Our co-op told us the amount of our STAR refunds and then accessed the same amount. What's the thought behind this practice? I was told the assessment (that recouped our STAR refunds) was to pay for a tax the co-op was assessed. I think they also mentioned following legal or accounting advice in handling it this way. I'm all for paying what's required, and happy for whatever benefits the co-op... [more]
Our co-op told us the amount of our STAR refunds and then accessed the same amount. What's the thought behind this practice?
I was told the assessment (that recouped our STAR refunds) was to pay for a tax the co-op was assessed. I think they also mentioned following legal or accounting advice in handling it this way.
I'm all for paying what's required, and happy for whatever benefits the co-op collectively, but don't really understand what's going on with this somewhat opaque program and my co-op's process of accessing the refund.
I've heard different things. Sometimes I hear the co-op is supposed to give the money back to the shareholders, other times I hear co-ops access the STAR refunds like mine does. And then there's the whole issue of people who don't apply for the STAR program but would have qualified, seniors, non-primary residents, etc.
Thanks for any info!!
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Response by alexikeguchi
over 8 years ago
Posts: 38
Member since: Apr 2012
My building does the same with the goal of maintaining good capital reserves while avoiding an increase in monthly maintenance or relying on frequent assessments. There has to be some source of funds for building upkeep, and this is a relatively painless method compared to the alternatives.
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Response by bryantpark
over 8 years ago
Posts: 83
Member since: Dec 2011
It's all just accounting / arithmetic anyway.
Would you prefer to pay a higher monthly maintenance amount every month, so you can get something back once a year?
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Response by 30yrs_RE_20_in_REO
over 8 years ago
Posts: 9880
Member since: Mar 2009
It's a game which ignores the fact that money in fungible. The building needs to raise more money, but they know everyone gets cranky if there is a raise in maintenance or an assessment, so instead they grab your tax refund and act as if it's not a real assessment. OTOH if you don't qualify for STAR abatement you get an actual assessment. When the STAR abatement first came out there were a few Coops who just tried to grab it rather than making an assessment in an equal amount and got in trouble. one issue is that if it is not designated as a special assessment for a capital project you can not legally add it to your basis for capital gains purposes..
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Response by sgsg
over 8 years ago
Posts: 13
Member since: Dec 2014
Thanks for the explanations. It's what I guessed, I was just hoping for a more transparent and honest explanation from our board, I can handle it, and who knows, maybe they're being honest.
As I said, I'm happy for what benefits us collectively as a co-op, and understand unexpected assessments make people grumpy, but the reason I was given, was that it directly cancels out a tax assessment the co-op received.
We pay maintenance every month, and it's not low (at all) -- so I have to wonder what the extra money "grab" from STAR actually pays for ... in the interest of transparency I think co-op members have every right to know, whether it actually pays for a yearly tax assessment (not already covered by our monthly maintenance), contributes to our reserve, or pays lawyers, etc.
Interesting about the capital projects accounting ... I'm not sure I follow all that, but think it's something we discuss, and they might be making the numbers work for, but again they say it's to pay for an assessment the co-op receives.
I'm still curious if others can add any clarity to this STAR craziness.
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Response by flarf
over 8 years ago
Posts: 515
Member since: Jan 2011
sgsg, read your building's financials. You'll see the sources of revenue (monthly assessments, one-time assessments from the STAR refunds, flip fees, etc.) and the expenses (property taxes, interest, salaries, utilities, etc.).
You are not going to find a line that says "STAR proceeds went to pay for x" because as has been pointed out, money is fungible. The STAR proceeds get thrown into the mix with all the other sources of revenue.
Can the building not assess for the STAR proceeds and instead pass the amounts along to shareholders? Sure, but to maintain the same level of revenue, your monthly maintenance would be higher, or there would be a special assessment. It's a zero sum game -- you're paying the same amount either way.
My building does the same with the goal of maintaining good capital reserves while avoiding an increase in monthly maintenance or relying on frequent assessments. There has to be some source of funds for building upkeep, and this is a relatively painless method compared to the alternatives.
It's all just accounting / arithmetic anyway.
Would you prefer to pay a higher monthly maintenance amount every month, so you can get something back once a year?
It's a game which ignores the fact that money in fungible. The building needs to raise more money, but they know everyone gets cranky if there is a raise in maintenance or an assessment, so instead they grab your tax refund and act as if it's not a real assessment. OTOH if you don't qualify for STAR abatement you get an actual assessment. When the STAR abatement first came out there were a few Coops who just tried to grab it rather than making an assessment in an equal amount and got in trouble. one issue is that if it is not designated as a special assessment for a capital project you can not legally add it to your basis for capital gains purposes..
Thanks for the explanations. It's what I guessed, I was just hoping for a more transparent and honest explanation from our board, I can handle it, and who knows, maybe they're being honest.
As I said, I'm happy for what benefits us collectively as a co-op, and understand unexpected assessments make people grumpy, but the reason I was given, was that it directly cancels out a tax assessment the co-op received.
We pay maintenance every month, and it's not low (at all) -- so I have to wonder what the extra money "grab" from STAR actually pays for ... in the interest of transparency I think co-op members have every right to know, whether it actually pays for a yearly tax assessment (not already covered by our monthly maintenance), contributes to our reserve, or pays lawyers, etc.
Interesting about the capital projects accounting ... I'm not sure I follow all that, but think it's something we discuss, and they might be making the numbers work for, but again they say it's to pay for an assessment the co-op receives.
I'm still curious if others can add any clarity to this STAR craziness.
sgsg, read your building's financials. You'll see the sources of revenue (monthly assessments, one-time assessments from the STAR refunds, flip fees, etc.) and the expenses (property taxes, interest, salaries, utilities, etc.).
You are not going to find a line that says "STAR proceeds went to pay for x" because as has been pointed out, money is fungible. The STAR proceeds get thrown into the mix with all the other sources of revenue.
Can the building not assess for the STAR proceeds and instead pass the amounts along to shareholders? Sure, but to maintain the same level of revenue, your monthly maintenance would be higher, or there would be a special assessment. It's a zero sum game -- you're paying the same amount either way.