Some municipalities threatening overrides of new property-tax cap

Joseph Spector

ALBANY — Cities, counties and towns are busily preparing their budgets for next year, and some are threatening to override a new property tax cap that they say could devastate programs and services.
Dealing with a property tax cap is uncharted territory for local governments as they struggle to balance their budgets amid stagnant revenue and increasing costs. They are also grappling with the complexity of the cap and its myriad provisions.
“We don’t know how it will be implemented, and therefore it’s really difficult to say the impact it will have on our budget this year,” said Monroe County spokesman Noah Lebowitz.
There are more than 10,000 taxing entities in New York, including local governments and special taxing districts for lighting, water and sewer services. All have to stay within the cap.
One ambiguity was cleared up Friday: The cap will limit the growth in property taxes to 2 percent in 2012, the Comptroller’s Office confirmed to Gannett’s Albany Bureau.
The tax cap law adopted in June limits the growth in property taxes to 2 percent a year or the rate of inflation, whichever is lower. The Comptroller’s Office said Consumer Price Index figures show the rate of inflation is slightly higher than 2 percent, so the 2 percent cap will stand when the law takes effect in January.
While officials feared a cap lower than 2 percent, some cities, counties and towns said they would bust the cap even at 2 percent. Staying within the cap would decimate services, some said.
“Even with cuts, even with layoffs and attrition, we are going to have to go over the cap just to maintain essential programs,” said Martha Robertson, chairwoman of the Tompkins County Legislature.
Local governments took another hit Wednesday. The Comptroller’s Office announced that pension costs in 2013 are set to rise 16 percent to cover public employees and jump 19 percent to fund police and fire workers. The increase will be a particular hit to cities that have police and fire departments.
Some officials said the tax cap is untenable, saying their costs are growing more than 2 percent. For counties, state-mandated costs are expected to increase $245 million in 2012, according to the state Association of Counties. But the 2 percent tax cap will only allow them to raise $90 million in new taxes.
“I believe the tax cap, although a nice headline, still has not fundamentally changed the real issue, and that is state spending — and that has to be changed as well as state mandates,” said Westchester County Executive Robert Astorino.
Astorino said he will keep a pledge not to raise taxes next year, but it will likely mean spending cuts.

Binghamton Mayor Matt Ryan said he would be hard-pressed to recommend a budget next month that stays within the cap. To exceed the 2 percent cap, the local governing board would have to pass a law with 60 percent of the board’s vote.
That would be easy for smaller communities, which often have five-member boards. A 60 percent vote is still a simple majority, or three members, on a five-member board.
“There’s no way we’ll be able to stay under the cap,” Ryan said. “Obviously politics play into this, but I just don’t see how we can stay under the cap.”
Politics will be an issue. Seats on most local boards are up for election this year, making a potential tax-cap override a political hot potato.

Gov. Andrew Cuomo and state lawmakers adopted the cap to respond to long-standing complaints about New York’s property taxes. New York ranks among the highest in the country for property taxes — an issue that has been blamed for population losses upstate and a decline in job growth.
Cuomo this week said that New Yorkers simply can’t afford the high taxes. The Washington, D.C.-based Tax Foundation has ranked Westchester County as paying the highest taxes in the nation. Upstate counties, including Monroe, have ranked among the highest in taxes compared to home values.
“The answer can’t always be that government puts its hand in the pocket of the taxpayers, and that was my basic point from day one,” Cuomo told reporters Thursday while attending the State Fair near Syracuse. “People are leaving the state. Businesses are leaving the state.”
Most municipalities will unveil their 2012 budgets in early fall, while some will do so in November. Villages largely adopt their budgets in the spring and schools — which also will have to abide by the cap — adopt their budgets by public vote in May.

Some local leaders said they would try to live under the cap, even if it means cutting services and staff.

“Rein in and reduce expenses, cut employees and change the level of service. That’s how we’ll live with it,” said Genesee County manager Jay Gsell.
Dutchess County Executive William Steinhaus wrote a letter to Cuomo on Wednesday urging him to call a special session of the Legislature to cut state-mandated programs, which counties say are squeezing their budgets.
“Respectfully Governor, the failure of you and the state Legislature to enact state mandate relief for counties concurrent with the enactment of the property tax cap makes a mockery of your good intentions,” Steinhaus wrote.
Local governments said they are unclear about many technical aspects of the cap. For example, there are two major exclusions: taxes incurred through new housing or commercial development and pension costs that grow more than 2 percentage points from the prior year.
Municipalities are awaiting their “growth factor” rates from the state Department of Taxation and Finance to find out if any development would be exempt from the cap. Those figures and guidelines for the cap are expected in early September from the Comptroller’s Office.
Governments will have to submit their property tax cap plans to the Comptroller’s Office before adopting their budgets. The office is planning to have a reporting form online in early September.
“We recognize the challenge this new requirement poses for all local governments and we are working hard to make this submission as easy as possible,” said Steven Hancox, deputy comptroller for local government and school accountability.
Some local leaders said the cap and an unstable economy makes it difficult to make budget forecasts. Most local governments’ fiscal year runs on a calendar year.
“There are a lot of unanswered questions and the challenge is the timing of when you get final information,” said Mary Foster, mayor of Peekskill, Westchester County. “The other issue becomes the economy and are we still in a slow recovery or have we slid back into a recession?”
Elmira Mayor John Tonello said it’s unclear whether the City Council will seek to override the tax cap. The exemption in pension costs doesn’t relieve most of the growth in the expense, he and others said.
He said the city’s costs will exceed the amount they can raise under the cap.

JSPECTOR

Includes reporting by Gannett Albany Bureau staff writer Jon Campbell. http://www.democratandchronicle.com/article/20110829/NEWS01/108290321/Some-municipalities-threatening-overrides-new-property-tax-cap

About the tax cap

What is it?
The allowable tax levy growth will be 2 percent in 2012.
What’s covered?
Property tax levies of all counties, cities, towns, villages, school districts and special districts outside of New York City and outside the Big 5 schools, including Buffalo, Rochester, Syracuse, New York City and Yonkers.
What’s excluded?
Any taxes to support voter-approved school capital expenditures, any legal settlements that exceed 5 percent of a prior-year tax levy, any growth above 2 percentage points for pension contributions and any major growth in a community.
Can the cap be exceeded?
For municipalities, it can be exceeded with a vote of at least 60 percent of the governing body. For schools, the cap can be overridden by 60 percent of voters. School tax levies will be frozen if a school budget fails twice.
When does it take effect?
It starts in January for governments and in July 2012 for schools.