The newly enacted 2 percent property tax cap isn’t as simple as the name implies, as many municipalities are finding out in their 2012 budgeting processes.
The cap is really the first of many calculations behind the tricky maze of exceptions and exemptions. Gov. Andrew Cuomo’s approved mandate on how high town, county and school leaders can raise taxes appears to be a simple calculation if only looking at the surface, the “2 percent tax cap.” As tentative municipal budget proposals are surfacing for next year’s spending, many proposals fall under the mandated guidelines but exceed 2 percent.
The Town of Bethlehem and City of Saratoga can still fall within the “2 percent tax cap” even if budgets were proposed doubling the limit. After calculating exclusions, Bethlehem holds a 4.11 percent limit on its tax hike and Saratoga’s limit is even higher at 4.53 percent. Both municipalities are proposing budgets with a tax levy increase around 1 percent, falling well below their limit and the perceived 2 percent cap.
The Town of Niskayuna is also proposing a 3.4 percent tax levy increase in its tentative budget, but it falls under its tax cap limit. The Town of Glenville is similar with its 3.2 percent tax levy increase.
The state Department of Taxation and Finance and the Department of State have released a 12-page guide to implementing the property tax cap. Various webinars and seminars are being hosted by the state to provide government bodies with the knowledge to implement the cap, too.
“We’ve spent a lot of time trying to figure out how it works and it is essentially a formula,” said Bethlehem Comptroller Suzanne Traylor. “People within the government are confused … the process is getting educated to what it means.”
Traylor has attended “numerous” informational presentations, she said, including a special session of the state Office of Comptroller.
To calculate the tax levy limit there is an 8-step process:
Take the prior year’s tax levy to start; then, multiply by a “tax base growth factor,” which is a figure provided by that state; then add in any payment in lieu of taxes; take out tort action payments exceeding 5 percent of the previous year’s annual tax levy; then multiply by the “allowable levy growth factor,” which is 2 percent or the consumer price index, whichever is lower; take out PILOTs scheduled for the coming year; add in any carryover funds (extra taxes from the previous year); and carry forward eligible exclusions.
After budgets are developed and public comments are heard, the state Comptroller’s Office receives the adopted budget of a municipality or school district. The state then determines if levies are “erroneous,” or exceeding the limitations provided by law. Of course, this is overridden if the governing body has voted to remove the cap with a 60 percent majority.
Any charges exceeding the limit, no matter the circumstance, is always placed into a reserve.
There are special circumstances, though, where the Office of the State Comptroller would determine a tax levy limit calculation, which would result from the consolidation of two or more local governments, transferring functions of one government’s activity to another government (such as policing), or when a local government dissolves. New local governments that don’t result from consolidation or dissolution do not have a tax levy limit applied the first year.
University at Albany professor Betty Daniel, who teaches macroeconomics and international economics, said personally she was opposed to the tax cap, but understands the public wants to see ever-rising taxes stopped.
“You’ve got people assured that property taxes aren’t going to go up so rapidly they don’t feel like they can’t afford their homes anymore,” Daniel said. “I think the public likes it because they want to see limits on the rate of their property taxes going up.”
Possible impacts for education are why Daniel is opposed to the limit. She said if people understood “possible implications for school funding” their support from the cap might waver. School boards would have to set a vote for the public to override the cap and if 60 percent of voters share their support the cap can be lifted.
“We are withdrawing public support of education at all levels … and I personally think that is a big mistake,” she said. “We need an educated workforce.”
If the rate of inflation does increase greater than 2 percent, she said, government and schools could also see their purchasing power drop along with the value of a dollar. The cap only prescribes adhering to the rate of inflation if it falls under 2 percent.
