Tax Cap

State Judge Tosses NYSUT’s Tax Cap And ‘Freeze’ Suit

A state Supreme Court judge on Monday tossed a legal challenge from the New York State United Teachers union to the state’s cap on property tax increases and a “freeze” on tax levies.

The ruling from Judge Patrick McGrath was latest setback to NYSUT’s effort to challenge the constitutionality of the cap, which was first approved in 2011 and is one of Gov. Andrew Cuomo’s signature economic achievements since taking office.

The cap does not expire until next year, but is tied to rent control measures for New York City, which are due to sunset in June.

The Cuomo administration wants to make the cap on levy increases permanent.

“Taxpayers prevailed today as yet another meritless special interest lawsuit that sought to undo the progress made under Governor Cuomo failed in the courts,” said Cuomo spokesman Rich Azzopardi. “The fact remains that the tax cap has successfully reined in out-of-control property tax increases – something that has only been strengthened by the tax freeze. It is our hope that the Legislature joins with us to not only continue the cap in New York, but also to make it permanent.”

The lawsuit had been previously dismissed in September, but at the time McGrath gave the union a chance to alter their challenge to the measure.

NYSUT amended the suit to include both the cap and a rebate program Cuomo proposed last year that he referred to as a “freeze” for tax increases in the budget agreement.

Both challenges were dismissed today.

“In the present matter, there is little doubt that the credit is designed to influence voters to stay within the cap,” McGrath wrote in the ruling. “However, this does not render the law unconstitutional.”

Decision and Order 3 16 15 by Nick Reisman

Report: Binghamton Tops Effective Property Tax Rate

A report from the Empire Center on New York State Policy released on Tuesday found the city of Binghamton in the state’s Southern Tier has the highest effective property tax rate of any city.

The report found the city has a rate of $58.28 per $1,000 of assessed value. That computes to a $4,959 tax bill for a median value home of $85,100 in Binghamton.

The city with the lowest effective tax rate is in Rye, Westchester County, where the rate is $19.20 per $1,000 of assessed value.

Nevertheless, Rye and other communities in the downstate region still have much higher property taxes because of the higher home values.

The highest property tax rate of any local government is the village of Sloan, in Erie County, where the rate is $64.67 per $1,000.

“There’s no question that New Yorkers pay some of the highest property taxes in the country, but the burden can vary widely even among neighboring jurisdictions,” said Tim Hoefer, executive director of the Empire Center. “By making it easier to compare taxes in different localities, we hope to encourage local taxpayers and elected officials to search for ways of reducing taxes and spending.”

The state Legislature in 2011 agreed to cap on property tax levies that limited increases at 2 percent or the rate of inflation. The cap expires next year, but it is tied to the extension of rent control for New York City, which is due to sunset this June.

PropertyTaxes2013 (1) by Nick Reisman

Skelos: Don’t Tinker With Tax Cap

The cap on local property tax increase isn’t broke, so don’t try to change it, Senate Majority Leader Dean Skelos on Monday said in an interview.

Skelos said the cap, first approved in 2011, which limits local property tax levies to increases of 2 percent or the rate of inflation is “working great.”

“It’s forced discipline at the local level, whether it’s a city, a town, a village or a school district,” Skelos said. “I think it’s been very successful.”

The cap is one of the top economic achievements for Gov. Andrew Cuomo’s first term and this year he plans to once again pursue local government consolidations as a means of controlling spending on the municipal level.

But as laws governing rent in New York City is due to expire at the end of the year, some Democratic lawmakers are discussing the possibility of tinkering with the cap (Both rent control and the tax cap are tied together, so one cannot be approved without the other being reauthorized).

Skelos, who represents a suburban district in Nassau County, said there isn’t a need to change the cap’s provisions.

“I like the cap the way it is right now,” he said. “It’s forced school districts and others to discipline how they’re spending taxpayer dollars.”

A report from state Comptroller Tom DiNapoli’s office last week found local governments have struggled to grow their revenue in the years since the cap has been in place.

DiNapoli’s office isn’t recommending any changes, but he said that it’s worth keeping an eye on how the law affects school district funding.

“I think long term probably the area we all need to look at is the long-term impact on the funding equity issue for our schools,” DiNapoli said.

DiNapoli: Property Tax Levy Growth Slows

The era of the tax cap has slowed down the cash spigot to a trickle on the local level, a report from Comptroller Tom DiNapoli’s office released Friday found.

The amount local governments and school districts have collected in property taxes has slowed over the last decade, from a peak increase of 7.7 percent in 2003 to a 2 percent jump at the conclusion of the 2013 fiscal year.

“Local governments are navigating through some choppy waters,” DiNapoli said. “As costs continue to rise, local officials have had to make difficult choices. Although some key economic indicators suggest an improving economy, property tax growth is slow and the pressure remains on local governments to do more with less.”

State lawmakers in 2011 approved a limit on local property tax increases, setting the cap at 2 percent or the rate of inflation, whichever is lower.

In the years since the cap has been in place, revenue in 2012 grew by 1.9 percent and, in 2013, 1.4 percent. Spending, meanwhile, has been kept largely flat.

This is, in essence, what the cap was designed to do.

But DiNapoli’s report finds the dried up revenue has also led to staff and program cuts, reduced rainy-day reserves and putting off of maintenance.

Between 2009 and 2013, counties have reduced health service spending by a combined $370 million and cities have slashed spending on transportation costs by $33.3 million.

The cap may be tinkered with this year as regulations governing rent in New York City are due to expire in June (the cap and rent control are designed to be yolked together, with the idea that neither upstate and suburban lawmakers would want to do away with rent control at the expense of the cap, with the same thinking applied to New York City-based lawmakers).

Already, some Democrats are discussing ways of changing the cap’s technical provisions to provide for more revenue growth without increasing taxes overall (the cap already does make some allowances for the growth of a municipality’s base as well as some pension costs).

Still, along with changes to the state’s tax code that helped generate revenue to close a budget deficit, the tax cap is one of Gov. Andrew Cuomo’s signature economic achievements of his first term.

This past election year, Cuomo said he wanted to go further with reducing the burden of local property taxes.

Despite the cap being in place, counties in New York continue to collect among the highest property taxes in the country.

Meeting with the state Business Council last fall, Cuomo said he wanted to use some of the state’s $5 billion windfall surplus from financial settlements to encourage local governments to share and consolidate services.

Cuomo is no stranger to shared services and consolidation efforts, which have largely faltered.

The governor has also pointed to the proliferation of local governments and taxing districts as a reason for the amount collected in taxes, a claim that financial experts contest.

DiNapoli’s report can be found here.

What Becomes Of The Tax Cap?

From the Morning Memo:

Some state lawmakers could begin pushing for changes to the state’s cap on property tax increases, which is due to expire next June, 2016.

The cap is the signature economic achievement for Gov. Andrew Cuomo’s first term and is tied to rent control for New York City, which is also due to expire on June 15, a year before the tax cap.

Yoking rent control to the tax cap was a way of ensuring both Senate Republicans and Assembly Democrats have a mutual interest in seeing they are re-approved together.

But with any expiration and pending re-approval often comes proposals to make changes.

Senate Minority Leader Andrea Stewart-Cousins in an interview on Capital Tonight on Monday suggested some changes may be supported in order to accommodate concerns raised by local governments as well as the expected infusion of infrastructure projects due to be proposed next year.

“I think there’s a real conversation to be had about the tax cap and how we can make it work for everyone,” she said in the interview. “We are very clear that the burden of taxes certainly for the middle class is quite crashing and we need more mandate relief.”

The property tax cap, a long sought measure for suburban lawmakers in high-tax areas, does allow for some growth in a municipality’s tax base as well as some exceptions in pensions costs.

At the same time, two major drivers of local government spending that officials on that level can’t control, pension rates and Medicaid costs, are expected to decline and seen slower growth respectively.

Nevertheless, school districts and local governments continue to point to the outsized spending requirements from Albany. And there’s more pressure on local governments to meet the cap’s requirements in order for taxpayers to receive a rebate.

“I think there are certainly things we could do to make the property tax cap more viable,” Stewart-Cousins said. “People have talked about the capital needs that are happening in these various districts and how we can build our infrastructure.”

Meanwhile, Stewart-Cousins and her Democratic conference will continue on in the minority next year after failing to win and hold enough seats to gain a majority this month.

Stewart-Cousins insisted Gov. Andrew Cuomo did enough to help her conference, but insisted it was just a bad year for Democrats overall.

Cuomo has been criticized by liberals for not doing enough to back Senate Democrats in their effort to gain a full majority in the chamber.

“I think the governor did a good deal in terms of helping our conference campaign and he certainly supported the majority of my conference for election,” Stewart-Cousins said. “He had a difficult election as well. So, the reality is that New York was not immune to this Republican wave. I think he kept his promise. He did the work.”

And she repeatedly noted that Republicans only hold a one-seat majority in the Senate, adding there are no plans to drop an emphasis on key issues for Democrats such as a minimum wage increase, strengthening abortion rights and the Dream Act — even if the votes just aren’t there for those measures.

“We are still very much in a position of influence and very much in a position to advocate for the things that New Yorkers want as we continue to build our economy and grow our jobs,” she said.

Judge Tosses Property NYSUT’s Tax Cap Challenge (Updated)

A legal challenge to the state’s limit on local property tax increases brought by the state teachers’ union was tossed on Thursday by a state Supreme Court judge.

In his ruling, Justice Patrick McGrath held the property-tax cap complies with state law and the state constitution.

The measure was first approved in June 2011 and is a signature economic achievement for Gov. Andrew Cuomo in his first term.

A legal challenge to the cap was first made in 2013, when the New York State United Teachers union held the limit on local property tax increases constricts both local education spending and unlawfully requires a 60 percent majority to approve a budget that increases the levy over the cap.

But McGrath found the claim by NYSUT that the tax cap doesn’t provide for local control is untrue.

“The vote itself connotes local control,” McGrath wrote in the ruling. “Stated differently, local control is still served if a ‘cap’ exceeding budget is disapproved by a district’s voters.”

The tax cap limits year-over-year increases in tax levy at 2 percent or the rate of inflation.

NYSUT in statement said it was reviewing the ruling, but indicated it would move forward with an appeal.

“NYSUT believes strongly that the tax cap undemocratically deprives taxpayers of their constitutional right to determine local school funding levels, while exacerbating existing funding inequities that harm the state’s neediest and most vulnerable students,” the union said in a statement. “It is very likely that NYSUT, as permitted by today’s decision, will continue its challenge to the constitutionality of the tax cap, the effect of which is worsened by the recently enacted tax freeze.”

NYSUT and Cuomo have been at odds on a variety of issues ranging from the tax cap, to the state’s education spending formula and the ongoing debate over the state’s teacher performance evaluation law.

Updated: Cuomo spokesman Rich Azzopardi responds to the judge’s ruling.

“This decision is a victory for property taxpayers across New York,” Azzopardi said. “By every measure, Governor Cuomo’s tax cap has successfully reined in out-of-control property tax increases and has been a key part of this administration’s efforts to restore fiscal sanity to this state and bring accountability and rigor to our education system.”

240975401 Decision and Order (2) by Nick Reisman

NYSUT Files Papers To Stop The Tax Freeze (Updated)

The statewide teachers union this week filed papers in effort to stop Gov. Andrew Cuomo’s signature property tax measure in 2014: a rebate program aimed at property taxpayers.

In papers filed on Tuesday, the union is trying to hitch the effort to block the rebate program — which Cuomo has referred to as a “freeze” in property tax increases over several years — to the group’s lawsuit filed against the state’s property tax cap.

In the filing, NYSUT argues the rebate program “incentivizes” school districts to submit budgets within the tax cap.

If successful, the legality of both the tax cap and the rebate program could be heard together in state court.

“It also effectively punishes districts, voters, taxpayers and school children in districts where school boards and voters exercise their constitutionally protected right to exceed the tax cap, by denying tax credits to otherwise eligible taxpayers in such districts. This is done without regard to the current funding effort of the disfrict or the current educational achievement or need of the district’s school children,” the filing states. “Plaintiffs submit that the freeze’s tax credits are thus, an unconstitutional disbursement of sate funds.

The rebate program was part of the 2014-15 state budget agreement that spreads nearly $1 billion in relief over the next two years providing that local governments and school districts budget within the state’s cap on property-tax increases. In the second year, the municipalities must take steps to share services and reduce costs.

Updated: Cuomo spokesman Rich Azzopardi weighs in with a response.

“By all measures, Governor Cuomo’s tax cap has successfully reined in property tax increases and – with the reforms passed in this year’s budget – the tax cap has been turned into a tax cut. New York taxpayers simply cannot afford to return to the bad old days of skyrocketing tax bills, little accountability and schools with the highest costs in the nation without the results to match.”

A h/t to Gannett for spotting this.

NYSUT Freeze Suit by Nick Reisman

Megna Downplays Look-Back Period For Tax Rebate

Gov. Andrew Cuomo’s budget director on Wednesday downplayed the look-back for local governments when calculating a tax rebate for local property owners.

Bob Megna told Susan Arbetter on The Capitol Pressroom that the multi-year rebate program was about “looking forward.”

“We don’t want to make this about backward looking things,” Megna said in the interview. “We want to make this about forward looking things.”

The program — which Cuomo first billed as a “freeze” on tax increases — is designed to push local governments to keeping under the state’s cap on property tax increases and find ways to share services.

The property owners would receive a rebate equal to an annual tax hike as long as a local municipality stays within the state’s property tax cap — currently under 2 percent.

In the second year, a local government would have to find ways to reduce costs through shared services.

Added into the final agreement was a nod to past efforts by local governments to share and consolidate functions with other local governments.

The Senate had originally proposed a look-back period to 2011, when the state’s tax cap was first approved.

But Megna indicated that the period may not go back that far.

“We would not put too much emphasis on the look-back,” he said, adding, “We certainly want to take those things into account, but we want to make this a forward-looking exercise”

Any past efforts at sharing services that could be counted toward the rebate program would be judged by the state Division of Budget.

The tax program is designed to encourage local governments to find ways to cut costs which, in the long run, could lead to reduced tax increases.

Local governments had raised concerns with the program as proposed by Cuomo’s initial budget presentation, pointing to the costs they’ve managed to contain over the years as well as the lack of increased state aid over the years.

Pataki-McCall Commission: A Carrot And Stick For Consolidation

A 13-page report from a commission led by former state Comptroller H. Carl McCall and former Gov. George Pataki found $2 billion worth of recommended tax cuts spread out through 2018, and also provides a carrot-and-stick approach for getting local governments to live within the state’s cap on property tax increases and consolidate services.

In addition to recommending the so-called circuit-breaker approach for property taxes and cuts to business taxes such as a complete phase out of the 18a assessment surchage for utilities, the commission called for linking the tax cap, consolidating services and individual tax credits for homeowners.

In sum, the move appears aimed at goading local officials into shrinking their governments while also providing an incentive for homeowners to back local consolidations and sharing of services in order to receive what is essentially a tax freeze.

Indeed, the move would likely apply more pressure on — or incentive to, depending on your point of view — local governments and school districts to budget within the property tax cap, which was approved in 2011.

Local governments can override the cap with a two-thirds majority of a governing body’s approval.

The cap on local property tax levy increases is generally at 2 percent or the rate of inflation, whichever is lower.

The freeze would work like this: In the first year, homeowners eligible would see a tax rebate that’s equal to the amount of an increase in their tax bill.

By the second year, the homeowners in municipalities living within the tax cap would receive a receive of their tax increase if the local government is taking “meaningful concrete steps” toward a permanent structural savings such as sharing services or consolidating local governments.

The goal appears to make it so that individual tax savings will in theory become more apparent for homeowners if local governments find ways to merge or share.

“Only through such bold steps can New York hope to achieve a long-term reduction in real property taxes,” the commission’s report found.

Cuomo at a news conference on Long Island announcing the report acknowledged the difficulty in consolidations, which have been opposed when put before voters in the past.

But, he said, it’s necessary to get the country’s highest property taxes under control.

“Corporate America did this 30 years ago,” he said.

McCall, whom Cuomo unsuccessfully challenged in 2002 Democratic primary for governor, was more pointed, saying: “Why are the property taxes so high? It’s because of the spending of our towns and local governments,” he said.

Commission Report by Nick Reisman

387 Tax Cap Overrides

Nearly 400 local taxing districts and municipalities plan to override the state’s cap on property taxes, according to the most recent data from the state comptroller’s office.

The vast majority — 1,004 local governments — plan to budget within the cap, however.

Last month, 206 local governments submitted budgets that would override the cap; that number has grown to 387.

Increasing local property taxes is limited to the rate of inflation or 2 percent, whichever is lower. Some narrow exemptions are made for the growth in tax base and pension costs.

This is the second year local municipalities are budgeting with the cap in place.

Among the state’s county governments, 12 have plans to override the cap, which requires a 60 percent majority of the governing board.

Below is a database of which local governments plan to override the cap, which plan to live within it. A “Y” denotes plans to override the cap.

Tax Cap Request 12 03 13 by Nick Reisman