Tax Cap

Senate Approves Permanent Property Tax Cap

Senate Republicans on Tuesday approved a permanent extension of the state’s cap on local property tax increases as a debate is expected to heat up in the coming weeks over the measure.

The bill to extend the cap indefinitely was approved 47-13.

“By permanently continuing the cap, we will bring certainty to taxpayers, help them keep more of their hard-earned money, create good jobs, and grow our economy for the future,” Senate Majority Leader John Flanagan said in a statement. “The Assembly and the Governor must help us take the next step and make the current property tax cap permanent.”

First approved in 2011, the cap does not expire until next year, but it is considered linked to the re-approval of rent control regulations for New York City and outlying areas, which is due to sunset by June 15.

The measure limits tax levy increases at 2 percent or the rate of inflation, whichever is lower.

The vote in the Senate coincides with school districts across the state putting their budgets before voters, as well as the release of a report showing $7.6 billion in savings from the cap.

Assembly Democrats this afternoon approved their own preferred version of a rent control extension which strengthens the regulations and ends the practice of vacancy decontrol.

Democratic lawmakers in the chamber have spoken in recent months of making alterations to the cap as well as approving new measures aimed at reducing state-mandated spending.

Local government advocates, too, have called for reducing Albany-imposed spending on the local level.

“Making the property tax cap permanent without providing mandate relief is not sustainable,” said Stephen Acquario, the executive director of the New York State Association of Counties. “We are putting a Bandaid on a broken leg. The tax cap is great for bringing attention to high property taxes in New York State, but it does not fix the problem. We can and must do more.”

A permanent tax cap is backed by Gov. Andrew Cuomo, who introduced the measure in 2011 and has railed against property taxes in the state.

Cuomo’s additional efforts to induce lawmakers to pass a version of the so-called “circuit-breaker” that ties tax increases to a households income have faltered in the last two budget proposals.

The governor was able to have lawmakers back a program — which he termed a “freeze” — that provided rebates in an election year to homeowners whose taxing districts budgeted within the cap.

Flanagan Pushes Permanent Tax Cap (Updated)

Republican Senate Majority Leader John Flanagan on Tuesday reiterated his support for a permanent extension of the state’s property tax cap, saying such a move would benefit the entire state.

Flanagan appeared at a news conference held by a coalition of business groups and the fiscal watchdog the Empire Center, which released a report and website showing the regional and statewide savings from limiting local levy increases at 2 percent or the rate of inflation (Overall since the cap has been in place, the Empire Center says $7.6 million billion has been saved).

“The more we can do to keep property taxes down, the better off we are as an economy and a state,” Flanagan said.

The Senate included a permanent cap in its one-house budget resolution and Flanagan over the weekend introduced a stand-alone bill that doesn’t make any changes to the measure.

“We’re going to pass that legislation again,” he said. “We want to set the tone and tenor and content of the debate.”

The cap does not necessarily have its fans on the local government and school district level, however, and some there have pushed for changes to the cap, which is linked to rent control regulations for New York City and the surrounding area, due to expire next month.

School districts vote on their budgets today.

First approved in 2011, the cap doesn’t expire until 2016, but is considered a key component in keeping rent control in place.

The cap also remains a signature economic achievement from Gov. Andrew Cuomo’s first term and he has also called for the cap to be approved on a permanent basis.

“Under Gov. Cuomo’s tenure working with the Legislature we have lived within in essence a property tax cap even though we don’t have one at the state level,” Flanagan said. “I think that’s very important because we are not asking people to do things that we are not doing as a state.”

Updated: Cuomo weighed in on the tax cap report as well in a statement.

“The tax cap has successfully broken the cycle of skyrocketing property tax increases, providing real relief to property taxpayers across the state and reversing New York’s perception as the high tax capital of the world,” Cuomo said in a statement. “This report illustrates what we’ve seen for ourselves over the last four years and proves that the cap should not only be kept in place, but also made permanent.”

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.