Suffolk County to issue $25 million tax refund to South Shore Mall in Bay Shore to settle assessment case

Suffolk County will refund at least $25 million to the owner of the South Shore Mall in Bay Shore after a court settlement cut the property's value by an annual average of $260 million over the past four years, according to data from the county comptroller's office and state court records. 

The reduction in the property's assessment will shift tax burdens in the Bay Shore school district, Town of Islip and Suffolk County.

The South Shore Mall on Sunrise Highway has had one of the county's largest assessments for years — ranking fifth in 2023 — according to Suffolk's most recent annual financial report. With one of the town's largest properties contributing nearly four times less to the community's tax base, it will fall on other property owners to cover the difference to pay for school, town and county tax levies.

The mall's owners sued the Town of Islip in 2023 over assessments it had assigned to the mall beginning in the 2021-22 tax year. The town — which sets property values used to compute school and general tax bills — assessed the mall "in an erroneous, arbitrary, and capricious manner,” lawyers argued in court papers. The mall's assessments ranged from $315.2 million in 2021-22 to $411.9 million in 2024-25, Islip tax records show. The settlement lowered the mall's valuation to a range of $86.2 million to $98.6 million during those years — a roughly 75% reduction.

The mall's annual property tax bill averaged $11.2 million during the four-year period. The settlement lowered bills to an annual average of $3 million, according to data from the Suffolk Comptroller's Office. The mall property covers nearly 87 acres of land.

Suffolk Legis. Steven Flotteron (R-Brightwaters) said he feared the settlement could have an adverse effect on residential and commercial property owners in the Town of Islip.

“The miscalculation of [property value] assessment in the settlement is very alarming because this is going to affect — besides businesses — all the residents who own homes and pay real estate taxes,” Flotteron, whose legislative district includes Bay Shore, told Newsday. “It falls on not only the local business owners but also the resident homeowners in the community.”

Sean Cronin, the attorney who handled South Shore Mall's tax case, said malls across the country have fallen in value with the departure of major retail stores that once anchored them and steep declines in rental revenue. 

"The shopping mall market has undergone significant changes in recent years. During times of disruption for properties like malls, it is crucial to strike a balance between the property owner’s ability to operate and the appropriate tax burden," Cronin said in a statement to Newsday. "We are pleased to have reached an agreement that will enable the owner to make a sustainable, long-term contribution to the town."

Caroline Smith, a spokeswoman for Islip Town, said in an email it was too soon to determine the impact of the refund on next year's tax bills. But she said the effect "will be inconsequential when spread throughout the Town."

Smith said in the email: "Reducing the negative impact on taxpayers is THE primary consideration when a case is settled."

The town agreed not to dispute the new assessment, state court filings show.

Impact on tax bills

South Shore Mall is due at least $25 million for property taxes it paid for the first three tax years, according to the office of Suffolk Comptroller John M. Kennedy Jr. The office hasn't determined the refund for 2024-25. State Supreme Court Justice John Leo signed off on the settlement on Feb. 27, court records show.

The mall will be repaid in four installments beginning in July. The final installment is scheduled for October 2027, according to the comptroller's office.

Suffolk County pays the initial refund, officials said.

The county then recoups most of the refund from owners of property in the town where the assessment was calculated. That process is known as a chargeback. Town tax bills will reflect a future fee to cover the bulk of the refund to Suffolk County, officials said.

The comptroller's office also declined to estimate how much extra that taxpayers will have to pay as a result of the mall's refund.

The mall has successfully challenged its property assessments in the past. From 2020 to 2022, according to the comptroller's office, Suffolk paid more than $10.9 million in refunds to the mall's owners to resolve assessment challenges spanning three prior tax years: 2017-18, 2018-19 and 2019-20. 

Of the largest property tax refunds the county has processed during the past five years, four of the five largest recipients were in the Town of Islip, data from the comptroller's office shows. 

School tax revenue

In 2023, South Shore Mall had the fifth-highest valuation in the county, according to Suffolk's annual financial report. National Grid ranked first, followed by PSEG Long Island, Fairfield Apartments LLC and Verizon New York Inc. 

The mall had been contributing around $11 million annually to county, town and school tax coffers, town records show.

The Bay Shore school district will be hit the hardest. The school district was entitled to the greatest share of the tax revenue — a range of $8.4 million to $8.8 million during each of the prior four years, town tax records show. 

With the mall's annual tax bills slashed, other taxpayers in the community will have to cover the difference. 

“At the end of the day, it’s fairly straightforward mathematics,” Kennedy said in an interview. “There is a finite number of properties in the taxing jurisdiction. … If you take one property and reduce [its value], you’ve got a deficit — and everybody else has to make it up.”

The impact on property taxes won’t be clear until after voters approve school district tax levies next month and county and town budgets are finalized in the fall. 

Islip has not completed a townwide reassessment of property values since 1979, according to a 2024 report from the New York State Department of Taxation and Finances. The Towns of Babylon, Brookhaven, East Hampton and Huntington haven't completed town-wide reassessments since before 1974, according to the report.

The industry standard is for towns to conduct a "mass appraisal" every year to "keep up with changes in the market ... ," said Larry Clark, the retired director of strategic initiatives for the nonprofit International Association of Assessing Officers.

If a municipality "is not revaluing every year, then by definition the property tax burden is not being equitably distributed," Clark said.

Smith, the Islip spokeswoman, said in an email: "Conducting a townwide reassessment on an annual basis would be exceedingly expensive." She noted in recent years, only two of Suffolk's 10 towns had completed reassessments. The towns — Southampton and Shelter Island — "are significantly smaller than Islip in parcel count and overall size," she wrote.

Bay Shore school district Superintendent Steven Maloney said in a statement the district does not “control or participate in the assessed valuation process.”

“The Bay Shore Board of Education continually strives to maintain the highest level of fiscal responsibility while providing outstanding educational opportunities for all students,” Maloney wrote.

Malls declining in value

The mall has lost major tenants in recent years, including Lord & Taylor in 2020 and Sears in 2015, Newsday has reported. The mall first opened in 1963 and featured Long Island's third Macy's department store and space for 4,500 cars to park, according to Newsday archives. Known then as R.H. Macy's, the department store covered 375,000 square feet. 

A 1963 advertisement in Newsday billed the property as "wonderfully spacious ... yet so artfully planned that you don't wear yourself out walking around."

David Caputo, a data scientist with Moody's Analytics, said decades-old malls are "struggling" financially due to a number of factors that have rocked the retail world.

A number of newer malls centered around "experiences" are gaining steam across the country, including those with pickleball courts and other forms of entertainment, Caputo said.

"The consumer doesn’t just want to go to a mall to shop. They also want experiences," he said. Older malls "are mostly just old-school stores and not really offering much of an experience."

Many "staple" stores that used to anchor malls are exiting, and mall operators are struggling to secure new tenants, Caputo said. Older malls "are the ones that are getting demolished or turned into something else. ... Those are the ones that owners are taking losses on. We’re seeing a lot of vacancies there. Not many stores are trying to fill these vacancies."

As online shopping surges in popularity, malls are struggling to remain viable, said Cronin, the attorney for the mall.

"It’s basically e-commerce and the Amazon effect. Consumers prefer home delivery now," he said. “The value of the South Shore Mall 10 years ago was higher than it is today."

In 2023, a group of investors bought the South Shore Mall and another mall in Connecticut as a package deal from Unibail-Rodamco-Westfield, a Paris-based real estate company, Newsday reported. The investors paid $196 million for both properties.

The Sunrise Mall in Massapequa, which is mostly empty, sold for about $30 million in 2020. The figure was nearly 20% of the price of its last sale in 2005 — $143 million, Newsday reported at the time. Last year, the Broadway Commons Mall in Hicksville sold for $40.2 million, less than half the $94 million the mall sold for in 2014.

By Sam Kmack

sam.kmack@newsday.com

Sam Kmack covers the Town of Islip for Newsday. He is a graduate of the University of Southern California and previously worked as a city watchdog reporter in the Phoenix metro area, as well as an investigative journalist at the Arizona Center for Investigative Reporting.