Tax Cap

Counties: Tax Cap Rate ‘Good News And Bad News’

The coming 0.73 percent growth rate for the state’s cap on property taxes is good news for taxpayers, but potentially a damaging development for revenue that funds vital services, the New York State Association of Counties said in a statement.

Comptroller Tom DiNapoli’s office on Monday released a report showing the growth rate for the limit on local government property tax increases will be 0.73 percent in 2016.

The state’s cap on property taxes — in place since 2012 — limits levy increases to 2 percent or the rate of inflation, whichever is lower.

“This is good news and bad news. Good news that property taxes will remain low, but bad news in that quality of life services, such as police protection and road maintenance, are likely to see cuts in the coming year,” said Stephen Acquario, the NYSAC executive director. “The property taxpayers of New York deserve tax relief. New York property owners have been taxed too high for too long. Local governments have done their part to lower this burden. Sadly, the state imposed tax cap carries with it no assumption of the costs of state services delivered locally.”

The cap’s being so relatively low this time around will likely increase calls for both relief from mandated services imposed by the state as well as increased calls for local government assistance, which have not been hiked since Gov. Andrew Cuomo has taken office.

Cuomo has sought reforms to Medicaid spending as well as pension costs, but local government leaders have said the adjustments need to go further at the state level.

“The end result is clear: our communities will continue to see a sacrifice of local services to meet the state’s goals. As we enter the 2016 budget year, county leaders renew their call for the state to pay for its public assistance programs,” Acquario said.

Oneida County Executive Anthony Picente agreed, saying revenue is “shrinking” once again on the county level.

“County governments have made cuts where we can, and we are committed to continuing to serve our residents,” said Picente, a Republican. “It’s time for the state to partner with counties to give New Yorkers real, permanent tax relief.”

Counties Overriding Tax Cap Cut In Half, Report Finds

Approved county budgets that overrode the state’s limit on property tax levy increases has dropped by more than half in the last four years, a report from Comptroller Tom DiNapoli’s office released on Tuesday found.

In 2012, the first year local governments and school districts were required to adhered to the cap approved in June 2011, 15 counties overrode the limit. This year, only six chose to do so.

The cap, which impacts the 57 counties outside of New York City, limits property tax increases to 2 percent or the rate of inflation, whichever is lower. In the last four years, the tax cap is essentially been under 2 percent given the relatively flat inflation growth.

The slow growth has limited county revenue and could make future budgeting difficult, DiNapoli said.

“Counties are holding the line on property taxes,” said DiNapoli. “If inflation continues its downward trend, however, counties will need to tighten their budgets even more to stay within the tax cap and deliver services that homeowners expect. I believe the financial decisions for county leaders next year will be especially difficult.”

County government levies have increased overall between 2012 and 2015, from $5.1 billion to $5.4 billion.

The tax cap was re-approved this month for an additional four years with modifications that were not as sweeping as some local government and school district leaders had sought, such as making the cap easier to override and ending the linkage to the rate of inflation.

Instead, lawmakers and Gov. Andrew Cuomo approved new exemptions for PILOTs and capital spending for BOCES programs.

County Tax Cap 0615 by Nick Reisman

Business Groups Applaud Tax Cap Extension

Business groups are getting behind the legislature’s four-year extension of the state’s property tax cap.

Business Council President Heather Briccetti said in a statement Friday morning that overall, “this was a good session for [their] members.”

The two-percent tax cap was ultimately extended four years and coupled with a rebate program based on income and property values.

“The cap remains a tremendous success, having saved businesses and homeowners more than $7.5 billion,” Briccetti said in a statement. “The cap’s extension was our top priority for the end of session. While we would like to have seen a permanent extension, we are pleased the leaders passed changes that will help incentivize business investments, while rejecting cap-busting exemptions.”

That seems to be the consensus across the business community, though some would have liked to see more done in the final bill – mandate relief for localities, for example.

“While we are disappointed that taxpayers have been denied a permanent cap, we are pleased that it will be extended through 2020,” said Greg Biryla, Unshackle Upstate’s Executive Director in a statement. “In addition, we remind lawmakers of the need to address the problem of New York’s sky high property taxes by enacting meaningful mandate relief. It seems that the effort to provide real relief to local governments, school districts, businesses – and ultimately taxpayers – has stalled.”

Others have pointed to a few significant reforms to the cap, including the exclusion of BOCES and PILOTs.

“We appreciate the important reforms lawmakers made to the property tax cap, such as excluding some BOCES capital costs and including PILOTs in the tax base growth factor,” The New York State School Boards Association said in a statement Friday. “We encourage the Department of Taxation and Finance to implement these changes in such a way that the legislative intent is fully realized.”

Tax Cap Changes Will Be Done Administratively

State lawmakers and Gov. Andrew Cuomo agreed on modest changes to the state’s cap on property tax increases, with two exemptions in a deal that will be carried out administratively.

The changes include exemptions for capital expenses of BOCES programs. School districts were previously exempt under the cap from capital expenses, but BOCES costs were not at the time included when the measure was first approved.

The second exemption to the cap includes payments in lieu of taxes from local developments.

The PILOT exemption is due to be carried out administratively by the Department of Taxation and Finance.

School districts, local government advocates and the state’s teachers unions had sought more sweeping changes to the tax cap, including making the limit easier to override as well as eliminating the provision that has essentially limited levy increases to the rate of inflation.

Cuomo and state lawmakers agreed to a $1.3 billion property tax rebate program, though the details of that proposal are yet to be formally ironed out. Some lawmakers on Tuesday night indicated the rebate program would be carried out on a similar basis as the STAR rebate program. Checks from the new proposal are expected to be sent out by the fall of 2016 should the package be approved.

Cuomo had called for the tax cap, first approved in 2011, to be made permanent as had Senate Republicans. In the end, the measure is extended until 2020 and will expire alongside rent control laws for New York City and the surrounding area.

The cap was initially due to sunset next year if lawmakers did not act on rent control.

A Last-Minute Push Made For Tax Cap Changes

Local government advocates on the final scheduled day of the legislative session pushed for changes to the state’s property tax cap — and they may have a sympathetic ear from Senate Republicans.

Representatives from the New York State Association of Counties, the Association of Towns and the New York Conference of Mayors, alongside a coalition of school district and teachers unions called for changes to the cap that would make it easier to budget within the limit and give them more leeway in overriding it.

Proponents of the cap have pointed to the vast majority of school districts and local governments being able to budget within the cap.

The state Business Council urged lawmakers to not back efforts to “weaken” the cap.

“One of the chief criticisms of the property tax cap was that it would negatively impact school funding,” said Business Council President Heather Briccetti. “Four years in, we now know that is not the case. In fact, while the tax cap kept this year’s levy increases well below two percent, state schools saw a six percent increase in funding.”

At the same time, the cap has not caused credit ratings of local governments to downgrade as many municipalities were upgraded following the end of the recession.

But those who favor changes to the cap have argued that the effective limit of increasing levies to the rate of inflation, which has been largely flat since 2011, makes raising revenue too difficult.

“This is a state-imposed revenue cap,” said NYSAC Executive Director Stephen Acquario. “The state did not restricts its own revenues, it restricted its expenditures. There’s a difference here.”

Local governments have also been cut off when it comes to aid to municipalities, which has not been increased under Gov. Andrew Cuomo’s time in office.

“I think to simply extend it as is is wrong,” Acquario said. “It’s going to hurt this state. We’re kicking the can down the road to support our infrastructure.”

The cap does not expire until next year, but its continuation is linked to rent control laws, which lapsed this week and is at the center of the end-of-session negotiations between Cuomo and the legislative leaders.

“Our point is how can you extend a law that is historic in how it effects local finances without giving it a review,” said New York Conference of Mayors Executive Director Peter Baynes. “Just saying it’s worked is not sufficient.”

Senate Majority Leader John Flanagan indicated, meanwhile, that he’s sympathetic to these arguments, saying his conference backs “minor” changes to the measure.

“A lot of our members have advocated for minor changes to the cap,” Flanagan said after meeting with Cuomo earlier in the day. “There’s a lot of issues involving PILOTs, which is complicated issue, regardless. changes involving BOCES.”

Flanagan reiterated the conference continues to push for a permanent cap.

Local Government Advocates Seek Tax Cap Changes

A trio of local government organizations have written to legislative leaders and Gov. Andrew Cuomo asking them to address what they consider to be shortcomings in the state’s cap on property tax increases.

The letter signed by executive directors at the state Association of Counties, the New York Conference of Mayors and the Association of Towns backs changes to the cap that Cuomo would be unlikely to embrace.

The groups want the cap to be renewed on a temporary basis and no longer tie the cap to the rate of inflation, but leave the ceiling at 2 percent.

The groups also back excluding cap growth from municipal expenditures such as public infrastructure. They groups also back including payment-in-lieu-of-taxes in the calucation of the cap’s tax base growth factor.

The changes are similar to ones recommending by a coalition of school groups earlier this month, who also want to end linking the cap to the rate of inflation.

Currently, local governments and school districts are prevented from raising the tax levy above the rate of inflation or 2 percent, whichever is lower.

“With the imposition of the tax cap, you have asked more of local officials, and municipal leaders have answered the call as best they can with the limited tools you have provided,” the letter states. “Yet the tax cap is reaching a point of diminishing returns and local decline will continue unless you provide increased municipal aid and meaningful mandate relief. Now is the time to help local governments help themselves.”

The cap itself doesn’t expire until next year, but its continuation is linked to the extension of rent control regulations, which are due to sunset on Monday.

Majority Leader Flanagan.pdf by Nick Reisman

NYSUT, Plus School Officials, Push Tax Cap Changes

As the state Democratic Committee and Gov. Andrew Cuomo push to have it renewed, the leaders of local school district groups as well as the New York State United Teachers are backing changes to the state’s property tax cap law that would make overriding it easier to do.

The changes are being backed by a broader group called the Educational Conference Board, whose membership includes the Council of School Superintendents, the New York State Schools Boards Association, School Administrators Association of NEw York State as well as NYSUT and the Conference of Big 5, the five largest school districts in the state.

“A tax cap should not be punitive,” the ECB, a coalition of seven leading statewide education organizations, said in a recent report. “The goal should be to provide relative stability for taxpayers while accounting for the costs needed to provide services — many of which are required of public schools and supported by their communities.”

The changes being proposed would make it easier to override the cap by requiring a simple majority of voters rather than a two-thirds supermajority.

At the same time, the school groups support ending the provision that essentially caps levy increases at less than 2 percent: Currently, the cap law limits increases to either the rate of inflation or 2 percent, whichever is lower. The CPI over the last several years has been under 2 percent.

Other changes include allow for growth in budgets without going over the cap, including counting general fund transfers to a capital reserve fund in cap exclusion as well as including payments in lieu of taxes as a factor in tax base growth.

“The tax cap is unfairly limiting the ability of communities to decide how much they can choose to invest in their local schools,” said NYSUT Vice President Andy Pallotta said. “Without reasonable, thoughtful modifications to the tax cap — such as recognizing enrollment growth and counting capital expenses for BOCES — public schools will again be looking at cuts that erode educational quality, especially in the neediest school districts.”

Despite the calls for changes, the vast majority of school districts last month approved budgets within the cap, with only 18 districts statewide overriding the limit on levy increases. Of those, 11 budgets were approved.

A report from Moody’s last month found a “growing reluctance” to override the cap on the school district level as well, and the requirement to budget within the cap has not led to widespread crediting rating downgrades.

Cuomo had previously called for a permanent tax cap extension, though he now appears to be backing away from the move.

The cap does not expire until next year, but is linked to an extension of rent control regulations for New York City and the surrounding area, which sunset June 15.

Moody’s Report: ‘Growing Reluctance’ To Override Tax Cap

Most school districts have managed to adopt budgets within the state’s property tax cap and have those spending plans approved by voters, largely without a negative impact on their credit ratings, a report released by Moody’s on Friday found.

The report examined the overwhelming passage of school district budgets statewide this month, noting that with only nine of the 700 or so districts not passing their spending plans the first time around is a “credit positive.”

Meanwhile, 18 districts overrode the limit on levy increases, with 11 succeeding.

With a record high rate of passage and with levy increases averaging only 1.6 percent statewide, Moody’s found this is part of a “growing reluctance” of district officials to risk a failure of the budget and try to override the cap.

“The number of districts attempting overrides is less than one-half the number that tried in fiscal 2013,” the report found. “Of the nine districts whose budgets did not pass, seven attempted to pierce the cap through an override.”

A cap override is also harder to pass: A budget with a levy higher than cap requires a supermajority in order to be approved.

The state’s tax cap was first approved in 2011. While tied to rent control regulations that are due to expire next month, the cap itself is not scheduled to sunset until next year.

Nevertheless, tax cap supporters want to make the measure a permanent one for local governments and school districts. Some Democratic lawmakers have raised the possibility of making some changes to the cap law, which limits increases in the amount collected in taxes to 2 percent or the rate of inflation.

Still, school districts have been able to continue budgeting within the cap without impacting their credit ratings. Moody’s found that since 2012, the number of downgrades among school districts has decreased, while the number of credit upgrades as actually increased.

From the report:

“While the constraints of the levy cap have challenged school district operations, most have managed without a significant impact on credit quality. Initial trends of districts appropriating greater portions of their reserves to balance budgets immediately following the implementation of the tax cap have started to subside and districts are generally able to balance operations without tax-cap overrides. As Exhibit 3 shows, upgrades outpaced downgrades in 2014 for the first time since the tax cap was implemented. Upgrades have so far outpaced downgrades in 2015 as well.”

creditratingsdistricts

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.”