Tax Cap

Moody’s Finds Benefit In Increased Tax Cap For Counties

A report released Friday by Moody’s found good news for local governments with the state’s tax cap coming its closest to a 2 percent rise since it took effect in 2012.

Allowable tax levy growth for local governments will reach 1.84 percent, up from 0.68 percent.

The cap is tied to the rate of inflation or 2 percent, whichever is lower. Inflation has largely been flat for the last five years, leading to largely flay growth in property taxes as a result.

“The allowable property tax levy increase is credit positive because it provides revenue-raising flexibility for issuers in the state,” the report found. “Property taxes make up a large portion of operating revenues for many issuers, usually comprising the first or second largest source of revenue. Any ability to increase this revenue source allows for greater budgetary flexibility.”

New York typically has the highest property taxes in the country.

But while taxes have broadly been kept low, municipalities have called for changes that would make it easier to budget within the cap.

DiNapoli: Tax Cap Approaches 2 Percent

The allowable growth in property tax levies for local governments will be set at a 1.84 percent cap, Comptroller Tom DiNapoli’s office on Friday announced.

The calculation of the cap impacts county and town governments, as well as fire districts and 44 cities and 10 villages.

“After two years of tax growth being limited to less than one percent, inflation has crept up resulting in the highest allowable levy growth since 2013,” DiNapoli said. “This increase is offset by rising fixed costs and limited budget options. I continue to urge local officials to exercise caution when crafting their spending plans.”

The state’s tax cap has been in place since 2012 and limits the rate of year-over-year increases in the amount collected in taxes to 2 percent or the rate of inflation, whichever is lower.

In the last five years, inflation has largely been flat and has never hit the 2 percent threshold.

In the 2017-18 fiscal year, property taxes were capped for school districts at 1.26 percent.

Five Years Into The Tax Cap, Local Governments Haven’t Seen Credit Hurt

Local municipalities who have had to budget within a cap on local property tax levy increases have not seen their credit adversely impacted, while financial reserves remain mostly steady or have grown, according to a report released Wednesday by Moody’s Investor Services.

The report coincided with the five-year anniversary of the cap, which limits levy increases by 2 percent or the rate of inflation, whichever is lower. Since inflation has been flat since 2012, the cap has been generally under 2 percent since 2013.

The report found that growing state aid for school districts has offset the impact of the tax cap, with state aid outpacing growth of the tax levy — a move that has provided support for especially needy districts.

City and county governments are more prone to overriding the cap more often than school districts. Over the last five years, 22 percent of the state’s city governments and 18 percent of counties have exceeded the cap. Only 2 percent of school districts, meanwhile, have done so.

Local government and school lobbying entities have sought to make changes to the cap, such as no longer tying it to the rate of inflation. Those efforts have largely failed in the face of opposition from Gov. Andrew Cuomo, who counts the cap among the significant economic achievements of his first term.

NY-19: Another Super PAC Enters The Fray

From the Morning Memo:

Yet another Super PAC has decided to weigh in on the NY-19 fight to replace outgoing Republican Rep. Chris Gibson, adding to the rapidly mounting tally of outside spending on this hotly contested race. 

National Horizon, a conservative group, this morning is launching its first – and so far only – TV ad in New York, aiming to boost the Republican contender in this contest, former Assembly Minority Leader John Faso. 

The ad echoes a theme Faso and his allies have been pushing hard lately, accusing the Democrat running in NY-19, Zephyr Teachout, of wanting to significantly raise a plethora of taxes. 

The script features a female narrator who says: 

“More of the same, that’s Zephyr Teachout. More taxes. More political double-talk. Teachout opposed a cap on property taxes here. She backed a new ten billion dollar tax on investments. and on energy, Professor Teachout wants something she calls a quote fee and dividend system, a quote tax is what regular folks might call it. Zephyr Teachout, more of the same with more taxes.”

Republican strategist Nelson Warfield, who has long been involved with National Horizon, said the Super PAC is spending about $150,000 on this ad, ($10,000 of that is to cover production costs), which will run on Albany-area network and cable stations for the next week. 

Warfield said National Horizon decided to get involved in this race because it believes Teachout “presents a unique threat to the public purse,” adding: “A kooky professor is fun at a cocktail party, but in Congress, it’s another matter entirely.” 

This is a potentially potent line of attack against Teachout, especially when it comes to her opposition of the popular property tax cap, which she first expressed in 2014 when she was challenging Gov. Andrew Cuomo in the Democratic primary. 

Teachout recently released a video explaining her position on taxes and pushing back against what she characterized as “lies” about her position. She expressed support for a circuit breaker, which is an idea long embraced by progressive advocates and organizations in New York. 

National Horizon hasn’t done much work in New York since 2012, when it spent $500,000 to assist Republican Wendy Long, who was then challenging Democratic U.S. Sen. Kirsten Gillibrand. 

Long ended up losing to Gillibrand in a landslide that year. She’s now running a long-shot campaign against the state’s senior U.S. senator, Chuck Schumer. 

Moody’s: With Low Levy Cap, School Districts Rely More On State Aid

The flat growth in this year’s cap on school property taxes is driving districts to rely on overrides and on increasing state aid, an analysis released by Moody’s on Monday found.

Nearly all school districts saw their proposed budgets approved by voters.

But eight school districts requesting overrides of the state’s cap on property taxes failed to pass their spending plans. Meanwhile, the number of school districts seeking to override the cap has doubled this year to 36 from last year’s vote.

This has coincided with ever-increasing school aid from Albany.

“If allowable levy growth remains restricted, school districts will have to increasingly depend on overrides, state aid growth, and expenditure cuts to balance their budgets, a credit negative,” Moody’s found.

The tax cap, in place since 2012, is set at limiting levy increases to either 2 percent or the rate of inflation, whichever is lower. With inflation virtually flat, the cap for school districts was on average 0.12 percent.

It requires 60 percent of voters to support a budget that overrides the cap in order for it to effect.

There have been efforts to make the cap easier to override or end the linkage to inflation, but those have largely failed.

With the cap levy progressively lower each year since it’s been in effect, state aid has grown, making districts more reliant on funding from Albany.

“Growth in state aid revenue has outpaced levy growth, which generally benefits districts that are more reliant on state revenues and challenges districts more dependent on property taxes,” Moody’s found.

“Although school districts more reliant on state aid derive a greater benefit from the current environment of low levy growth and increased state revenues, property taxes have traditionally been a more stable source of revenue than state aid. Continued dependence on state aid growth to enhance revenues and balance budgets exposes districts to state-level budget strain.”

School Districts Seeking Tax Cap Overrides Doubles

As school districts face zero inflation and virtually no room under the state’s cap on property taxes, the number of school districts seeking overrides of the limit has doubled, according to the New York State School Boards Association.

“The 2 percent tax cap is not really a 2 percent tax cap,” said NYSSBA Executive Director Timothy G. Kremer. “The quirks and vagaries of the cap formula mean it can fluctuate widely from year to year and district to district. It’s time for truth in advertising: Make the tax cap growth factor a true 2 percent.”

Most school districts in New York this month are putting their budget proposals before voters for approval. A spending plan that overrides the limit on tax levy increases — set at 0.12 percent this year given flat inflation — requires a 60 percent majority to be approved.

There are 36 school districts that have proposed budgets overriding the cap, double the 18 districts that do so last year.

Meanwhile, there are 95 school districts that have negative tax levy limits, which requires them to not hike property taxes from a year ago without the supermajority approval.

Statewide, the average levy hike is 0.7 percent, lower than the 1.5 percent from last year. Spending, however, is up by 2.1 percent, compared to the 1.8 percent on average in 2015.

Gov. Andrew Cuomo has touted the tax cap as an important tool for voters and taxpayers to control some of the highest property taxes in the nation.

But school districts and local governments have sought increased flexibility under the cap, such as eliminating the linkage to the rate of inflation.

NYSUT Releases Conference Board Letter To Lawmakers On Tax Cap

The New York State United Teachers union has released a letter from the Education Conference Board written to state lawmakers urging them to boost education spending by $2.2 billion as the state’s cap on property tax increase is due to be virtually flat this year.

“If the state cannot match local tax relief with solid support for schools, it will be at the expense of opportunities and programs for students,” the letter states. “The Educational Conference Board strongly recommends the following actions to blunt the detrimental impact of this year’s low cap and provide schools with the state funding needed to continue to provide critical services for students next year.”

At the same time, the union raises concerns with the negative growth rate under the cap which has been calculated for some school districts. In all, the union says 82 school districts are facing a negative cap this year.

“The financial pressure of a negative cap can cause the loss of student programs,” the conference board states. “It complicates the public’s ability to engage in the school budget process and creates instability for schools. We recommend setting a floor of zero percent for tax caps to provide a degree of stability rather than the disruption a negative cap causes for students and communities.”

The crimping under the cap makes school aid all the more important for districts, NYSUT argues. Both the Assembly and Senate want to increase foundation aid beyond the $266 million proposed by Gov. Andrew Cuomo. All together, the Assembly wants a $2.1 billion hike in spending, the Senate backs $1.6 billion increase. Cuomo’s education funding proposal stands at a $961 million increase.

Despite the concerns from NYSUT and other school district officials when it comes to the tax cap, the provision is unlikely to change in New York. Lawmakers have argued the tax cap is popular and supporters, including Cuomo, say it’s working as it was intended: Keeping the nation’s highest property taxes under control.

ECB March2016Letter TaxCapFilings Release by Nick Reisman

Counties Release Budget Priorities

The New York State Association Of Counties released its to-do list of budget priorities for the coming fiscal year, with the local government officials backing a variety of measures aimed at easing the burden on municipal-level officials and taxpayers.

The counties back a takeover of county indigent defense costs, as well as an increase in community college funding. The counties also want the state to lower the E-911 surcharge.

Perhaps most importantly, the counties are pushing for using bank settlement funds for upstate road and water infrastructure projects and have the state invest in clean water infrastructure.

County leaders are feeling the squeeze this year, as are other local government and school district officials, given the allowable growth in the state’s cap on property taxes is less than 1 percentage point.

“County officials from across the state have been communicating concerns to their state legislators,” NYSAC President Bill Cherry, the treasurer of Schoharie County, said in a statement. “A projected property tax cap growth at basically zero in 2017, combined with stagnant sales tax revenues, counties will not be able keep up with the rising costs of state mandated programs provided at the local level. We need State Lawmakers to assist their local taxpayers and provide mandate relief, and dedicate bank settlement funds to local roads and water projects.”

Modest changes were made to the state’s property tax cap law last year, but not as much as some local government leaders had sought.

NYSAC noted in a release that nine different mandated spending requirements from the state took up 99 percent of county property taxes that were levied statewide.

DiNapoli: School Districts Overriding Tax Cap Grows

The number of school districts planning to submit budgets that override the state’s cap on property tax increases has grown to 36, according to Comptroller Tom DiNapoli’s office on Thursday in a report.

That number is still relatively low compared to the 601 school districts that have reported their proposed budgets to the state as March 2. But percentage-wise, the number has increased from 3.5 percent of schools to 6 percent.

The limit for increasing the tax levy this year is capped at 0.12 percent, the lowest level since the cap has been in place when it was first applied in 2012.

“School districts are feeling the impact of a historically low tax levy limit,” said DiNapoli. “Although district administrators and school boards have been reluctant to exceed the tax cap, this year’s limit seems to have left some districts with limited options. As school budget planning continues over the next few weeks, we may see additional districts deciding to seek voter approval for an override.”

The cap is linked to the rate of inflation or 2 percent, whichever is lower at the time. Some local government officials and school districts this year, along with labor unions, are urging lawmakers and Gov. Andrew Cuomo to remove the rate of inflation component of the cap and simply limit levy increases to 2 percent. Such a proposal is unlikely to be backed by Cuomo, who has counted the tax cap as one of the signature economic achievements of his first term.

DiNapoli’s office found that so far, at least 76 of the 601 school districts reporting are facing a negative levy limit. Those districts will need to cut taxes by $18.6 million or in order to stay within the allowable limit.

Two-thirds of voters can override the cap, along with a supermajority of elected officials who consider budgets.

NYSUT: Tax Cap ‘Crippling’ School Districts

commoncoreThe zero percent growth in the state’s tax cap this year is “severely crippling” school districts and their ability to raise revenue, the New York State United Teachers union said on Wednesday in its prepared testimony to state lawmakers.

The labor umbrella group is calling for a $2.6 billion increase in state aid for schools as well as modifications to how the tax cap impacts districts.

The funding request i more than twice the $963 million proposed by Gov. Andrew Cuomo in his $154 billion budget proposal made earlier this month.

“We are making progress on many fronts but there is still work to do,” said NYSUT President Karen Magee. “This is the year the state should significantly increase the Foundation Formula, eliminate the Gap Elimination Adjustment and make good on its commitment that, no matter where students live or go to school, they have the opportunity for the sound, basic education the New York Constitution requires.”

Calls for altering the cap are back again this year as school districts face the prospect of setting budgets that allow for less than a 1 percent increase in the levy, or the amount collected in taxes. A supermajority of voters can choose to approve budgets that override the cap.

NYSUT, along with education officials that represent school districts, want a “true” 2 percent cap on taxes that eliminates linking the rate of inflation to the measure that’s been in place since its approval in 2011.

It’s unlikely Cuomo would go along with alterations to the cap, even as state lawmakers last year approved modest changes to the measure that allow for some growth in certain instances.