessed valuation. “The small increase in the assessed value of ordinary real estate should be considered in connection with the assessment of 1911, anck the increase for the two years should be averaged. If the increase for 1911 is added to the increase for 1912, it appears that the average for the two years is still more than the normal increase.” Notwithstanding the unwarranted statements, the Mayor made no protest in any public utterance nor has he offered any remedy to cure the over-valuation or reimburse the property owner for any over-payment made. Mayor Gaynor, on November 21, 1911, at the 5th Ave. Association Dinner in his speech acknowledged in plain, unmistakable language the inefficiency of the Tax Departmental System and Methods, and the Department as a whole in the past and at that time. He stated that Brooklyn was over-assessed for 1911, about $200,000,000. The Mayor never made a truer statement. The Mayor during the course of his remarks on excessive real estate values said, “Well, the valuations probably did strike some parts of the City unfairly, and this year we are correcting that, so that there can be no complaint” The increase for the year 1911 was $719,989,770. In the report of the Department of Taxes and Assessments on March 31, 1912, to the Mayor in regard to 1912 Assessments of ordinary real estate for purposes of taxation, no reference is made to any of the remarks of the Mayor in regard to 1911 excessive valuations, instead, an apology is offered by the Tax Com¬ missioners for their apparently small success in increasing the assessed values of ordinary real estate for 1912. The net increase in the assessed value of ordinary real estate for 1912 was $68,253,882 (in all the Boroughs), and we are offered the following apology in the 1912 report at page 12. “The small increase in the assessed value of ordinary real estate should be considered in connection with the assessment of 1911, and the increase for the two years should be averaged. If the increase for 1911 is added to the increase for 1912, it appears that the average for the two years is still more than the normal increase.” 5 IMPROPER METHODS The New York American —on January 22, 1912, editorially comments on the tax situation, as follows: THE AMERICAN’S crusade against excessive tax assessments on Brooklyn real estate received the seal of success at the annual banquet of the Brooklyn Board of Real Estate Brokers on Saturday. Mr. Lawson Purdy, president of the Tax Board, confirmed in freer and franker terms the admission made to The Ameri¬ can a month ago. He told the Brooklyn real estate men, that the cases of excessive assessment were many, thanked them for assistance they had rendered in making corrections and offered explanations as to how it all happened. The American must still insist that, quite apart from special cases of over-assessment, the whole system can be and ought to be over¬ hauled and improved. Especially ought the office of Deputy Tax Com¬ missioner to be held by men specially qualified as real estate experts. The editorial referred to the following article in THE NEW YORK AMERICAN—JANUARY 21, 1912. Lawson Purdy, president of the Tax Board in addressing the mem¬ bers, admitted that in many instances assessments had been placed too high a figure. He thanked the real estate men for assistance that they had rendered in making correct valuations, and said: “The conditions confronting the Tax Department during the last two years have been peculiarly difficult. The assessment of 1911 was made in the Summer and Autumn of 1910 and was based on the sales, mortgages and other transactions of preceding years. When the Board off Tax Commissioners was engaged last Winter in acting upon the applications for reductions of assessments they were frequently confronted with the fact that property which had been purchased for $10,000 could not be resold for $8,000. The assessment had been based on the pur¬ chase at $10,000.” Mr. PURDY’S FRANK ADMISSION 6 Following is a report of an interview with Tax Commissioner Wall, published in the Brooklyn Daily Eagle on December 15, 1911: Wall on Real Estate Values Tax Commissioner Comments on Cheapness of Brooklyn] Land. “It is an unfortunate fact that land is cheaper in Brooklyn, com¬ paratively speaking, than anywhere else in North America. Even farm land has advanced more in value during the last fifteen years. Why does this condition exist? Many people say that it is because public sentiment in Brooklyn has been for forty years or more molded and dominated by narrow, selfish and provincial interesets. “That may or may not be true, at any rate the condition is not new and not due to high assessments. It seems as though there should be a change for the better soon, and that land purchased at present prices should realize for the purchaser a handsome profit. “Manhattan real estate experts calculate that land occupied by stores is worth about twenty times the annual rental of the ground floor. If anyone will try and apply that rule to land in Brooklyn they will see how comparatively low the actual selling price is here. “What Brooklyn appears to need is intelligent, unselfish, optimistic leadership. Let us hope that Dr. Hillis and his ‘Beautiful Brooklyn Committee’ will supply that leadership.” Commissioner Wall says that values are declining in Brooklyn—but still taxes go up. The increased assessed valuation in Brooklyn in six years, 1907 to 1912, appears as follows: Total increase assessed value of land about 72 per cent amounting to... $329,845,908 Total increase assessed value of buildings about 42 per cent amounting to 233,658,334 About 57 per cent, in six years, increase in the - VALUE LAND AND BUILDINGS By the Tax Commissioners.$563,504,242 At a dinner given by the Mechanics and Traders Exchange of Brooklyn on February 3, 1911, Tax Commissioner Wall— Raps Mortgage Gamblers Speculative Methods Bad, Says Wall at Dinner of Builders. Mr. Guider, the toastmaster introduced Judson G. Wall, the tax commissioner, who spoke on the Brooklyn tax situation. Mr. Wall defended the department against criticism, saying that the men who made the valuations were pushed for time and did as well as could be expected in the circumstances. “If the builders of Brooklyn would get together and devise a way to do away with stupid building, and with gambling in second mortgages,” the speaker said, “the borough would have little to complain of. The correction of these evils would render unnecessary any change in the taxation for The last year. The taxes have been criticised, but in the main they art: fair and just.” From the Brooklyn Daily Eagle, February 14, 1911. 7 During the course of Tax Commissioner Wall’s remarks regarding the Tax Department, at the dinner, he was reported in the Standard Union as saying the following: “It is not very strange that we should fall by the wayside once in a while,” he argued.. “Any department is liable to get into a bad condi¬ tion occasionally. If the proper supervision is not maintained, there is no telling what will happen. That is the reason the Board of Tax Commissioners used so much care this winter in directing the work. A housecleaning was necessary. When the men found that the com¬ missioners were standing by.them their efficiency increased immeasur¬ ably” At least some people are alive to the injustice of the tax question. John Pullman, known as the Dean of Brooklyn Real Estate Brokers, in a letter to the Brooklyn Eagle, published December 9, 1911, among other state¬ ments in regard to the 1911 assessments, said: “Great wrong has been done to the Borough. We were informed in the first month of the year by the tax commissioners that real estate had increased $390,000,000 in Brooklyn during the year 1910, when real facts are that real estate was not worth as much, but worth at least in many cases, from 10 to 25 per cent, less, and I, like many tax-payers, feel that great wrong has been done our borough. “From my personal knowledge I know real estate will sell from 10 per cent, to 25 per cent, less than it did the past three years, and is bringing from 10 per cent, to 20 per cent, less rent than it has brought the past two or three years, and when you come to assess income property, the income, in almost all cases is what establishes the value.” t John Pullman is considered an authority on all matters pertaining to realty. He has resided in the Borough of Brooklyn for the past 40 years and most of the time has been engaged in renting, leasing, buying, selling, placing mort¬ gage loans and appraising real estate. Frank Bailey, Vice-President of the Title Guarantee & Trust Co., in a signed article, published in The Evening Post, December 31, 1912—Annual Real Estate Review—Mr. Bailey makes the following statements in reference to Brooklyn’s obstacles: “Real estate as a whole is not doing well. The reason is not hard to find—first, Brooklyn suffered two years ago from an increase in taxation which was unwarranted and unjustified. The valuations made were theoretical and not at all practical. Thousands of pieces of property were assessed from 10 to 40 per cent, more than they could be sold for, and the cost of having that assessment reduced was so great that the city practically took from the owners of the property an amount of forced tax contribution they were not entitled to pay. SELLING BELOW ASSESSMENTS. “Some feeble efforts were made to correct that assessment during 1911 and 1912, but at the present time Brooklyn is assessed a material amount more than the value of its property. ******** 8 “There is not a single day that a contract does not come in to my office where the assessment is not 10 to 20 per cent, more than the price at which the property is sold. ******** “The destructive results of this unjust increase will be felt for ten years.” Governor Sulzer, in a speech at the first annual dinner of the Allied Real Estate Interests, held at the Waldorf-Astoria on February 28, is quoted in the Brooklyn Daily Eagle of March first, as follows: “A serious condition, as you know, now exists among real estate owners, particularly in the cities of the State, on ac.ount of the present heavy taxation. There is at present practically no market for the sale of real property at the valu¬ ations on the tax assessment rolls. “From an investigation of these matters, I know that while the stagnation in real estate business may be general elsewhere, in the City of New York, largely owing to the enormous increase in the assessments on real property, there has been created a condition of distress among our taxpayers and rentpayers without precedent in the history of the metropolis.” JUSTICE FREDERICK E. CRANE, OF THE SUPREME COURT, SAYS STAGNANT VALUES ARE “COMMON KNOWLEDGE.” (From the N. Y. Law Journal, May 1, 1913.) By Crane, J. C. I. Jockey Club v. Purdy —The relator in this case, the Coney Island Jockey Club, has been assessed upon its property at Sheepshead Bay for the taxes of 1913 at $2,470,275, and it has brought this proceeding in order to procure a reduction therein upon the ground of overvaluation. As it developed from the testimony of one of the relator’s witnesses that many of the parcels of lots assessed were under¬ valued while others were overvalued, and these practically counterbalanced, it was tacitly agreed upon the hearing to eliminate from consideration all parcels with the exception of the part known as the race course, or block 7405, lot l, assessed as one piece and containing 335 acres. The assessment upon this parcel for this year’s taxes, after certain deductions, is $2,130,000, including $8,750 for buildings. The value placed upon this tract, figured according to acreage, by Robert Huntley an expert for the relator, was $1,537,500, and by another expert, David A. Kelly, figured according to lots, $1,583,420.- The city’s expert, George F. Byrnes, places the value at $2,396,635, or $260,000 over the assessment. I have oeen much im~ pressed with the case as presented by the relator, as the figures for this tract as given by the expert witnesses correspond very nearly to the assessment and values of previous years. In 1909 this same tract was assessed for $1,161,400, and in 1910 for $1,550,000. There has been no , change whatever in the nature and condition of this property since these years. It is unimproved land, without streets or grading, formerly used for a race track, and adjoining Ocean avenue, not very far from the shore of Sheepshead Ba}'. It is common knowledge that property in the Borough of Brooklyn and this vicinity has not materially increased in value during the Iasi four or five years, and the testimony of Mr. Byrnes, the city expert, upon this point is that from 1907 prices have practically been at a standstill, “no increase or de¬ crease, just remained at the figure they were in 1907— prices and activity .” It is not to be presumed that the assessors in previous years were derelict in their duty and almost a million dollars below the actual value in their estimate, but it is rather to be surmised that some error has crept into the present method of com¬ putation when it is virtually admitted that general real estate values in this vicinity 9 nave not increased. The testimony of the relator’s experts, therefore, being in har¬ mony with the official action of tnese other years, 1 find that Mr. Byrnes bases his conclusions upon elements winch 1 ao not believe can be considered in arriving at the present value, in the first place, he bases his vafues upon knowledge of the community, sales in and about that section, “and if I may be permitted to say it, my confidence in the future of Sheepshead Bay.” Again, he states that he looks for a good increase of business almost immediately as the result of the signing of the subway contracts. The future of Sheepshead Bay as the witness pictures it in his testimony, and the increase of business awaiting the subway has not yet manifested itself; 1 therefore do not see how it can be an element of actual present value. It may be that a speculator would be willing to hold this property on the chance of such a future change, but there have been no sales in the neighborhood or any developments to indicate a market upon any such theory. When the change does come and the values do increase by reason thereof, of course the assessment of this property will increase accordingly, but there is no occasion for anticipating it. Moreover, the value placed upon the property by Mr. Byrnes is affected by the sup¬ position that a land company of large financial proportions stands ready to buy this tract as a whole and develop it into a fine residential section. At page 270 of the stenographer’s minutes the witness testifies as follows: “I expect that if a development company purchased that property and developed it into a first-class residential section, that they would not lose any money on the proposition; that this property is one of the largest and most costly pieces of undeveloped property on Long Island. And if cut up into building lots, with residences built upon it, and so forth, why it would improve the whole community generally, and inci¬ dentally I have every confidence that it would be a good salable proposition. The amount of capital necessary to carry out the witness’ idea can be gathered from his estimate that after development it would be worth about $4,000,000. The value of property consisting of vacant lots can hardly be estimated upon imaginary condi¬ tions that capitalists stand ready to improve the property and that it has been improved by the expenditure of large sums of money and therefore is worth in lot value the increase zuhich such development brings to it and the surrounding neigh¬ borhood. No doubt ah that Mr. Byrnes says will come true, but I do not find sufficient evidence of its nascency to warrant estimating present values upon it. / shall therefore reduce the assessment on block 7405, lot 1, to $1,592,170, which is Mr. Kelly’s estimate, plus $3,750 for the buildings. President Lawson Purdy of the Board, who has occupied that position since 1907, in an article written by him and published June 29, 1907, in the “Record and Guide,” the recognized real estate publication, New York City, among other statements, in regard to the assessments of real estate for purposes of taxation in the City of New York, said as a final analysis of the subject: “The equitable assessment of real estate is the foundation of the City’s credit and the basis of its economic welfare.” Tt naturally follows—the City’s credit and its economic welfare are the very foundation of realty values and of the most vital importance to real estate owners. If “the equitable assessment of real estate is the foundation of the City’s credit and the basis of its economic welfare” what question could be more important to the city as a whole than the correction of the tax evil? Disregard of Law The Tax Commissioners have never attempted even to justify the increase of 1911 with any facts, either publicly or in their annual report for 1911 to the Mayor and they appear to have shown a disregard for the law. 10 The New York Times, November 22, 1911, quotes Mayor Gaynor as follows: “A year ago, Purdy and myself and his whole board, we got our heads together, and we determined that we would equalize values throughout the. whole city. It was a fact that the values were very unequal all over the city. They had as many knolls as the surface of the ground has throughout the city. The values ran up in a knoll here and ran down in a hollow there, not following the knolls and nollows in the ground, but something like it, and so it was all over the city, and I am sorry to say that some, by favoritism, procured by political influence, (I think that is what it is called, with the accent on the second syllable very often) and I am still very sorry to say sometimes by money, had their values altogether too low. “I said something about that during the campaign, and, when I became Mayor, said that that would come to an end, and in doing that equalizing process we ran values up throughout the city $800,000,000. (Eight hundred million dollars). “Well, it looks dreadful because $250,000,000 is normal. Eight hundred millions! and a great many people complain. “Well, the valuation probably did strike some parts of the city unfairly, and this year we are correcting that, so that there can be no complaint. “I freely acknowledge that the Borough of Brooklyn had too much advance in that raising of $800,000,000 of values. Relative to Manhattan, we added alto¬ gether too much there—probably $200,000,000, maybe not so much—but some¬ thing approaching that. That will all be attended to, and be equalized and distributed over the city in due time. So that that $800,000,000 increase was made to equalize the values, but, at the same time with an eye to the building of the subways, which a great many people want built as soon as possible.” The 1911 increase in assessments of real estate, as a whole, can be sus¬ tained neither in theory or fact, nor can any of the City Officials or City Employees produce facts of any description or kind whatsoever, that will even tend to justify the increase. The City Charter plainly says: “Real Estate assessed valuations for the purposes of taxation shall be for the sum which real estate would sell under ordinary circum¬ stances.” The provisions of the Charter are plain; then why should they be dis¬ regarded and Tax Departmental System exist, so elastic and so cunningly devised that inequitable and excessive valuations result, which cannot be sustained? Is it in order to meet budget demands, to increase the borrowing capacity or for any other purposes which public officials may deem expedient? The increase in 1911 may seem light to Mayor Gaynor, as it only means about 12 per cent, increase, as a whole, on the total assessment of ordinary real estate •for 1910, or about three times the normal increase Tax Commissioners have assumed to exist. The Tax Commissioners have so far failed to produce any facts to sustain their statements that the City of New York has a normal increase of $250,000,000 per annum in real estate. There are over 500,000 separately assessed parcels in New York City, an in¬ crease on an average of only $1,500 upon each parcel would amount to $750,000,000. Admitting the Tax Commissioners’ contention of a normal increase of 4 per cent, to 5 per cent, a year—or an average of $500 on each parcel—the excess valuation would still be $1000 on each parcel, or over $500,000,000 excess assessment on real estate as a whole. 11 The average assessed value per parcel in Brooklyn is about $7,500. Suppose $2,500 excess valuation existed on each parcel of the 200,000 separately assessed parcels in Brooklyn; the additional tax levied on each $2,500 would amount to $46.25. with a tax rate of 1.85. The employment of a real estate appraiser to appear before the tax commission¬ ers at a hearing on protests, would incur an expense of not less than $25—and this without any guarantee of the granting of a hearing upon the parcel in question or of securing a reduction. Should the Tax Department voluntarily offer to make a reduction of $1,000, it would be good business at present to accept it. On any $1,500 excess valuation, the usual cost of securing a reduction is now greater than the saving in taxes, 200,000 parcels with average of $1,500 excessive valuation would amount to $300,000,000, and in excessive tax levies about $5,500,000. The discretionary powers conferred by the City Charter on the Tax Com¬ missioners are used in such a way as to place the whole burden of proof as to the actual values upon the taxpayer who protests, while the Tax Com¬ missioner makes no effort to sustain the Department’s valuations. The Tax Report for 1907, at Page 20, says: “More important than the law is the departmental system. A good system can only be evolved by years of con¬ scientious work by permanent public servants. The methods of the Department are too little known in our own city.” The Tax Commissioners tell us that “equitable assessment of real estate is the foundation of the city’s credit, and the basis of its economic welfare. The provi¬ sions of the Charter are perfectly plain, and intended to assure equitable assess¬ ments. And it is through the Tax Department that the city annually raises nearly $200,000,000; and the officials who have this tremendously important duty imposed upon them consider that a “departmental system is MORE IMPORTANT THAN THE LAWP Unwarranted Increases and Excessive Assessed Valua¬ tions of Ordinary Real Estate for Purposes of Taxation The fact that real property is over-assessed is clearly demonstrated by the fol¬ lowing data: The Annual Reports of the Department of Taxes and Assessments show the following figures in assessed valuations: Total Assessed Value Ordinary Real Estate in all of the Boroughs, exclusive of “Special Franchises” and “Real Estate of Corporations” Year 1912 . $7,279,579,651 Year 1906 . 5,326,413,110 The increase for six years, inclusive. $1,953,166,541 12 DEPARTMENT OF TAXES AND ASSESSMENTS. 1909 ANNUAL RE¬ PORT, PAGE 17. “Any consideration of the assessed value of ordinary real estate must take into account the fact that the assessment is based on the evidence of value given by sales, rentals, etc., during the preceding fifteen months. Assessments must follow the evidence of value and cannot precede it.” In the face of this statement from the Tax Department, we find that the condition of the real estate market absolutely fails to show any justification for increased valuations. No person could reasonably predicate increased valuations in the face of a declining market when, as will hereinafter be shown, the “Record and Guide” and other real estate publications that are accepted as authentic, show a steady and continuous decrease in the total number of mortgages, the total number of conveyances, and the amount of money loaned on bond and mortgage, since the year 1905. The statement, “Assessments must follow the evidence of value, cannot precede it” in the 1909 report must therefore fall of its own weight. In the face of this declining real estate market, we have a steady increase in the annual tax budget, in the total tax levy and in the annual tax rate. THE EAGLE ALMANAC, 1913, shows a steady increase in the Tax Budget, in the Tax Levy, and in the Tax Rate from 1906 to 1912: GRAND TOTAL BUDGET. YEAR. TOTAL TAX LEVY. $116,805,490 1906 $94,098,174.42 130.421,505 1907 101,950,253.58 143,572,266 1908 116,542,896.09 156,545,148 1909 122,745,210.17 163,128,270 1910 131,478,283.11 173,967,835 1911 142,240,654.56 181,090,657 1912 150,506,057.47 The annual reports of the Department of Taxes and Assessments from 1905 to 1912 show the following increases in assessed valuations of ordinary real estate in the Boroughs of Manhattan and the Bronx: INCREASE BOR. MANHATTAN. TAX RATE. YEAR. LAND. BUILDINGS. TOTAL. 1.49 1905 .. $80,300,920 1.47 1906 .. 234,999,750 1.48 1907 .. ... .$112,121,360 $100,745,360 212,866,720 1.61 1908 .. ... . 99,331,980 73,080,150 172,412,130 1.67 1909 . ... . 22,552,590 32,337,065 54,889,655 1.75 1910 .. ... 75,454,269 52,786,580 128.240,849 1.72 1911 .. .... 209,611,518 32,148,057 241,759,575 1.83 1912 .. .... 13,039,815 30,048,417 43,088,232 Total .$532,111,532 $321,145,629 Increase in land for six years . .$532,111,532 Increase in buildings for six years _ . 321,145,629 Total increase, land and buildings, 1906-1912. .$853,257,161 13 MANHATTAN. Total assessed value, land and buildings—ordinary real estate, 1912_$4,675,641,742 Total assessed value, land and buildings—ordinary real estate, 1906 _ 3,822,384,581 Increase, 1906-1912.$ 853,257,161 INCREASE BOR. OF BRONX YEAR. LAND. BUILDINGS. TOTAL. 1905 . $ 9,076,096 1906 . 75,557,509 1907 . . $ 7,090,334 $ 20,232,094 27,322,428 1908 . . 26,864,973 15,481,715 42,346,688 1909 .. . 8,764,106 9,453,484 18,217,590 1910. . 14,084,713 18,086,398 32,171,111 1911 .. . 64,905,070 33,372,894 98,277,964 1912. . 2,265,201 12,664,084 14,929,285 Total .... .$123,974,397 $109,290,669 BRONX. Total assessed value, land and buildings—ordinary real estate, 1912-$555,674,643 Total assessed value, land and buildings—ordinary real estate, 1906_ 322,409,577 Increase, 1906-1912.$233,265,066 In the face of these large increases in the Tax Budget, Tax Levy and Tax Rate, and assessed valuations on ordinary real estate, we have a steady decline in the real estate market, as shown by the “Record and Guide”: “RECORD & GUIDE” FIGURES MANHATTAN AND BRONX. TOTAL NO. OF TOTAL NO. OF AMT. OF YEAR. CONVEYANCES. MORTGAGES. MORTGAGE. 1905.... . 34,617 30,527 $565,109,682 1906.... . 32,040 27,625 445,970,314 1907.... . 20,697 19,466 377,372,445 1908.... . 16,982 15,395 308,096,145 1909.... . 17,587 16,601 365,046,964 1910.... . 16,797 14,680 361,886,960 1911.... . 16,111 13,120 353,691,695 1912.... . 16,165 11,734 335,400,690 THE BOROUGH OF BROOKLYN may be used, more or less, to show the conditions in the other Boroughs regarding tax increases and inactivity in real estate during the period 1906 to 1912, inclusive. 14 BOROUGH OF BROOKLYN. Total Assessed Value of Ordinary Real Estate. Land and Buildings, 1912.$1,556,281,439 Land and Buildings, 1906 . 992,777,197 Increase 1906 to 1912—about 57 per cent.$ 563,504,242 Total increased assessed valuation of land (about 72 per cent.).$328,845,908 Total increased assessed valuation of buildings (about 42 per cent.).... 233,658,334 Total increase value, land and buildings (about 57 per cent.), 1906 to 1912.$563,504,242 The total number of instruments filed annually in the Register’s Office, affecting real estate in the Borough of Brooklyn from 1906-1912, is shown in the following table: 1906 . 117,111 1907 . 95,357 1908 . 81,841 1909 . 90,008 1910 . 90,018 1911 . 82,170 1912 . 78,075 Total, 1906. 117,111 Total, 1912. 78,075 Decrease. 39,036 The annual reports of the Department of Taxes and Assessments show the in¬ creases in the Borough of Brooklyn to be as follows: BOROUGH OF BROOKLYN. TOTAL INCREASE IN TAX RATE. YEAR. THE LAND VALUE. 1.55 1907... ... $ 29,599,483 1.67 1908... ... 90,734,155 1.73 1909... 7,873,990 1.81 1910... ... 11,629,509 1.75 1911... ... 197,997,868 1.87 * Decrease. 1912... ... *7,989,097 Total. ... $329,845,908 TOTAL INCREASE TOTAL INCREASE IN BUILDINGS. LAND AND BUILDINGS. $49,649,705 $79,249,188 47,528,720 138,262,875 21,560,790 29,434,780 35,020,872 46,650,381 71,410,194 269,408,062 8,488,053 498,956 $233,658,334 $563,504,242 Total assessed value land and buildings, 1912.$1,556,281,439 Total assessed value land and buildings, 1906. 992,777,197 Increase, 1906-1912 $ 563,504,242 15 Annual Reports of the Bureau of Buildings, Borough of Brooklyn, show a decline in additional assets to the City in the way of new buildings erected. The increase in assessed valuation of buildings in the Borough of Brooklyn are given, in the following table; note the results of a comparison with the figures as shown in the official reports of the Building Bureau: The fact that old buildings do not increase in value has been practically ad- in the annual reports of the Tax Commissioners. INCREASE IN ASSESSED NEW BLDGS. NEW BLDGS. COST OF VALUE OF BUILDINGS YEAR. COMMENCED. COMPLETED. BUILDINGS. BY TAX DEPARTMENT. 1906.. .7,070 7,067 $47,950,276 1907.. .6,713 7,775 59,666,977 $49,649,705 1908.. .6,041 6,245 45,262,625 47,528,720 1909.. .7,600 6,218 41,342,327 21,560,790 1910.. . 4,860 6,349 37,942,930 35,020,872 1911.. .4,277 4,202 27,999,934 71,410,194 1912.. .4,072 5,172 30,088,484 8,488,053 During this period there has also been a steady decline in Real Estate activity in the Borough of Brooklyn, as shown by the following figures from the Record and Guide ; NUMBER OF NUMBER OF AGGREGATE AMOUNT YEAR. CONVEYANCES. MORTGAGES. OF MORTGAGES 1906 . 46,218 39,420 $162,574,512 1907 . 32,251 32,756 138,889,521 1908 . 26,455 24,901 88,650,608 1909..... 27,274 26,398 104,706,117 1910 . 26,605 24,399 106,453,775 1911 . 25,111 21,915 95,527,909 1912 . 24,349 19,216 79,063,269 Does this steady decline indicate that “assessments must follow the evi¬ dence of value, cannot precede it?” While we are told that the increase “cannot precede” the “evidence of value,” yet, with a declining market, as appears from the above tables, the Department of Taxes and Assessments has annually given us the following increases: —ALL THE BOROUGHS— LAND. BUILDINGS. TOTAL YEAR. TOTAL INCREASE. TOTAL INCREASE. LAND & BUILDINGS 1906. $439,428,219 1907. .. $196,059,478 $181,537,064 $377,596,542 1908. 284,271,643 153,218,824 437,490,467 1909. 42,561,710 73,290,550 115,852,260 1910. 115,402,444 118,581,176 233,983,620 1911. 554,795,626 165,194,144 719,989,770 1912. 7,432,238 60,821,644 68,253,882 Total . ... $1,200,523,139 $752,643,402 $1,953,166,541 Total assessed value of land and buildings, all the Borough, 1912.$7,279,579,651 Total assessed value of land and buildings, all the Borough, 1912.... 5,326,413,110 Increase, 1906 to 1912 16 $1,953,166,541 Increase in Assessment of Ordinary Real Estate in each of the Boroughs for 1911 INCREASE IN INCREASE IN TOTAL INCREASE BOROUGH. Manhattan Brooklyn Bronx ... Queens ... Richmond LAND. $209,611,518 . 197,997,868 .. 64,905,070 . 75,908,855 . 6,372,314 BUILDINGS. $ 32,148,057 71,410,194 33,372,894 23,498,692 4,764,308 LAND AND BUILDINGS. $241,759,575 269,408,062 98,277,964 99.407,547 11,136,622 Total .$554,795,625 $165,194,145 $719,989,770 MONTHLY BULLETIN Published by BOARD OF BROKERS OF THE CITY OF NEW YORK, (Inc.) Jan., 1912—Page 17. FOOD FOR THOUGHT. 326-330 Broadway (Tefft-Weller Property) Sold December 29, 1911, for $500,000. It was appraised in 1901 at $1,200,000. Tax Department assessment is $725,000. In April, 1911, it was bid in at auction for $570,000. The entire tax list should go back to the 1910 assessment values to give New York City real estate a fair deal. In the face of the numerous facts to the contrary, many that are a matter of public record, the Tax Commissioners would have the taxpayers believe that in 1910, facts were in existence that the Tax Commissioners discovered, yet have never produced, which would fully justify the retaining and the increase in the assessed valuation of real estate as a whole, for the year 1911, to the extent of $719,989,770.00. How is such an increase justified when the City Charter requires that assessments be based upon “what real estate would sell under ordinary circumstances?” The Borough of Brooklyn’s share was an increase for 1911 in land value $197,- 997,868 (over 33 per cent, increase) on the 1910 assessment, and an increase in the > assessed value of buildings of $71,410,194, (over 10 per cent, increase) on the 1910 building assessment. Total increase in assessed value of land and building was $269,408,062, or about 21 per cent, increase on the total assessed valuation for 1910 in the Borough of Brooklyn. 17 Notorious excessive valuations of real estate for the purposes of taxa¬ tion, with an excellent prospect of further increase and no relief for inequitable or excessive assessments in sight, complaints ignored, protests having been found vain—these conditions have had a tendency to retard the value of real estate, to decrease its marketability, and to make it less desirable as an invest¬ ment. In fact, the present condition of the real estate market can be properly and directly attributed to our present Tax System and Methods more than to any other cause. Deputy Tax Commissioners, who place the tentative assessed valuations on real estate for purposes of taxation, cannot be held responsible for the existence of these conditions, for they are powerless to remedy them. The Deputies are civil service appointees and solely under the instructions and supervision of the Board of Taxes and Assessments, and furthermore, the Tax Commissioners, as a Board of Taxes and Assessments have ample power to correct any assessment, which in the opinion of the Board is erroneous, regardless of any opinion to the contrary by the deputies. Were the Tax Commissioners to give the same careful supervision that they give to reductions—require the same character of positive evidence as to the actual value before assessments on real estate are increased; then pay as little attention to the facts as they do when reductions are requested—there would never be any occasion for taxpayers to complain in regard to excessive valuations on ordinary real estate for purposes of taxation. What amount o.f increase in the assessed valuations of ordinary real estate will the books show on October 1, 1913, for the year 1914? Prior to October 1, 1913, under the present rules of the Department of Taxes and Assessments, no information can be obtained in regard to any as¬ sessment on real estate for 1914. April 1st to October 1st, the Deputy Tax Commissioners place the tentative assessed valuations on ordinary real estate for 1914. Will real estate owners receive another 1911 boost of $900,000,000 in their real estate valuations? On the same theory of equalization and depression of 1907 and 1908, small increases in assessed values for the two previous years. (In 1911 it was 1909 and 1910.) (In 1914 will it be 1912 and 1913?) Conditions are very sim¬ ilar. The necessity for more money and an increased borrowing capacity still exists. The 1911 increase was saddled on real estate owners without any previous notice or warning. The same Tax Departmental System and Methods used to increase the 1911 assessed valuations also to retain the increase, and the same facts made use of by the Tax Commissioners to justify the increase of 1911 in their yearly report to the Mayor, might just as easily and readily be used in jus¬ tification of a similar or even larger increase in 1914 valuation of ordinary real estate for purposes of taxation. Should the Tax Commissioners see fit to use the additional fact of signing of subway contract, there is no telling where the increases may end. Any further increase at this time would sound the death knell to real estate values. 18 Discrimination Against Real Estate In the Department of Taxes and Assessments Annual Report for 1912 on Page 13, this Statement appears: “96 per cent, of the total assessments of property upon the rolls for 1912 is real estate—4 per cent, is personalty.” THE ENORMOUS EXTENT TO WHICH REAL ESTATE OWNERS CONTRIBUTE TO THE CITY’S EXPENDITURE SHOULD AT LEAST ENTITLE EVERY OWNER TO RECEIVE HONEST TREAT¬ MENT AND SIMPLE JUSTICE AT THE HANDS OF THOSE TO WHOM THE ENFORCEMENT OF LAW AND POWERS OF GOVERN¬ MENT HAS BEEN ENTRUSTED. * Aitnough the Assessment Rolls do not indicate all the City’s sources of revenue, they serve to show the extreme need of efficiency and proper methods, especially in appraising real estate for the purpose of taxation. The City Charter very clearly states that, “Real Estate assessed valuations for purposes of taxation shall be for the sum which real estate would sell under oruinary circumstances.” This is the only legal basis which may be used for placing assessed valuations on ordinary real estate by the Department of Taxes and Assessments. Equitable assessments of real estate are the only methods by which each tax¬ payer may be charged with a just portion of taxes, and such methods tend to in¬ spire confidence in real estate as a safe and sound investment—equitable assess¬ ments are the best asset any city can possess. Governor Sulzer, Mayor Gaynor, President Lawson Purdy of the Department of Taxes and Assessments and Tax Commissioner Judson Wall of the Borough of Brooklyn, have all publicly admitted the inequitable and over-assessment of real estate valuations for purposes of taxation in the City of New York. Governor Sulzer’s statement at the dinner of Allied Real Estate Interests, Fri¬ day, February 28, 1913, was as follows: “To-day most of the real estate (in the city) is not worth what it is assessed at.” Star Chamber and Tyrannical Methods The Present Tax Departmental System is a mystery to the average real estate owner. The present system now in use has been so devised and re¬ vised that it can stand anything but publicity. It thrives on the ignorance of the public, more especially on the part of the real estate owner. 1909 Annual Report, Department of Taxes, Page 19. “Assessments are more and more regarded as reliable indications of the conservative market value of Real Estate. The methods of the Tax Department are good and the more they are understood the * more will assessments be regarded as good evidences of value.” Governor Sulzer’s remark, “To-day most of the real estate is not worth what it is assessed at” is a most pertinent commentary upon this statement. It needs * neither qualification nor amplification. 1909 Annual Report, Department of Taxes, Page 17. “Any consideration of the assessed value of ordinary real estate must take into account the fact that the assessment is based on the 19 evidence of value given by sales, rentals, etc., during the preceding fifteen months. Assessments must follow the evidence of value and cannot precede it.” Considering this statement of the Tax Commissioners to be a fact; there was certainly no increase in the valuation of ordinary real estate as a whole, nor were there in existence any other facts during the years of 1909 and 1910, or even prior to the opening of the books for public inspection of the assessed valuations placed on real estate for 1911, which would warrant or could justify any such increase either in theory or fact, as was placed on real estate for purposes of taxation for 1911 by the deputy tax commissioners, amounting to $897,048,683, or the reduced amount of $719,989,770, as was finally approved by the Tax Commissioners. The assessment rolls and the records of the department will confirm the truth of a statement credited to President Purdy in the Manhattan Lectures, published 1911 by the West Side Y. M. C. A. “There is a notion quite commonly entertained and absolutely erroneous, that a board to hear complaints can be so constituted that it can secure a fair assessment. “No board for the correction or review of assessments has ever existed that can do very much to correct a poor assessment. In the City of New York there are over 480,000 separately assessed parcels of real estate. The greatest number of applications for correction since the consolidation of the city has been about 10,000, or only a little over two per cent, of the whole number. With so large a number of applica¬ tions as 10,000, it is almost physically impossible to give each application the attention it deserves, and this statement is made with full knowl¬ edge of the fact that not more than one application in five has any merit. If all the 10,000 had merit and all could be acted upon with sufficient time and intelligence, there would then be corrections as to only two per cent, of the total number of assessments. In spite of the fact that a Board of Review has very little value as a means of correcting a poor assessment, it may have very great value indeed in performing the most important function of securing a beirer assess¬ ment the following year if the Board of Review is composed of the same men who direct the work of the assessors.” Dept, of Taxes and Assessments’ annual reports for 1911 show 20,216 written applications for reductions were filed during 1911—about twice as many as were quoted by President Purdy as the greatest number filed in the City. Ten per cent, more than what were quoted as the greatest number ever filed in the City, were filed in Brooklyn alone in 1911, there being 11,800 written applications for reduction. According to President Purdy, it was physically impossible to give proper attention to these protests. If no board can do “very much” with a poor assessment what hope was there for the 11,000 protesting property owners in Brooklyn? When a written protest has been filed for the correction of an excessive as¬ sessment on real estate and the Board of Taxes and Assessments has refused to grant the reduction requested, an action at law, known as Certiorari Proceedings, may be commenced in the Supreme Court within a stated time to review and correct any final determination of the Board. 20 Certiorari Proceedings are about the only means apparent by which the Board of Taxes and Assessments can be compelled to correct any erroneous ex¬ cessive assessments. In the Department of Taxes and Assessments annual report, 1908, on Page 93, there appears as follows: Certiorari—Right of Taxpayers to Review is Absolute and not a Matter of Discretion The right of a taxpayer to review an assessment by Certiorari is absolute and not a matter of discretion, and may show that the assessment is invalid for any reason. —People ex. rel. Friendly vs. Davenport, 119 App. Div. 790. Should a taxpayer bring a certiorari proceeding and be successful, only the assessed value of the property in question is corrected. All similar properties may retain excessive values, regardless of the number. Certiorari Proceedings are a luxury the ordinary real estate owner cannot afford, on account of the expense for legal services, expert testimony, etc. The Board of Taxes and Assessments has devised an effective plan to discourage the correction of even a single parcel by any such means. On November 11, 1909, at the Bedford Branch of the Y. M. C. A., in Brooklyn, President Lawson Purdy, of the Department of Taxes and Assessments, de¬ livered a lecture on “Assessments and Taxation” before a real estate class. During the course of his remarks, he said, referrring to certiorari proceedings: “If you own or represent a good deal of property, I will give you a little advice. Be very slow about getting into litigation with the Tax Department; it is Bad Business. This is what happens when there is litigation. We make an assessment and you make application to correct it. Perhaps we are wrong and you are grieved. You take out a writ to reduce the assessment. The next year we do not enter that, as that would be a confession that we were wrong the year before. You may then have to get a writ the next year and the year after, and no one knows where it will end.” This statement was made during my presence and a copy cf the entire lecture containing this statement is in my possession. The question might well be asked: What kind of treatment is granted the small taxpayer who protects against an excessive valuation, and cannot afford the expense of a real estate appraiser or litigation, in order to secure a reduction, if such elaborate precautions must be taken to avoid the appearance of error? Certiorari Proceedings are not only expensive to the taxpayer but to the City also in defending erroneous assessments. For instance, expert real estate appraisers who testify for the city are men outside of the Department, and never the men employed in the De¬ partment who place the disputed assessment on the property. The main qualification required of the experts employed by the city are that they shall sustain the departmental valuations on real esate. All ex¬ penses entailed by the City in such litigation, eventually are a charge on all taxpayers, as they swell the budget and raise the tax rate. The Departmental records furnish conclusive evidence of how effective this method is, in discouraging litigation with the City. 21 None of these deplorable conditions or facts is due to the tax laws; it is purely and simply a matter of Tax Departmental System (which, according to the Commissioners, is more important than the law), and of methods which are arbitrary, impractical and fallacious. Among the 12,000 1912 applications for reduction, about 6,500 written protests on over-valuations were filed in Brooklyn; about 1,700 were given a hearing, and after only a cursory examination reductions amounting to about $25,000,000 were made, effecting 27,000 parcels of real estate, or only about 15 per cent, of the total number of separately assessed parcels of real estate on the Brooklyn tax rolls. (There are over 200,000 parcels in Brooklyn). About 85 per cent, retain their excessive valuations of 1911. The increase in the previous year, 1911, was $269,408,062. Mayor Gaynor stated in November, 1911, “that this increase was excessive to i the extent of $200,000,000.” A proper correction of Brooklyn ordinary real estate assessed values at present would disclose that at least $150,000,000 of excessive valuations has existed since the 1911 assessments. This, in plain words, means that a large number of Brooklyn property owners are compelled on account of excessive assessed values of real estate to pay taxes on an amount of real estate WHICH THEY NEVER OWNED, and in taxes were over-charged more than $2,500,- 0CG during each year, 1911, 1912 and 1913, with apparently no redress or any chance of ever obtaining any. For a majority of them, the cost of securing correct assessed valuations would far exceed the saving in taxes. On this basis, in order to increase the borrowing capacity of the City, the excess cost to Brooklyn real estate owners alone, will be over $7,500,000 for the years 1911, 1912 and 1913. THIS IS ONLY BROOKLYN’S SHARE. THERE ARE FOUR OTHER BOROUGHS. Deputy Tax Commissioners and others in the employ of the City, who place the tentative valuations on ordinary real estate for purposes of taxation, perform all such duties solely under the direction and supervision of the Board of Taxes and Assessments. The Department of Taxes and Assessments, the head of which is called “The Board of Taxes and Assessments,” consists of a President, designated in his appointment, and six tax commissioners. Appointments of President and the six commissioners are made by the Mayor, and all, or any of them, are removable at the pleasure of the Mayor. Ample power is given the Tax Commissioners under the charter and the tax laws to insure equitable, fair and just assessments of real estate on the City Charter basis, for the sum real estate would sell under ordinary circumstances. They have also most extraordinary discretionary powers. The Departmental System of appraising is termed by the Tax Commissioners as wholesale appraising. When any correction is made, it necessitates wholesale correction as well to insure equality. The increase in the Borough of Brooklyn for 1911, as approved by the Tax Commissioners after written protests were filed and so-called hearing was held, was $269,408,062. The books and records of the Department of Taxes and Assessments for 1911 in the Brooklyn office will prove conclusively that the enormous increase in the assessed valuations of 1911 in Brooklyn were based upon mere con¬ jecture or surmise as to the value. 22 The records will also disclose the facts, that the Tax Commissioners assigned the Deputy Tax Commissioners to districts for 1911, that they had little or no previous experience or knowledge of, in regard to the real estate valuations or conditions. In Brooklyn for the year 1912, on account of a change in the Tax Laws, there were only about three months to correct the 1911 over-valuations and under¬ valuations and also place correct valuations for 1912. Many of the deputies were assigned to new districts. With three months less to do this work, and not having had even the benefit * of the experience in placing the original assessments, about all the deputies could do was to copy the 1911 assessment for the 1912 assessment. RESULT—$27,252,673 tentative increase in 1912, mostly new building assets, i In a few of the districts the land was decreased, but still the total increase on land was $2,855,997. A vigorous campaign for reductions of the 1912 assessments was conducted by the press in Brooklyn, especially in the Brooklyn Sunday edition of the New York American and the Brooklyn Daily Eagle: The Tax Commissioners probably realized that the public sentiment had to be considered, as for the first and only time real public hearing on protests was held and the result was almost disastrous to the tax system (in 1913, as formerly, Star Chamber proceedings were held). Brooklyn received probably the smallest increase in the history of any of the boroughs. The $27,252,673 increase in the 1912 assessed valuation by the Deputy Tax Commissioners was reduced by the Tax Commissioners to $498,956 in Brooklyn. The 1913 Brooklyn assessments of ordinary real estate furnish another prac¬ tical demonstration of the absolute control the Tax Commissioners exercise over the deputy tax commissioners’ figures. The Brooklyn Eagle, March 2, 1913, in an article referring to the 1913 assess¬ ments of ordinary real estate as approved by the Tax Commissioners. It is stated that the tentative increase by the Deputy Tax Commis¬ sioners in Brooklyn was $24,000,000 in the assessed value of real'estate due to improvements. This would mean that the deputies practically copied the 1912 figures for 1913, plus the amount of new buildings, being the same method used for the 1912 assessments, copying the 1911 assessments. The tax commissioners reduced this increase so that the amount remaining for 1913 is $2,813,093. The tax commissioners reduced the land value as placed by the deputies for 1913, about $21,000,000. There still remains about $170,000,- 000 of the increase on Brooklyn land as approved by the tax commissioners for 1911 upon which owners pay taxes. * New buildings erected, which were added by the deputies to the 1912 and 1913 assessments, amounted in 1912 to over $17,500,000; in 1913 about $24,000,000. This new asset to Brooklyn in the way of new buildings, amounting to about > $41,500,000, according to the Tax Commissioners, this new asset has had a most remarkable effect: that of decreasing the land value in Brooklyn about $29,000,000, and only increased the assessed value for 1912, $498,956 and for 1913, $2,813,093, making a total for 1912 and 1913 of an increase of $3,312,049, with new assets of $41,500,000. 23 Taxpayers seeking a reduction of an erroneous, excessive assessment on real estate invariably are compelled to file a written protest, and are handed a De¬ partment Blank for that purpose, on which is plainly printed: “To secure proper attention, this form must be used and the questions clearly answered.” Some of the questions are such as the average real estate owner is unable to answer, and he must seek outside aid. Unless written request for a hearing is made on the blank, no hearing will be granted before the tax commissioners as a Board for the correction and review of assessments. There is nothing on the blanks to indicate such a written request is necessary in order to be entitled to a hearing before the Board of Revision. Even when such written request is made, only a small percentage are granted hearing by the Tax Commissioners. The Tax Commissioners frankly state that such hearings, when granted, are to be considered as an act of courtesy only. These so-called hearings are practically “Star Chamber Proceedings.” Written protests presented in the Brooklyn Office for filing have been refused, unless facts stated were in affidavit form and sworn to. In order to answer the Tax Commissioners satisfactorily the technical ques¬ tions asked at the hearings regarding valuations, etc., it would necessitate the; employing of a real estate appraiser or an attorney-at-law—more frequently both. After these forms of filing protests are duly performed and the courtesy of a hearing is granted, then, as a matter of fact, the taxpayer, as has been explained, has slight chance of securing any reduction. One of the Tax Department officials in the Brooklyn office was interviewed in my presence in the latter part of 1911 by an editor of a certain news¬ paper and was asked by him “If he would state what facts, in the opinion of the Deputy and the Tax Department, could possibly justify a certain increase in 1911 that was made, amounting to over 100 per cent., especially in view of the fact the books showed that the Tax Commissioners had the previous year (1910) reduced much lower figures made by the same Deputy on the same property?” His answer was: “That the increase was made OPENLY, MALICIOUSLY AND DEFIANTLY,” (the facts regarding the increase confirm the statement). After a pause, he added: “What are you going to do about it?” After Mayor Gaynor’s speech, at the Fifth Avenue Association dinner on Nov. 21, 1911, the tax officials in the Brooklyn office became a little more diplo¬ matic, for instance—Tax Commissioner Wall. Tax Commissioner Judson Wall, of Brooklyn, makes use of a stereotyped answer to ward off all pertinent specific questions in regard to excessive valuations or about the tax department system. It is, “that the questions are asked to embarras the department and I refuse to answer them.” If pressed further for an answer, Tax Commissioner Wall will refuse to be interviewed, and any further or future audiences on the subject will be positively denied. Sometimes a suggestion is made by Commissioner Wall, or his chief clerk, “better see President Purdy.” President Purdy’s answers are still more diplomatic, but results are the same. No information that will tend to em- barass the department can be obtained—neither will a correction of an er¬ roneous assessment be made which will enable any one to point a finger at the department and say, “There’s an error that was acknowledged.” 24 Editorial Comments Brooklyn Daily Eagle, January 9, 1911. THREE HUNDRED MILLIONS. “Now comes 22 per cent. more. That is doing things by wholesale. That is « worse and more of it. There has been no boom. On the contrary, Brooklyn real estate has been and is a drug in the market.” “The assessors have obeyed instructions. They have done what they were told . to do. And they have done it thoroughly. In hundreds, not to say thousands, of cases they have added to burdens already almost too heavy to be borne.” WHY NOT BE HONEST WITH THE PEOPLE? Brooklyn Daily Eagle, January 10, 1911. “When the people put a government in power they expect to be fairly treated by the officials they create. The people of Brooklyn have not been fairly treated by the tax officials of this administration. They have a cause for profound and bitter complaint in the raising of assessments beyond the values at which much of the property assessed could be sold, even if the market for Brooklyn real estate were active, which is not the case.” “If a certain amount of additional revenue be required for the mainten¬ ance of the city government and the execution of public improvements, why not take an obviously honest method to obtain it. Why push up assessments beyond the values at which Brooklyn owners would be willing to dispose of their holdings; if buyers could be fortunately found? Why not assess on the basis of real, and not on assumed values and then raise the tax rate to meet the demand for increased revenue? “The method adopted by the Board of Assessors is nothing less than robbery perpetrated to a large extent at the expense of people who cannot readily meet the extortion. Of these people the Sun says this morning: ‘In their household budgets, taxes and carfare are important items. Yet they are now taxed more heavily than ever before on values which for the most part virtually represent expected salaries or other future incomes/ “This puts the case in a nutshell. The new assessment is an attempt to capitalize the future rather than an honest effort to arrive at true values as they now exist. The wrong of this is apparent. It is a wrong for which the people of Brooklyn will insist upon redress.” i CAUSE AND EFFECT. Brooklyn Daily Eagle, January 10, 1911. > “Assess at full value.” Nothing could have been shorter or sharper or more decisive. And, of course, it bore fruit after the manner of its kind. This for the best of reasons. “The assessors knew not only what was expected, but what to expect. Self- preservation. being the law of official nature, they obeyed orders. There was multiplication all along the line. 25 “There is such a thing as confiscation ‘in the name of the law.’ A fair share of the cost of government none should object to paying, but assessments based upon fantastic figures are different. “With a higher rate, based upon the actual, none would find fault. A lower rate, based upon the inflated, is a humbug.” TAX VALUATION. Brooklyn Union, February 14, 1912. “The amount of taxes is fixed by the appropriation, including the appropriations that have to be made for debt service; but whether the rate shall go up or the valuations shall go up depends upon whether an extended borrowing capacity happens to be wanted.” THIS YEAR IT IS THE TAX RATE. Brooklyn Standard Union, March 2, 1912. “They get you one way or the other. The City’s expenses have got to be paid by the taxpayers; if the payment is put off by borrowing, it simply increases the amount to be paid, for of the $181,000,000 budget this year, $35,000,000, by far the largest single item, is to meet interest on the city debt. When for some reason or other they want the borrowing capacity to be vastly increased they made it so and put down the rate; when they prefer to have the borrowing capacity only slightly increased, they put up the rate. About the only difference is that if your valuation is marked up you can bring pressure to bear and may have your in¬ dividual assessment reduced; but when they put up the rate, that rate stands for everybody.” Brooklyn Citizen, March 2, 1912. “To those whose 1912 tax bills will be higher, this explanation, we know, will be cold comfort. They will feel somewhat like the man who got it going and coming. When the tax rate is, comparatively speaking, low, the assessments are abnormally high. When the assessments are fairly normal the tax rate jumps up.” VALUES—REALTY AND REAL The Evening World, September 30, 1912. “The Tax Department seems to have adopted the policy of the wily Oriental, who always states a figure so high that it can stand a lot of beating down and still show profit.” VALUES AND TAXES. The Brooklyn Times, March 4, 1913. “An unprecedented real estate situation is revealed by the latest report of the Department of Taxes. The report states that the official valuations of land for taxation are now equal to the actual cash value of the properties. As a matter 26 of fact, complete figures would show that the valuations are greater than the real values, because in the departmental estimate foreclosure sales are used in making a basis for the estimate. Further, the true values of the real estate which has changed hands in the past year cannot be ascertained save in a few scattered instances.” EDITORIAL. Record and Guide, March 15, 1913. THE CAUSE OF THE REAL ESTATE DEPRESSION AND THE REMEDY. ‘“No one who watches closely the condition of public opinion among New York taxpayers can fail to be impressed by the gathering alteration in their attitude * toward their own troubles. Until recently they did not exhibit any very lively and omnipresent interest in the effect which the tax policy of the city government was having upon the condition of the real estate market. Of course they grumbled at the increase of taxes, and their discontent was sufficiently obvious and im¬ pressive to play a certain part in the last municipal campaign. But still they were not thoroughly in earnest. “They did not take the prevailing depression very seriously. They did not attribute it chiefly to causes connected with the policy of their city government. They had been familiar with periods of depression in the past, and they remembered that after some years of agitation a sudden revival of prosperity supervened and their grievances were swallowed up in the beneficial effects of enlarged busi¬ ness activity and a return of confidence. They have anticipated that the present prevailing period of depression would vanish in the same way and that nothing which they could do as citizens and voters would contribute much either to the acceleration of the return of prosperity or to its retardation. “Recently, however, they have begun to evince a more serious and responsible interest in the situation. General business prosperity has, in a large measure, returned without benefiting real estate in New York City. The number of trans¬ fers recorded are smaller than they were during the past two dull years. The amount of building is on the decrease. Very little money is being invested in real estate. Speculation is at a standstill. The general condition is worse than ever, while at the same time there can be no doubt as to the cause of the depression. Real estate is almost unsalable, except in a few favored locations or at a sacrifice, not because the city is not increasing in population and business, not because its general prospects and situations are not as flattering as they ever have been in the past, but largely because of the effects of past increases in taxation and the threat of future increases. “The growing public understanding of the real cause of the exciting depression has increased the prevailing sense of responsibility among property owners as to the adoption of an active, protesting and remedial policy. They are beginning to realize that conditions will not substantially improve until something is done to make them improve—until something is done, that is, to remove the threat * which is now hanging over the future of real estate values in New York City. This action must be taken by the municipal authorities and fit must assume either one or both of two forms. t “Either new sources of revenue must be discovered and tapped that will provide for the increase in the city budget, or else a policy of the most rigid economy must be adopted. In truth a combination of these two methods of meeting the difficulty will be necessary, and it will not be taken withput the exercising of active pressure on the municipal authorities by the property owners of New York. The time has come when it is necessary for the property owners to exercise their 27 latent political power. Even in the matter of votes a large proportion of the taxpayers of the city would be in a position to exercise a great deal of pressure, and their indirect influence, if properly mobilized and executed, should be still more powerful. “In this connection, however, property owners should remember one important fact. In New York municipal elections take place only once every four years and the possible political influence they possess cannot be exercised oftener than that. An election takes place next fall and that election will provide the taxpayer with the only opportunity to make himself felt that he will enjoy for a long time. y It promises to be a very interesting election, during which questions of municipal policy will receive an unusually fine and enlightening discussion. It will be the fault of the property owners of New York and the organizations in case this discussion does not emphasize the real needs of the existing situation and the real grievance of taxpayers. They should take care that the discussion turns chiefly upon methods of economic administration and the problems of taxation. Every candidate of all the parties should be pledged, if possible, to a definite pro¬ gram of economy and of tax reform, and preparations looking in the direction of effecting these results should not be left until after the summer vacation, but should be begun during the spring and pushed just as far as the general situation will permit.” It is high time that real estate owners and the public officials, and others responsible for this condition came to the parting of the ways. A searching exposure of the facts and persistent publicity will clear the way for the remedy and will result in equitable taxation, lower tax rates, a general revival of interest in real estate. Thus, the best interests of the City would be conserved. We have long since learned that reforms need not wait for a change of ad¬ ministration. There will never be a more auspicious moment to change and do away with, once and for all, a Tax Departmental System with which, it is obvious, the object strived for is to increase the real estate assessed valuations that the borrowing capacity of the City may be augmented, and to meet the incessantly increasing expenses of the City with as low a tax rate as possible, regardless of the City Charter, which says: “Real estate assessed valuation shall be for the sum which real estate would sell for under ordinary circumstances.” There are over 500,000 separately assessed parcels of real estate on the tax rolls of the City of New York. Were these owners or any considerable number of them to make a concerted effort to correct the Tax Departmental System, it could be accomplished practically over night. At their hands any resistance by the few city officials responsible for the present deplorable conditions with ample power to remedy it, would be about as useless as for any one to attempt to steer an ocean liner without a rudder. Ample power is vested in the Mayor to remove Tax Commissioners who are derelict in their duty. 28