SUFFOLK CLOSEUP - Pay Attention NYS Law "Fees Must Not Exceed Cost Of Service"

SUFFOLK CLOSEUP

By Karl Grossman

A decision last month by a state Supreme Court justice that Nassau County was imposing an “illegal tax” on commercial property owners is seen “absolutely” by Suffolk Legislator Rob Trotta as a sign that a class action lawsuit brought against increased real property fees charged by Suffolk County will also win out. 

If that happens and these and other increased Suffolk fees are ordered refunded, “the county will end up on the brink of bankruptcy,” says Mr. Trotta, who has been highly critical of Suffolk Executive Steve Bellone making use of hiked fees.

The Nassau case involved $36 million in fines charged to property owners who didn’t file financial information with the county assessor. Justice Anthony Marano ruled there wasn’t a “scintilla of evidence” that the fines had anything to do with funding assessment operations in Nassau. Instead, “the bottom line is they are relied on to balance the county’s budget.” 

That’s the same charge in the lawsuit brought against Suffolk in October which focuses on new real property fees imposed by its county government. 

“If Suffolk County wants to raise revenue, it needs to do it legally, not by levying unauthorized taxes through excessive fees on a subset of residents,” says Cameron Mitchell, executive director of the Government Justice Center in Albany and attorney for five Suffolk residents who are plaintiffs in the lawsuit.

It charges: “Unwilling to rein in its spending or face the political consequences of raising taxes to pay for general fund expenditures, the county passed legislation in 2015 and 2016 imposing unauthorized taxes on county real property owners, labeling the taxes as fees. Each year the county chose to fund budget gaps by raising the fees on tax map verifications performed by the Real Property Tax Service Agency for documents filed with the county. The revenue raised by the agency far exceeds the county’s cost to operate the agency.”

Under state law, the lawsuit maintains, fees must not exceed the cost of service.

It relates how in 2015 Suffolk “in an effort to balance the county’s revenue to spending, the county executive recommended increasing the agency’s [tax map] verification fee to $150 a parcel” from $60. Then the Suffolk Legislature, it goes on, increased that to $200. “The county was not finished,” it says. In 2016 “an additional $300” was added to the “verification fee…for every mortgage filed.” 

“The county knew that it had its home buyers and sellers over a barrel and that it would be unlikely that home buyers would do anything but pay the verification fees,” it says.

Meanwhile, the county’s Real Property Tax Service Agency cost the county $1.2 million last year to operate, it continues, thus the increased fees collected—$66 million in 2017 alone—have overwhelmingly not been for the agency but for general county purposes.

The lawsuit says “it is against equity and good conscience to permit the county to retain the illegal taxes.” It demands Suffolk “refund and repay” the money raised. In the Nassau case, the county is holding off on refunding money pending its appeal.

The office of Mr. Bellone, a Democrat, takes the position that the Suffolk lawsuit is “politically motivated.”

Mr. Trotta, a Republican, has in recent years been blasting the county for increasing fees for a variety of functions. In a legislative debate in 2016, when the additional $300 fee for filing mortgages was passed, he said—and this is pointed to in the lawsuit—“This is nothing more than a tax disguised as a fee. It’s death by a thousand knives.”

Mr. Trotta says increased fees for general county purposes “is not even a grey area. The New York State comptroller has stated you can’t do this, and there is case law stating it can’t be done.”  A retired Suffolk Police detective, Mr. Trotta says: “It’s a recipe for disaster.”

He further cites a statement at a Suffolk Legislature meeting by its counsel, George Nolan, himself a Democrat, that “if a case is brought challenging any fee on this basis, and the court finds it far exceeds the county cost of providing service, there is a good possibility a court would say the fee is excessive.”

As a class action lawsuit, if it is victorious everybody who has paid the increased real property fees could get them refunded. Then Mr. Trotta anticipates more lawsuits “going after every one of the increased fees—and like dominoes, they’ll all go down.” This would mean more refunds and, he says, the specter of bankruptcy for Suffolk County government. 

The plaintiffs in the lawsuit are Elizabeth Cella of Melville, Winifred Esoff of Kings Park, John McCarthy of Commack, Carol Rodgers of Calverton and Nicholas Accardi of Shirley. The first four paid Suffolk’s increased real property fees when they closed out home equity loans “established years before.”

Karl Grossman is a veteran investigative reporter and columnist, the winner of numerous awards for his work and a member of the L.I. Journalism Hall of Fame. He is a professor of journalism at SUNY/College at Old Westbury and the author of six books.