Extremely Low Property Tax Caps Approaching

The Good News: Less taxes to pay.

The Bad News: Less revenue for governmental services.

The New York State Property Tax Cap  is the highest amount a local government (County, Town, City, or Village) or school can raise their tax levy from one fiscal year to the next. It
was aimed to control expanding property taxes which are a major local source of revenue for those agencies. The other local sources of revenue would be from Sales Tax, Occupancy Tax and local fees. The law states that the tax cap is either a 2% increase, or the most recent inflation rate, which ever is less. The governing board may exceed the cap if it passes a Tax Cap Override local law  by a “Super Majority” (60%) vote. For a seven person board, it will need to have five votes to pass an Override Law.

There are limited, narrow exclusions to the tax cap,  including certain costs of significant judgments arising out of tort actions and unusually large year-to-year increases in pension contribution rates. Recently the value of property which has a PILOT  (Payment-in lieu-of-taxes)  has been excluded from the tax cap.

Don’t forget the State is now issuing Tax Rebate Checks to property tax payers who reside in municipalities that keep their budget tax levy at or below the Tax Cap.

Most New York State Villages’ Fiscal Years run from June 1 to May 31. They need to have their budgets developed and passed by May 1 to have the tax bills sent by June 1. Villages will start developing their budgets soon.

For Villages the 2012-13 and 2013-2014 inflation rates were over 2%, so they could raise their tax levy deflationby 2%.  The 2014-2015 inflation rate was 1.48%, and that became the tax cap for Village budgets. The Villages Tax Cap for our present budget (2015-2016) was 1.68%.

This week Villages received their New York State Tax Cap notices. The inflation rate for next year’s Village budgets is 0.12%!

Yes, in order to meet or stay under the tax cap the Villages in New York State can only raise taxes a bit more than one-tenth of one percent. Penn Yan’s 2015-16 tax levy was approximately $2.8 million. If  the Penn Yan Village Board is to meet the State’s Tax Cap, their budget’s tax levy can not be raised by more than approximately $3,400.

Even if the Village leaders have kept their employees’ salary raise to one percent  (plus related benefits) that would wipe out the tax cap increase. It doesn’t leave much money to maintain basic services, let alone doing preventive maintenance, upgrading old infrastructure, or improving services.

Local Village Boards will will face a dilemma. They are always concern about tax increases, and would like to stay within the tax cap. They also want to maintain or improve services to their constituents. Don’t be surprised if a lot of Villages override their tax cap this year.

Villages are just the beginning. The Town and Counties budgets, which goes into affect January 1 had a Tax Cap limit of 0.73%. Schools, whose budgets are voted on in May have not received their increase limit yet. How can their tax cap be much larger than Villages? For a chart to see the history of the tax caps rates follow this link.

When the Tax Cap law was created it in 2011, it was scheduled to expire in 2016. Polls show that 70% New Yorkers favor the it.. The feeling is that it is working since the property tax increases are leveling out.  Many, including Governor Cuomo, want to make the tax cap permanent.  Others want to tweak it. One suggestion is to have the Cap be a real 2% cap and not tied to the inflation rate. That is what Albany has done on state spending. Another suggestion is to exclude the cost of improving infrastructure from the cap.

The Legislature decided not to make it permanent, but to extend the Property Tax Cap through 2020. That gives our state legislators time to study how the low tax cap limits the local governmental services, and how it affects our economy.

Rich Stewart, the author of this article, is a Penn Yan Village Trustee.



About pystew

Retired Teacher, political science geek, village trustee. I lean a little left, but like a good political discussion. My blog, the New NY 23rd (http://newny23rd) is about discussing the issues facing the people of our new congressional district. Let's hear all sides of the issues, not just what the candidates want us to hear.
This entry was posted in Constituents, Data, Economics, NYS Government, Taxes and tagged , , , . Bookmark the permalink.

6 Responses to Extremely Low Property Tax Caps Approaching

  1. Barbara Griffin says:

    Personally, I would rather pay a little more in taxes than to have services cut. We’ll all be in trouble if our local governments can’t afford to send out the snowplows.


  2. pystew says:

    My experience is when a government thinks they are doing their constituents a favor by having a zero increase then the next year the increase balloons up to close to double figures. An ultra low increase can not be sustained for multiple years. Hopefully the legislature be able to amend the law if that takes place.

    To be honest, the Tax Cap is a great motivator for boards, but a one-tenth increase shouldn’t happen, and we will probably go over it, but we will try top keep it low, definitely under 2%. On thing that will be saving Penn Yan’s budget is that health insurance will be decreasing by about 30% because of the Affordable Care Act.


  3. whungerford says:

    In the Town of Elmira the increase reportedly will be 1.69% which is said to be under the cap. Can that be right? The Town claims they have used fund balances to balance the budget; doesn’t that bode ill for the future?


  4. whungerford says:

    I think I understand now. The 1.69% increase must be for the 2015-2016 TOE budget rather than the 2016-2017 budget.


  5. pystew says:

    Most (I think all, but am not sure) Town and County budgets run on a calendar year. Yates County had a 1.35% increase which they claim to be under the 0.73% tax cap. The County Treasurer told me they had a large mandated pension increase, which is excluded from the tax cap.

    I know during the first year of the tax cap program Yates County had an actual tax increase somewhere around 5%. I went to the budget hearing and the County Administrator, who was the Budget Officer, took time to go over the tax Cap formula to explain how that 5% figure was under the 2% cap. I think the formula was more lenient while governments were transitioning into the meeting the requirements.

    Don’t get me wrong, I feel the tax cap has been beneficial in giving boards a goal to meet, and that we can justify smaller salary increases during negotiations. If extremely low caps are going to be the way of the future governments will be handcuffed or always over-riding them. A few tweaks of the law would help. This is something we legislators, and new candidates should look at. Our present legislators approved of extending the legislation during the last term. I wonder if it can be amended.


  6. Pingback: Property Taxes by NY 23rd Counties | New NY 23rd

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