Tax Exemption Error Impacts Albany Mayoral Race

Jun 23, 2017

Two of the front-running Albany mayoral candidates have been trading barbs over tax exemptions.

The latest mayoral campaign skirmish in the split involving city Democrats was sparked by an article in the Albany Business Review that culminated in city assessor Keith McDonald, who served in that capacity for more than three decades, putting in a notice of retirement after he told the paper he granted some "mixed use" property tax exemptions that he shouldn't have. 

Turns out some commercial properties and luxury condos may have received "erroneous tax exemptions" that the Times Union reported "could have cost the city millions." The paper said 51 units in the city receive the 485-a tax abatements; 24 of them are in a downtown condo at 17 Chapel Street, where, seizing upon what some call an "oops" moment for the Sheehan administration, Frank Commisso held a Wednesday morning press conference.

Commisso is calling for Tom DiNapoli to look into the tax breaks. "The state comptroller would be a more appropriate entity to come in with some folks experienced in the audit function and go conduct an audit with the folks in city hall. Unfortunately that has not happened yet."

The deductions come under Section 485-a of New York state's real property tax law, under which municipalities may authorize a declining 12-year partial exemption from real property taxation  and special ad valorem levies for non-residential property converted to a mix of residential and commercial uses. 

Commisso is a common councilor running against Council President Carolyn McLaughlin and incumbent Mayor Kathy Sheehan in the Democratic primary. He alleges both Sheehan when she was city treasurer and her successor in the post, Darius Shahinfar, were aware of the glitch.

Within the hour, Sheehan called reporters to city hall.  "I've been told the determination of 485-a and the application of it, that that was presented to the common council. Mr. Commisso was a member of the common council at that time. I was city treasurer. I was not consulted about it. Nor would I have been. It's not part of the process. But this is an interpretation that was made under the prior administration and had continued to be applied in the same manner over that period of time up until the assessor became aware of the fact that his interpretation was really at odds with the language of that exemption."

Sheehan says the city is evaluating and reviewing the properties involved toward coming up with a remedy, and beyond that, trying to understand what happened and what internal controls should be in place. "It appears that for most of the other properties it was properly applied."

Commisso argues the 485-a error impacts local taxpayers.  "Folks are paying more for city taxes and school taxes and we're losing sorely needed revenue that we need in these entities, or we're losing the opportunity to hold the line better or actually have reductions or downward pressure on property taxes, or some combination thereof. But we are losing that here. I think that's something that is very frustrating to many folks in the city of Albany that are paying some of the highest taxes in the entire country."

Sheehan dismisses Commisso's rants as "a leap."  "People can say anything. We have, um, we are not running a campaign where I'm willing to just say anything. And, again, let's just be really straightforward about this. The decision around the interpretation of 485-a was made by at least 2010, long before I ever had the idea to run for mayor of the city of Albany. And it is not something over which I exerted any control. It is not something over which the assessor consulted me as to an interpretation of 485-a. It was yet another tool in the toolbox of economic development, something that I supported."

And as for the fate of outgoing assessor Keith McDonald:  "This has been a very ugly episode and I hope it does not get worse. But, you know, for Kathy Sheehan to be leaving her assessor hangin' out there, when clearly she knew better, that's wrong," said Commisso. Sheehan believes  "We owe him the courtesy of an independent investigation and evaluation to determine whether this was simply an error on his part or a misinterpretation on his part. What advice was provided to him by the prior administration and corporation counsel, and determine what happened. I owe it to him and I think we owe it to him rather than do what Mr. Commisso Jr. is doing, which is, to me, smearing somebody's reputation in order to create a news story."

The primary is in September.