Property tax cap: Can it halt exodus of jobs and people from New York?

The tax burden has been blamed for the exodus of jobs and population, particularly upstate. Each year, the Tax Foundation shows upstate counties, including Monroe, have the highest tax burden compared to property values in the nation.
By: www.Retire.LI
 
July 9, 2011 - PRLog -- ALBANY -- New York has long suffered from having among the highest property taxes in the nation.

The numbers have been staggering: 96 percent higher than the national average and, as a percentage of personal income, 79 percent above the rest of the country.

The tax burden has been blamed for the exodus of jobs and population, particularly upstate. Each year, the Tax Foundation shows upstate counties, including Monroe, have the highest tax burden compared to property values in the nation.

And Westchester County consistently pays the highest taxes: a whopping five-year average of $8,160. The county last month was ranked third nationally -- slightly behind Hunterdon County in New Jersey and Nassau County on Long Island.

Gov. Andrew Cuomo and lawmakers responded last week by adopting perhaps the toughest property-tax cap in the nation, a cap to restrict the growth in the tax levy to 2 percent a year or the rate of inflation, whichever is lower. This year, it would have meant a cap of 1.6 percent.

But while it may succeed in restricting property taxes -- which skyrocketed by an annual average of 5.4 percent over the past decade, double the inflation rate -- the debate is roaring over whether the cap will break local governments and schools.

Municipalities and schools are warning of dire consequences if the cap isn't coupled with greater reforms to state-mandated costs, such as Medicaid and pension expenses.

The cap also comes with provisions that will fundamentally alter the way schools and local governments adopt budgets. The cap can be exceeded if 60 percent of voters for school budgets, and 60 percent of a legislative body for municipal budgets, vote to do so. Another critical piece changes how contingency budgets are adopted if voters twice reject school budgets in May.

The cap takes effect Jan. 1 for local governments, which is the start of the fiscal year for most of them. It starts July 1, 2012, for schools, which is the start of their fiscal year. The state's largest districts, including Yonkers and Rochester, are exempt.

"I can't tell you how many people have come up to me and said, 'You know, I have to move, I have to sell the house. I just can't afford to pay the property taxes anymore,'" Cuomo said last week in Pleasantville, Westchester County, where he held a ceremonial tax-cap bill signing.

"It's forcing people to leave the state, and it has to stop."

Advocates say the cap will provide more stability for homeowners and businesses in a state with an onerous 10,000 taxing entities. While school taxes make up about 60 percent of a property-tax bill, counties, towns, villages and special districts also levy taxes.

"Probably the biggest thing is its predictability and consistency," Brian Sampson, executive director of Unshackle Upstate, a Rochester-based business group, said of the cap.

"We're not going to see these wild spikes in property taxes that we've seen over the last few years. So as a business owner, I can expect what my property tax bill is going to be. I can plan for it; I can work that into my pricing schedule."

Maybe so, but local governments warn that the cap will likely be busted if they aren't spared from growing state costs. Counties said next year they could raise $90 million in revenue if they increased taxes 2 percent. Their expenses are going up $280 million.

This year, schools raised taxes by about 3.4 percent, and they said even that amount still led to layoffs and program cuts. Schools and governments could be sued if they chose not to abide by the cap, a state law.
increase, sometimes even higher than what voters shot down. It can be a spending increase of 4 percent or 120 percent of the inflation rate.

But the new law would prohibit a school district from increasing taxes at all if voters rejected the budget twice. It will raise the stakes for schools, which will fear the consequences of a budget proposal out of line with voter sentiment, McMahon predicted.

"That is the most significant part of this," he said. "You will see very few zero percent increases, but what you'll see are schools being very careful on what they will propose. And that will be single greatest impact of the property-tax cap."

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