Tax Cap

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

Where The Tax Cap Is Being Overridden (Updated)

Nearly 600 local governments and taxing entities — 593 in total — around the state have proposed budgets that would stay within the state’s cap on property tax increases, according to numbers compiled by the state comptroller’s office.

Meanwhile, 206 local governments have proposed spending plans for 2014 that would override the cap.

The most recent data available is from Nov. 5, according to the comptroller’s office.

Many of the local governments that have filed so far are towns and a few cities, including fire and sewer districts that have taxing authority.

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

Here’s a spreadsheet of the local governments that have proposed budgets so far.

Update: I’ve sorted the spreadsheet by county to make it easier to search.

2014 Proposed Overrides by Nick Reisman

Difficulty In Overriding Tax Cap

Only a third of school budgets that sought to override the state’s cap on property taxes while the broad majority of spending plans was approved by voters on Tuesday, according to the state School Boards Association.

In statistics released this morning, the association found 95.5 percent of school district budgets were approved.

“Residents in communities across this state stood strong once again in support of public education,” said NYSSBA Executive Director Timothy G. Kremer. “The high level of voter support for school budgets speaks to the importance of public education. We appreciate the trust that voters place in our school board members and educators.”

Of the 642 school districts that stayed within the cap, 98.3 percent were approved. A 60 percent majority of voters is required to approve a spending plan that overrides the cap, which was first in place last year.

Twenty-seven districts proposed budgets that overrode the ceiling, but just under 30 percent of those plans were approved by voters.

Average spending grew in the 2013-14 school year by 2.9 percent, compared to 1.5 percent in 2012-13.

The cap on local property tax increases has been a signature economic achievement for Gov. Andrew Cuomo, who often cites the measure that passed in June 2011 alongside his other legislative victories.

For the districts that failed to approve budgets, a second vote will be held on June 18 or boards may be allowed to skip that introduce a contigency budget that cannot have any increase in the tax levy.

Iannuzzi: Education Community Too Scared To Join Tax Cap Lawsuit

ICYMI: NYSUT President Dick Iannuzzi told me during a CapTon interview last night that the reason more members of the education community have declined to sign onto his union’s lawsuit challenging the two percent property tax cap is because they’re afraid of “retribution.”

It was not explicitly stated, but it was fairly clear who would be meting out said retribution. After all, the tax cap was one of Gov. Andrew Cuomo’s signature policy achievements during his first year in office.

“We had a lot of people patting us on the back, and when we walked around with our press release they were really hard to find,” Iannuzzi said.

“But that didn’t matter. We’ve gone alone on important issues before, and we’ll go it alone if that’s what happens. I’m positive it’s fear of retribution…and it’s sad, frankly, it’s very sad.”

“Because you’re talking about education, talking about where you’re trying to instill in young people the importance of standing up for principles, and leading by example usually helps.”

I asked Iannuzzi if NYSUT has experienced any retaliation from Team Cuomo since filing its suit.

“Not at all,” he insisted, adding: “The governor knew how we felt about the property tax cap….there’s shared responsibility and I hope there will be shared responsibility in addressing it going forward.”

So, if you believe Iannuzzi – and who wouldn’t, since quite clearly retribution isn’t something that worries him – maybe this time the administration decided not to go the threat route.

Watch >> (TWC ID required) Video

Maziarz Proposes Cap Exemption for School Security

A Western New York State Senator has drafted legislation he hopes will encourage school districts across the state to invest in security upgrades.

“This would exempt security costs from the property tax cap,” said New York State Senator George Maziarz.

The Newfane Republican, who represents Niagara Falls and Niagara County as well as Orleans County and western Monroe County, told YNN Buffalo’s Sara Serafin Tuesday that he’s sponsoring a bill that would exempt the money schools spend on security from being calculated in the state’s two-percent property tax cap.

“Obviously with the tragedy we saw with the shooting in Newtown, Connecticut I think it’s important that school districts be encouraged to invest in security measures.  There’s nothing more important than protecting children,” Maziarz said.

The cap was signed into law in 2011 to limit the level of rising property taxes in Upstate New York.  But property taxes are also a main source of revenue for districts, so the cap can limit an important revenue stream.  Maziarz says there are some expenses that are exempt to the cap like employee pension and health insurance costs.  He hopes security costs will be added to that list.

“Hopefully encouraging districts to invest in things like school resource officers and other security measures like door locks and cameras and so forth,” said Maziarz.

The bill was sent to the Senate’s Education Committee.  Maziarz expects it to clear committee sometime in March and be passed by the full Senate in April.

“Everyone wants to make sure that the children that are in school are in a safe atmosphere, and I don’t think there will be any opposition to that,” Maziarz added.