Unemployment Takes Toll on American Dream

Mortgage delinquency rates and foreclosure rates are rising as the unemployment rolls swell. Another 500,000+ people lost their jobs in May. I can see how one's financial world can unravel so quickly especially here on Long Island. Housing is super expensive and the majority of it is classified single family - good old suburban glory at its finest. Unfortunately, if you are a homeowner, it will be downright difficult to survive a protracted unemployment if you are without adequate savings or adequate credit; though tapping credit during unemployment only compounds one's financial predicament. Unemployment benefits in NY are a maximum of $405 a week plus federal stimulus of additional $25 a week.

It is fairly obvious that the best and most effective way to cut expenses is to reduce one's housing expenses. Unfortunately, as of April 2009, the median home price is $350,000 for houses in contract and the median income is around $65,000 in Suffolk County and $85,000 in Nassau County. Property taxes are among the highest in the nation and average more than $7,000 per year. In addition, if one has to COBRA health insurance costs, even with the 65% subsidy, the average family plan will cost over $500 a month.

Those in rentals have more flexibility to downsize but homeowners, on the other hand are stuck with few alternatives. Many have put their homes up for sale but home sales are weak due to the economy and stricter lending standards. New buyers need at least 20% or $70,000 for a downpayment to purchase a home on Long Island at today's rates and it takes about 3 months just to close on a house in NY. Also, if you bought in the last five years, selling for even close to what is owed in mortgage is difficult; only those fortunate to have lived in their home long enough can "afford" to accept a cheap price to facilitate a fast sale.

Sadly, many homeowners are left with no alternative but to fall behind on their mortgage and as we can see this is happening in droves nationwide. Not everyone is a deadbeat, many are middle class Americans whose livelihood crashed along with the economy.

In the scheme of things, I certainly wouldn't mind moving to where the jobs are but what would I do with my house? In many cases, the American dream of home ownership becomes a nightmare the moment you lose your job. People are doing what they have to do to survive but for many, with ruined credit, depleted retirement savings and little left in available funds, it will be a long road back to personal financial recovery even if they do find a job.

Property Tax Cap: Solution or Disaster?

It is nice to see that the NY State Senate Is meeting to tackle the property tax cap issue in response to the Commission on Tax Relief’ recommendations. The Commission, instituted by former Governor Spitzer and headed by Nassau County Executive Tom Suozzi, recommended a school property tax cap of 4% annually; a proposal supported by Governor Paterson. This means that school budget increases must result in a property tax increase of no more than 4% each year. We have long known that New York spends significantly more per pupil than any other state in the nation and some regions in New York, like Westchester and Long Island have the highest property taxes in the nation so something has to be done.

A property tax cap seems like it would be welcome news but it has ignited a furor. School districts, the teacher’s union and other pro-union, pro-education forces have dug in their heels claiming that many school districts will suffer and they will. In order to meet budget requirements, districts will be forced to cut more and more programs to make ends meet. This budget cap will lead quickly to the demise of music, art, athletic and after-school programs. There are few, if any, districts that have been able to maintain the same level of programs without an increase greater than 4%. This is troubling.

Nevertheless, what can we do, the property taxes on Long Island are crushing middle class families and senior citizens. The high taxes coupled with the high cost of home ownership is forcing families to leave and preventing young families from settling here. There are other solutions, like revamping the school districts all-together or sharing administrative services. These are reforms that I personally favor but so far they have no champion. I also think that some elected official has to find a way reduce the stranglehold of the teacher’s and school administrator's unions even if it means political suicide. After all, school teachers and administrators cannot be entitled to tax-payer funded benefits that the tax-payer themselves do not receive in their private sector jobs. It is only fair. Nevertheless, we will see what the legislature comes up with; it won’t be pretty either way.

Things Are Not As Bad As They Seem

Good News! Congress is close to passing a housing bill to help struggling home owners. It looks like the taxpayer will be bailing out Freddie Mac and Fannie Mae after all. The bailouts are working and the stock market is happy to hear it. The stock market is going up and the Dow has reached the levels that it had 2 years ago. In addition, the consumer is still spending as major food retailers show gains. The price of oil is coming down; I saved 10 cents a gallon over the previous week on my most recent fill-up. Even the federal minimum wage is going up 70 cents tomorrow to $6.55/hr.

Thankfully, I can quit all of my bellyaching about how bad things are, recognize that Phil Gramm was right about us whining, and ignore the federal reserve drumbeat of economic doom and gloom. I was even brave enough to tally our retirement accounts today and they really are not so bad. At least we have the same amount that we had in 2006 in spite of subsequent contributions and here I was dreading the worst.

I need to learn that I have to stop worrying vicariously. I worry about the middle class. I worry that people are not affording what they think they can afford. I worry about my friends and family members whom I believe are being fiscally irresponsible. I need not worry when it is fairly certain now that bad financial behavior will be rewarded. The government is completely ready to bailout whatever financial fiasco we get ourselves into. Here I was struggling to pay down debt and jumping through hoops to preserve my credit score. I need to throw caution to the wind and start acting like everybody else. Good guys and girls always finish last.

Greed is good and I absolutely need to figure out how to get on that bandwagon so I can get my piece of the action. Besides, if I go out there and start spending, it will be great for the economy. In fact, I should stop worrying about finding a job because the government will save us. I need to try on this truth for size, it feels uncomfortable but I’m sure it will stretch after I wear it for a while.

Bruno is OUT, Skelos is IN

New York State can take a breather now that Joseph L. Bruno, the most powerful Republican in New York State, has stepped down as NY Senate Majority Leader, a post he has held since 1995, though it seems like forever. Bruno, 79, has been in office for 32 years representing Rensselaer County and the southeastern part of Saratoga County that includes Saratoga Springs. Bruno and Sheldon Silver, the Democrat from New York City who became Speaker of the NY State Assembly in 1994, have run the state together over the past 12 years or so with virtually no opposition from previous Republican Governor George Pataki until Eliot Spitzer, the muckraking Democratic Attorney General turned Governor, came along at the beginning of 2007.

Eliot Spitzer was elected with the mandate to change politics as usual in New York State and immediately went head-to-head with Bruno. Unfortunately, megalomaniac Spitzer brought himself down a year later without accomplishing his goal and suddenly Lieutenant Governor David Paterson was thrust into the Governorship a mere 3 months ago. I, for one, thought that Bruno and Silver would stomp all over him and that he would not have a fighting chance. So, lo and behold, Bruno suddenly decides to step down. Could it have anything to do with the FBI’s yearlong investigation into his business dealings? Bruno states that he plans to “move on with my life and give my constituents an opportunity for new representation and my colleagues in the Senate who have supported me, an opportunity for new leadership.” Joe, sorry you didn’t see fit for us to have benefited from this years ago.

Anyhow, the Republicans have elected Dean Skelos to become their new Leader to take the helm of the NY Senate which has been dominated by the Republican Party for the last 40 years. Likewise the NY State Assembly has long been dominated by the Democratic Party. The most important part about Dean Skelos is that he is from Long Island and has represented Rockville Center, Nassau County for the last 22 years. He is basically a career politician so I’m not sure how much change that will bring to NY State government. Many are suggesting that with Bruno gone, the Republicans may lose their majority in the Senate come November.

Skelos, 60, claims that his top priorities are property tax relief and job creation. Long Islander’s have been screaming for property tax relief for years. Where has Mr. Skelos been all of this time? Anyway, I am glad to hear that he is finally going to do something about it. Whohoo! I did not know this but apparently he was instrumental in helping Bruno attain the Leadership post back in the 90’s so he is no small fry. At the very least, he should be able to put Long Island squarely back on the map in Albany. Maybe something good will come of his reign after all.

Update on Special Districts reform

In Monday's (6/2/08) post I discussed the special districts reforms touted by former Gov. Spitzer in February. I was concerned that these reforms worth millions of dollars in tax savings for Long Islanders had been lost in the gubernatorial shuffle. However, it turns out that we have no one to blame but ourselves.

In today's Newsday an editorial in the opinion pages addressed the lack of action on special districts reform (See Newsday, 6/6/08 LI delegation should step up - Reform bills are withering in Albany, and there's no excuse for that). It turns out that Long Island’s flat-footed state legislators have done nothing about it. Yes folks, the very people that we elected to promote our interests in Albany have dropped the ball on an easy fix that would save us some money. Not one of Long Island's 30 legislators (21 Assembly 9 Senate) has bothered to sponsor any reform bills at all. Without sponsorship, these reforms will die along with any hope of property tax relief.

What happened to Special Districts Reform?

On February 8, 2008, the all but forgotten former Governor Eliot Spitzer, announced special district reforms proposed by the Commission on Local Government Efficiency and Competitiveness. The recommendations included ending pay for special district commissioners and encouraging town control of sanitation districts, as part of a larger package of initiatives to promote greater efficiency by local governments in delivering public services.

These reforms would save millions of dollars for the tax payers on Long Island. The press release stated that

“Long Island is unique in that it has a greater number of special districts than other areas of the state. Many of these districts overlap and dramatically increase the tax burden of residents. Nassau and Suffolk counties have a combined 340 special districts, which annually levy $271.3 million and $169.5 million, respectively, in property taxes. The average special district tax levy for other counties in the state is $7.7 million.”

Even though Spitzer is gone, we cannot let these recommendations fall to the wayside. We need to get back on track to making sure that these reforms are implemented. Do you really care who runs your sanitation or water district? As long as you could get the same service for less money, why should it matter? We do not need all of these fiefdoms costing 20+ times as much as it costs to provide these services in other counties. Period.

Property Tax Grievance

Last week my husband and I were lucky enough to file a grievance with the Town Assessor to reduce our property taxes. We had received a deluge of mail from many law firms and agencies offering to file on our behalf. In return the typical fee is 50% of your 1st year tax savings plus any appraisal fees if required. Of course, if your taxes are not reduced then you pay nothing. It is a win-win situation since you have nothing to lose and everything to gain. My husband thought it was a great idea and that we should sign up with one of these firms. I figured that I should research the matter and do it myself since that’s the type of person I am. Somehow, I had the date of May 20, 2008 in my head. It was the deadline stated on all of these offers. On May 19, I finally got around to my research only to find that May 20, 2008 was the absolute deadline for filing with my Town and that the grievance period began on May 1st. Great! I had no choice but to show up the next day and take my chances with the process.

I arrived in the rain with great trepidation because I was unprepared. Also, because it was the last day, I had no chance to fix any issues that may arise. I was pleasantly surprised. For all of the typical complaining about government employees, those at my Town Assessor’s office were stellar. Though the line got long at times, they patiently helped everyone along who needed it. If you couldn’t grasp the computer, if you couldn’t fill out the application, if you couldn’t grasp one single iota of the process, it did not matter. The Assessor’s office helped you with everything. It was incredible. Even when the waiting line for the computers got too long, residents were led to the back office to use the employees’ personal computers.

Luckily, I found the process to be simple. First, you are given an application and led to a computer to look up your address to get your tax id# (if you didn’t bring your tax statement with you) and your assessed valuation. The assessed valuation is the multiplier used to calculate the dollar amount of taxes owed. Using the valuation, the
assessed value (the current market value as deemed by the Assessor) of your property is calculated. I couldn’t believe the amount that my house was assessed, close to $100,000 more than I thought is was worth. This was a good sign that I might have a case. In my town, you also received a list of all the sales of homes in your zip code during the past year. It was your job to find 3 comps, 3 homes as similar to yours as you can find in your neighborhood that sold for less than the amount your home is currently valued by the Town Assessor. The same process an appraiser uses to qualify the value of your home. You were given the opportunity to use the computer again to verify the 3 homes you had chosen to get additional details to complete the application. You could also attach a recent copy of an appraisal if you had one. The final step was for you to value your home based on the comps that you picked and that was it.

Your application then goes to the Assessment Review Board for approval. I was concerned that some of the comps that I picked had higher assessed valuations than my house. However, the state of New York sets the rules for property tax grievance. Only the current market value of your home and other homes in the area can be used to determine if your house is overvalued. I hope that I am approved for this year. It will be a great help. If not, I will definitely try again next year. I couldn’t believe that there were so many firms and agencies making so much money for a process that was so simple, at least in my town.