Looks Good on Paper, But It’s Not Going to Work
New York State’s 2% municipal tax cap is a lot like your daughter being engaged to a very handsome young man from a great family. A Wall Street Wally type, he makes plenty of money, you know your daughter will never do without and have the option of not working after kids if she chooses. He’s athletic, witty, can pick a great cigar and mostly he makes your daughter happy. All the planets have aligned, life is good. However, then it comes to light, Mr. Perfect likes to hit up male hookers as a hobby in his spare time.
OH THAT’S BAD NEWS, it looked good on paper but it’s not going to work.
Ok the 2% Municipal tax cap garnered a sigh of relief for many on Long Island when it emerged in 2011, however, much like the fictional character above, it looked great on paper but it’s not going to work. Since that the implementation, it has come to light and to some instances fruition that many micro municipalities such as school districts, towns, fire departments have a great chance of suffering financially in a number of ways. There is the potential for the tax cap to even decimate some municipalities with school districts being most vulnerable.
First of all, the Utopian 2% Municipal tax cap aimed to keep the behemoth taxes in New York under control was an outstanding premise, however, it came without any unfunded mandate relief.
The mandate relief was promised by Gov. Cuomo – it is necessary for this to truly be an effective tax-cutting tool that doesn’t decimate education or small municipalities. Smithtown’s Assemblyman Michael Fitzpatrick has been a vocal proponent of the tax cap but equally vocal about the need for some of those unfunded mandates to be rescinded as promised. He has also been vocal about the antiquated Triborough Amendment (explained below) and how it negatively impacts taxpayers and plays into the tax cap problems.
Unfortunately, the school districts were the first to feel the punch in the stomach in the budget they had to prepare after the state’s 2% Municipal tax cap went into action. There are certain definitive in a school budget that can’t be changed or cut to reduce a budget: contractual items like salaries, health care costs and pension costs and things like the cost of fuel, etc. So if a small district like the Kings Park district were to find themselves with four high-needs special education students newly enrolled and Wall Street took another giant flop therefor changing interest rates/borrowing rates and the cost of fuel hit an all-time high, where is all that money coming from? If a district has a Reserve Fund, it isn’t prudent to use that fund for a line item that must be funded annually, it will rapidly deplete the Reserves. We see Reserve Funds dwindling in districts all over Long Island.
All those following education have seen where districts have to close the gap – cuts to jobs (including educators creating larger class sizes), cuts to music programs, the arts, sciences and sports. These are the goodies that attract parents or would-be parents to a community. The quality of the school district directly affects the economy of the community – people pay more to be in a good or what’s considered a high-performing school district on Long Island. They do it all over Long Island if they have the means.
Two gal pals of mine just sold their homes over the last year in the Kings Park district as their kids were all grown, they had lovely homes overlooking Callahans Beach right on the water in exclusive Fort Salonga.
They paid between 40 and 46 thousand dollars a year in taxes. Insane annual tax cost? YES. Did they enjoy living in the community and raising their kids in Kings Park? Yes they did. Are their six young adults out in the world living successful lives? Yes they are, they all received excellent educations. Families flock to Smithtown for the school districts. Like my cronies, we did. However, we only pay about $12K in taxes which is still insane because we live in a modest cape cod home in a middle class section of town.
Back in September, Town Supervisor Patrick Vecchio was lamenting about the tax cap while preparing the finalities of the 2016 budget as he addressed the KP Civic Association. He was right on the money to do so. As the town’s Chief Financial Officer, he fully understands the negative impact the well-meaning tax cap could have if Cuomo and Albany do not follow through with rescinding unfunded mandates and redacting the draconian Triborough Amendment. The Town of Smithtown is now feeling the negative impact of the tax cap that many school districts immediately felt after its implementation.
Key Components of the Tax Cap
What is the property tax cap?
The tax cap law establishes a limit on the annual growth of property taxes levied by local governments and school districts to two percent or the rate of inflation, whichever is less.
Who is subject to the tax cap?
The cap applies to all independent school districts outside of the Big Five Cities (i.e. dependent school districts) and to all local governments including counties, cities, towns, villages and special districts (except those special districts noted below). The cap does not apply to New York City.
Are there exceptions to the tax cap?
There are limited, narrow exclusions to the cap, including certain costs of significant judgments arising out of tort actions and unusually large year-to-year increases in pension contribution rates.
Is there an override mechanism to the tax cap?
The tax levy cannot exceed the cap unless 60 percent of voters (for school districts) or 60 percent of the total voting power of the governing body (for local governments) approve such increase. There are other over-ride mechanisms that were since added.
When is the tax cap effective?
The cap first applies to local fiscal years beginning in 2012. Local budgets that commenced in 2011 but concluded in 2012 were not affected.
LET NEW YORK WORK – UNSHACKLE LONG ISLAND
Well there are countless people, agencies, businesses and even school districts vocalizing the need for the other half of the promises Cuomo and Team Albany made they inacted 2% Municipal Tax Cap officially in 2012. One such non-profit is Unshackle Upstate.
Unshackle Upstate is a bi-partisan coalition of over 80 business and trade organizations representing upwards of 70,000 companies and employing more than 1.5 million people.
They hail from across Upstate New York with one goal: To achieve reforms in Albany that make Upstate New York a stronger place to do business. According to the Unshackle Upstate founders and members:
The six items in the Coalition’s mandate relief package include:
- Freezing step increases when contracts expire. The state’s Triborough Amendment allows so-called “step increases” – or salary increases – for public employees to continue under an expired contract. This places a financial burden on school districts and municipalities and provides a disadvantage in collective bargaining, as they must continue to provide salary increases even with no contract in place.
- Controlling construction costs. Lawmakers should enact a number of measures that would reduce the costs of public/private construction projects. These items include making permanent the use of Design Build as an alternative project delivery method, increasing the Wicks Law threshold to $10 million across the state, and enacting the Public Construction Savings Act, among other initiatives.
- Providing portable pension benefits. To help control the volatility of pension contributions made by local governments, New York should offer public employees at the state and local level a defined contribution pension option.
- Redefining Compulsory Arbitration. The statute governing binding arbitration should be amended to specifically define “ability to pay” as the ability of a public employer to pay all economic costs imposed on it by an arbitration award without requiring a reduction of municipal services or an increase in the level of real property taxes. The statute should also require the arbitration panel to deliberate in public and present its decision at a public meeting.
- Capping health insurance costs. Finally, state lawmakers should limit the employer contribution to health insurance for employees of schools and local governments to no more than 85 percent of a healthcare premium for individuals, or 75 percent for families or retirees. Moreover, if the employer contribution rates in state contracts decrease, then local contracts should follow the same reduction in the next negotiation cycle.
- Prohibiting new unfunded mandates. The state should not impose any mandates on municipalities, school districts and taxpayers unless it provides full funding to implement those mandates.
“The property tax cap was an historic step to finally place a meaningful control on the cost of government in New York State and its burden on taxpayers,” said Brian Sampson, executive director, Unshackle Upstate. “Unfortunately, the success of the cap was always predicated upon the enactment of meaningful and structural mandate relief. Not until New York gets serious about eliminating the cost drivers that keep our property taxes among the highest in the nation – the Scaffold Law, Wicks Law and the Triborough Amendment, among others – will New York actually achieve the real reform necessary to get the upstate economy moving and its population growing.”
UnShackle Upstate has it right – Assemblyman Fitzpatrick has it right, Supervisor Vecchio gets it as does our present Town Council. Now is the time to UNSHACKLE LONG ISLAND. This would have a positive effect on the pocketbooks and services for all Smithtown residents.