First, what are the differences between past and presentmethodologies and where are the pitfalls in adopting one formulaover another? Net income capitalization has been used by assessorsand endorsed by New York State courts for more than a century. In1962, the New York Appellate Division ruled that value arrived atby capitalization provides the surest ground for sound appraisal.In an earlier case, the New York Court of Appeals determined that"the net income of a property is more persuasive evidence of what aproperty is worth than using a sales price derived from a similarproperty. What an investor will pay for a property is measured inlarge part by the amount and certainty of the income that can beobtained from that property."

The Finance Department provided two reasons for renouncing thecapitalization approach: 1) expenses for some buildings were higherthan others, leading to lower assessments, while in some cases theexpenses may have been overstated by the owner; 2) using the GIMeliminated the need to study expenses or expense ratios and offereda simpler, more predictable one-step method.

While GIM offers more predictability, it fails to provide moreaccuracy. GIM is not seriously employed by any major developer,investor, lender or appraiser today, nor has any New York courtembraced it.