The 'two percent cap' can be misleading
TRI-COUNTY AREA—Municipalities and school districts are dealing with what is being called a two percent tax cap plan from the state. However, those working with it call it misleading and confusing.
“There’s nothing two percent about ‘two percent,’” said Doug Tomandl, Penn Yan Central School District assistant superintendent for business.
Instead, it is part of a formula for determining the tax levy increase, which the state approved in June, 2011. The state calls it, “an act to amend the general municipal law and the education law, in relation to establishing limits upon school district and local government tax levies.” The law goes on to say it establishes a real property tax levy limit on how high counties, towns, villages, and school districts can raise their property tax levy. However, the tax cap affects each local government and school district differently and can be a number other than “two percent.”
Tomandl explained the state is making municipalities and schools use an eight step formula to determine what the next tax levy increase will be. He added that two percent is one of the eight variables in the formula, but even that number is not a guarantee. Tomandl said the formula calls for two percent or the consumer price index, whichever is lowest.
“It is not a simple calculation so we want to explain the process to the Yates County taxpayers on how the two percent is figured,” said Yates County Treasurer Bonnie Percy. “There are many steps to the process, some information is maintained by the county and some information has been supplied by New York state government offices.”
According to the New York State Department of Taxation and Finance, the district or municipality must first determine the total amount of taxes levied in the prior fiscal year. Second, multiply that number by the tax base growth factor: a number the commissioner of tax and finance will supply to the local district or government. Third, add the total number of Payments in Lieu of Taxes (PILOT) that were received in the previous year. Fourth, subtract the tax levy necessary to make payments for tort court orders/judgments that exceed five percent. However, this starts for the 2013 fiscal year.
Fifth, multiply the number by the allowable levy growth factor, which will be provided by the office of the state comptroller. Sixth, subtract any PILOT funds that will be received in the coming year. Seventh, add any additional carryover from the prior fiscal year. This also starts for the 2013 budget. Eighth, growth in pension costs or tort judgments may not be carried forward and are exempt.
Tomandl said teacher’s retirement rate will be on of the exemptions because it goes above two percent: 2.49 percent specifically. He added that exclusion adds about $52,000 to the total tax level, bringing the levy up about half of one percent.
Concerning PILOTS, Tomandl said Penn Yan will be without a large one from the AES Greenidge plant in Dresden. He explained the district got $500,000 this year in a PILOT, but the plant is now closed.
In Schuyler County, next year’s tax levy has already been determined. County Administrator Tim O’Hearn said using the eight step formula, the legislature could increase the tax levy by 3.1 percent. However, he said they are looking at only doing a 2.5 percent increase.
Gayle Sedlack, Watkins Glen Central School District business administrator, used the eight step formula on the current 2011-12 budget. She said if the district had followed this calculation, then Watkins would have had a 2.53 percent tax levy increase; the actual 2011-12 tax levy increase was 4.5 percent. Sedlack explained the difference between the two increases could equal an additional three staff eliminations in addition to the 10.5 positions that were actually cut from the budget. Both she and Watkins Superintendent Tom Phillips called the formula “smoke and mirrors.”
Budgets will be voted on the same as before. Residents will approve school budgets, while the municipalities' boards alone will vote on their budgets. School districts have the opportunity to present a budget that goes over the tax levy limit calculated by the formula. However, if a district does this they need a super-majority of the voting public (60 percent) to approve the tax levy increase.