State's two percent tax cap: Not exactly
TRI-COUNTY AREA (April 10, 2012)—If it is called a “two percent tax cap,” why are some schools and municipalities calculating possible tax levy increases as high as 8.88 percent or 14.2 percent?
Those are the respective tax levy numbers Dundee and Penn Yan school districts have announced as the highest possible increases the state would allow. The maximum cap for schools, towns, villages, counties, and fire districts is determined by using a formula from the state.
When Gov. Andrew Cuomo first signed the law into being in July, 2011, he said “property tax increases will be capped at 2 percent or the rate of inflation, whichever is less.” The law became referred to as the “two percent tax cap.”
The law initiated by the governor involves a multistep process that must be followed for determining how high taxes can be raised. Penn Yan and Dundee schools used this formula to come up 14.2 percent and 8.88 percent. The steps are:
• The process begins by determining the tax levy for the previous fiscal year.
• The prior year tax levy is then multiplied by the tax base growth factor, which is supplied by the state taxation and finance department annually. Tax base growth reflects the total value of taxable real property emerging from physical growth or additions to existing properties.
• Districts or governments then add any Payments in Lieu of Taxes (PILOTs) that were received in the previous year.
• Starting in 2013, any taxes that were levied during the previous year from court orders because of tort actions for any amount greater than five percent and capital expenditures are then subtracted. The dollar amount that results from this is called the “adjusted prior year tax levy.”
• The “adjusted prior year tax levy” is then multiplied by the allowable levy growth factor, which is provided by the office of the state comptroller.
• PILOTS that will be received in the coming fiscal year are then subtracted from the amount.
• Beginning in 2013, add any carryover funds from the previous calculation.
• The following items are then added: extra tax levy needed from court orders arising from tort actions in excess of five percent total tax levied in the upcoming year, tax levy needed for capital expenditures, and pension exemptions.
The number that emerges is the highest allowable amount of taxes than can be raised. Officials can go over the formula’s number. With at least 60 percent board approval, an area government can override the “two percent tax cap.” A school district needs at least 60 percent approval by district residents.
In reality, Dundee school has approved a 3 percent increase and Penn Yan school is considering 2 percent. There are some groups that actually calculated a levy that was closer to “two percent.” The Hammondsport school board is considering a 3.1 percent increase, but is also looking at other areas for cuts. Watkins Glen Central School District can raise up to 2.49 percent and Odessa-Montour 2.5 percent. Christine Sutherland, village clerk/treasurer in Dundee, noted the tax levy could be elevated by as much as 3.02 percent for the village’s upcoming fiscal year.
Kate Gurnett, deputy press secretary for the New York State Comptroller’s Office, said the range of allowable levy increases in this area is “similar to the rest of the state.” She added the office only has partial data, but from what they’ve seen other districts and municipalities are seeing the same thing.
The state is also checking some school, town, and fire district calculations. Gurnett said the comptroller is looking to sample roughly 200 budgets statewide.
Watkins Glen Central School District approved their budget with a 2.49 percent increase. Business Manager Gayle Sedlack explained this is also the highest allowable increase using the formula.
“We don’t plan to override it. We plan to go right to the limit,” said Sedlack.
She added that, “people are truly voting on a dollar amount spending budget” as opposed to a budget crafted around the programs the school offers.
Greg Dale, Odessa-Montour business manager, said the district is going with a 2 percent increase, and not the allowable 2.5 percent, simply because it is less confusing for residents. He said, “it made sense to go out with 2 percent so not to create confusion.” He added Bradford Central School District is doing the same thing.
Dale explained the one part of the levy formula that could create such differences in allowable increases between schools is the capital tax levy. He said this is basically what the school is paying on capital projects.
Dundee school Business Manager Melissa Lawson brought up the same concern: residents being misled by the tax cap law. Lawson noted residents could get the wrong impression if the upcoming year’s levy exceeds “two percent.”
During the meeting on March 27, the village of Dundee approved to hold a public hearing on a proposed local law that would waive the tax cap. Mayor Fred Cratsley Jr. said he did not expect the tax levy for the 2012-13 budget to exceed the 3.02 percent limit which would be placed on the village through the new legislation. However, Cratsley pointed out overriding the tax cap would be a “safety net” in case mistakes are found in the paperwork dealing with upcoming budget. He explained the village could be penalized if the tax cap was applied and the levy ended up surpassing limitations.
The village of Watkins Glen voted to override the tax cap, should the need arise. Gurnett said the state comptroller’s office is aware municipalities are doing this and “it is certainly allowed.”