Proposal to Use Assessed Values to Determine Dues

The Board of Crane Neck Association

March 18, 2017

Section 1: Introduction

Since 2014, we have had a system of uniform dues in which all members pay the same annual dues and special assessments. Prior to 2014, annual dues were based on assessed values. Unfortunately there were problems with our records which motivated the move to the simpler system of uniform dues in 2014.

While the uniform dues system has the benefit of being extremely simple, it has the problem of being somewhat unfair since all property owners must pay the same amount despite the wide variation in property values. It is particularly unfair to owners of Cabanas and empty lots. For a different reason, it is also unfair to residents on Mt Grey since they do not use CNA roads for home access. This problem of unfairness would not be serious if dues were sufficiently small. But our dues are already $650 and we had a $1000 special assessment in 2016 which has been paid by only 60% of the members. In the interest of greater fairness, which we hope will induce greater participation, we propose to go back to dues based on assessed values. Unlike in the past, our new system has the feature that each member can easily verify that the dues are correct.

Section 2: Proposal

We propose making 70% of the dues proportional to assessed value and leaving the remaining 30% uniform. This will apply to both annual dues and special assessments. We also propose charging Mt Grey members only the uniform portion ($195=$650*0.3) since they do not use any of the roads maintained by CNA for access to their properties.

The choice of 30% as the uniform portion was made to control the disparity in dues between the members with the highest and lowest dues. This choice was made based on an analysis of the distribution of dues of all members.

Unlike in the past, we will include information in the invoice so that members can easily verify that their dues are being computed correctly. Invoices will state the median dues (say $650), the median assessed value (say 8650) and the uniform percentage (30%). Members can find the assessed values of their properties on the tax bill from the Town of Brookhaven or the Village of Old Field and easily verify their dues using the following formula:

Dues = (0.3 x $650) + (0.7 x $650 x Assessed Value / 8650).

Here are various arguments in support of this proposal:

1. It is required by CNA Bylaws: Article IV, Section 1 on Annual Dues states that: “… a family owning real property on Crane Neck shall pay annual dues to the Association based on the aggregate assessed valuation of all parcels of real property on Crane Neck owned by such family as shown on the latest Assessment Roll of the Village of Old Field”.
2. It is fairer in terms of impact on property values: To the extent that a good road system adds to the property value, it would be more reasonable to assume that the increase is proportional to the property value rather than a fixed amount. The truth is probably somewhere in between and closer to being proportional. As an extreme example, consider the effect of better roads on properties worth $50,000 (a cabana, perhaps), $500,000 (an empty lot, perhaps) and $5 million. It seems much more reasonable to expect the market value to increase by 1% (that is, $500, $5000 and $50,000 respectively) rather than by an equal amount for all of them.
3. It is fairer in terms of impact on roads: There is probably a correlation between higher property values and greater use of roads by heavier vehicles for landscaping, fuel and maintenance. Admittedly, this is a somewhat weak argument.
4. It is probably fairer in terms of usage: Properties further down Crane Neck Road tend to have higher values and need to use more of the road system for house access. Obviously, this argument is even weaker than the previous one.
5. There have been several discussions at CNA meetings regarding the possibility of charging extra fees for new construction since construction vehicles degrade the roads a lot more due to carrying heavy loads. Unfortunately, CNA may not have the authority to charge such fees and more importantly we do not have the resources (such as a building inspector and associated staff) to determine and collect a fair fee for each project. It turns out that new construction results in a much higher assessed value than an existing home of the same size. Thus this proposal would have the feature of collecting more dues from members with new construction.
6. A fairer system will hopefully lead to greater participation by members of CNA.
7. There will be less time spent at meetings discussing issues of unfairness, extra fees for construction, etc., allowing us to focus on the important issues.

And here are potential drawbacks:

1. Each year, some work will be required to collect updated data for assessed values. The Treasurer collected these data online from the Assessment Roll Map webpage maintained by the Town of Brookhaven and cross checked these with the data obtained on request from the Assessor for the Town of Brookhaven.
2. There is the possibility of errors in assessed values. Each member could easily detect these errors by comparing with the tax bill from the Town of Brookhaven or the Village of Old Field. Once detected, they can be rectified easily since the information is publicly available.
3. If members with more expensive properties do not pay, the impact will be greater than that in our current system of uniform dues.

Section 3: Assessed Value and Property Taxes in New York State

Assessed value can be thought of as a substitute for property value. The assessed value of a property is determined by the Town of Brookhaven and it is approximately 1% of the estimated market value. For properties in CNA, the median assessed value in 2016 was 8650. Property taxes levied by The Town of Brookhaven, The Three Village School District and The Village of Old Field are based on the assessed value.

Here is a brief summary of how property tax is computed on our tax bill.

1. The Town of Brookhaven determines an assessed value on each property. The assessed value is supposed to be a certain percentage of the market value as estimated by the town. The market value is called “Full Value” in our tax bill.
2. New York State establishes a ratio called RAR (Residential Assessment Ratio) which, when divided by the Assessed Value, equals the market value. The RAR is called “Uniform %” in our tax bill and is next to the Assessed Value.
3. The Assessed Value is adjusted for exemptions and multiplied by the “Tax Rate per $100” to determine the actual property taxes.

In summary,

Property Tax = Taxable Assessment x Tax Rate

Taxable Assessment = Assessed Value – Exemptions

More information is available at the following website:

https://www.tax.ny.gov/pit/property/learn/index.htm