First enacted in 2011, the New York State property tax cap limits the amount by which local governments and school districts (outside of New York City) can increase property taxes on residents within their jurisdictions—to 2 percent or a percentage tied to the rate of inflation, whichever is less. There are some exceptions, including a provision that allows a voting process to override the cap, but the state provides financial incentives to the residents of municipalities that manage to remain under the proscribed limit, which, according to a 2015 report released by the office of Gov. Andrew Cuomo, 80 percent of municipalities and school districts have done during the first three years—saving the typical taxpayer more than $800.
“I am a strong supporter of the 2 percent property tax cap,” said Assemblyman Phil Steck. “I commend both the Town of Colonie and our school districts for adhering to it—property taxes are too high in New York. But the tax cap is not really 2 percent. It is a complicated formula that depends on factors like the rate of inflation. The allowable increase under the current tax cap formula for the Town of Colonie is actually 0.12 percent.” With a nearly zero tax levy increase, said Steck, the state should be helping municipalities pay for the maintenance of essential infrastructure.
“The governor has been disinclined to increase funding in the Aid and Incentives for Municipalities (AIM) program,” he said, “preferring to incentivize consolidation of services among municipalities. Yet all our municipalities face infrastructure needs. So we either need to bridge the tax cap gap or revitalize AIM, perhaps with a greater focus on infrastructure needs. Another important program in need of additional funding is the Consolidated Local Street and Highway Improvement Program (CHIPS), which provides state funding for roadwork in our town.” Assembly Democrats are proposing legislation, said Steck, modeled on CHIPS, that would establish a similar program for water and sewer infrastructure improvements badly needed by aging municipalities all over New York state.
“We have major infrastructure needs throughout the state,” he said, “and the older municipalities clearly have more pressing needs. So we are proposing a bill, which is currently being drafted, to give municipalities the aid they need from state revenue to update their essential infrastructure, which they would be unable to do in a tax cap environment where there’s not enough revenue to engage in these repairs. So the bill would have the state provide additional funding—based on the population of the municipality and the age of their infrastructure—and it would exclude all privately-run infrastructure within that municipality. Obviously the private entities that are operating that should not be entitled to state funding.”
(Legislation introduced in the State Senate by Senator Tom O’Mara (R-58) early this month addresses water infrastructure concerns as well, also focusing on the sewage treatment systems and prioritizing projects “that result in the greatest water quality improvement or greatest reduction in serious risk to public health.” The bill S6905 is currently in the Senate committee on Infrastructure and Capital Investment.)
“This stuff is really complex,” said Steck of the tax cap formula. ““Like everything in the state of New York, the agencies are allowed to overcomplicate everything instead of making it simple. Simplicity is a virtue; remember that the more complex a thing is, the more employees you have to hire to figure out what the correct calculations are. So we would really be better off with a simple two percent cap or, for example, if the state took over Medicaid, then we would have an instant property tax savings.”
The New York State Educational Conference Board (ECB) is also in favor of a straight tax cap, like the ones implemented in Massachusetts and New Jersey (2.5 percent and 2 percent, respectively), saying that many of the expenses districts that districts face “bear little or no resemblance” to the factors involved in determining the current cap. “A consistent 2 percent,” said ECB in early 2015, “is more predictable and fairer.”
The current cap formula requires a seven-step process to calculate: (1) calculation of the total amount of taxes levied by the municipality or district in the previous year; (2) that figure is then multiplied by a “tax base growth factor” supplied to the local government (Town of Colonie = 1.0083; Town of Bethlehem = 1.0020; Town of Guilderland = 1.0121; Town of New Scotland: = 1.0024); (3) PILOT (Payment in Lieu of Taxes from tax-exempt entities) payments received are then added; after which, (4) tax levies used to support legal actions in excess of five percent of the total previous year’s tax levy are subtracted; that result is then (5) multiplied by an “allowable levy growth factor,” provided by the Office of the State Comptroller; (6) PILOT payments expected in the upcoming year are then subtracted; and, finally, (7) any available carryover from the previous fiscal year is added. (Unused exclusions associated with growth in pension costs or tort judgements are not carried over.)
Other legislators across the state—such Senator Andrea Stewart-Cousins (D-35), leader of the Democratic Conference, last month—have called for a straight 2 percent cap as low inflation has caused most municipalities to have a near-zero cap for this year under the existing formula, while others say the low caps are a realistic limit in light of low inflation. Senate Majority Leader John Flanagan has indicated that he doesn’t expect any changes to the current formula for the current year, so lawmakers and local officials are looking for other funding streams to ensure that essential state infrastructure remains safe and functional.
