Anna Champaney testifies on implementation challenges and CBC recommendations

Good afternoon.

I'm Anna Champany, the Vice President for Research at the Citizens Budget Commission.

Thank you for the opportunity to testify.

Clearly, implementation thus far has been rocky.

Insufficient vetting, compressed rollout, and inadequate communications all contributed to confusion, and both the city and the state can learn from the early stumbles.

CBC does not support the pied-a-terre tax.

There are, in our belief, better ways to stabilize the city's budget, but our decades of experience on tax policy reinforce the importance of high-quality tax administration.

Looking more specifically at the challenges, first, the legislation received limited public vetting.

The bill language was released just one day before the state legislature voted, leaving little opportunity to identify ambiguities and implementation challenges.

Greater vetting would not have prevented all issues, but would have improved the odds.

Second, DOF is implementing a new and administratively complex tax with less than eight months from enactment to revenue connection.

The law requires determinations about values, ownership, and

residency, including special rules for co-ops and condos.

To meet the deadline, DOF developed regulations and administrative processes in less than seven weeks.

This time constraint makes the desired analytics, consideration of public input, and communication harder.

Third, the city's public education and communications were insufficient.

Many did not understand that the law directed DOF to quote unquote, open to the public the books of annual records of market values of covered properties, which is a much broader group than those subject to the tax.

DOF chose to comply by publishing the supplemental rule.

This choice appears reasonable, but it did also create near instant confusion.

Notably, adequate vetting of the legislation may have helped inform the public or led to a change in the legislation itself.

Also, DOF did publish more variables than were required and did not indicate whether properties might be subject to the tax.

Concerns about public disclosure of private information are understandable, but potentially misplaced as the information is already public in the tax roll in the Pluto database in ACRES in numerous sources.

The city should have communicated about the 17,000 letters more clearly, who would receive a letter, why DOF needed additional information, and the next steps.

Given this confusion, the city was right to extend the deadline.

In addition to lessons noted above,

the city should take this ideal opportunity to evaluate the pied-a-terre's tax impact on property values, transactions, housing supply, ownership patterns, and tax revenues.

These findings would enable the legislature to smartly adjust the policy if it generates unintended consequences, while also informing comprehensive property tax reform.

The city could also evaluate broader related impacts of changes in supply and ownership, not just on property taxes, but all revenues.

Thank you.

Thank you.

Next.