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WPCNR QUILL & EYESHADE. By John F. Bailey. June 28, 2011 UPDATED July 3, 2011 in yellow.:
If you believe the euphoria coming out of the editorial pages of local and metropolitan newspapers you would believe the state legislature has stopped the rising tide of property taxes in its tracks.
Nothing could be farther from the truth.
City financial managers, mayors, school superintendents and city managers across the state today may just be beginning to discover the horrible truth about the 2% property tax cap:
It is misleading at best and sticks them with enforcing the cap and cutting expenses or facing voter outrage.
In the actual bill, the school district must get a budget passed on the second try to override the cap, or face keeping the budget on the 2011-12 level. Two defeats will necessitate massive cuts in personnel, and school district expenses.
That outrage will come when voters expecting a 2% cap on their taxes next year, get hit with a much higher tax levy. That is well within possibility, because the new Tax Cap Law lets cities and school districts off the hook by forcing the cities and schools to cover sharply higher pensions and dropping assessments with minimal relief.
There is no way without substantial, cruel cuts that White Plains, the city, or White Plains, the school district can keep the levy under 2% in 2012-13.
By WPCNR reckoning, unless the City of White Plains cuts their budget by $5 million dollars through layoffs for 2012-2013 or taps its fund balance restoration fund next year to deliver labor settlements in 2012-13 , you, the taxpayer could expect a 7% increase in property taxes next year and still incredibly comply with the 2% property tax cap.
Do not be surprised, I am telling you this one year in advance.
Commissioner of Finance for White Plains, David Genito, in his initial analysis of the tax cap as it applies to cities, told me today, that the city is not allowed to exclude assessment declines in figuring the allowable levy increase. Assessment declines are not addressed by the new tax cap law, confirming what Assemblyman Robert Castelli told WPCNR Saturday night. Pension increases are addressed, but only 2% of any total increase in pension payments in 2012-13 are allowed to expand the city tax cap amount , Genito said.
The city pension increase alone amounted to $2.1 M of the 2011-12 budget just approved (a 21% pension payment increase). That amount (probably more) could be spent and added to the levy, without violating the cap next year, though, it should be pointed out that is not under consideration at this time by the city.
The city, if they do not cut the budget substantially will never make the tax cap of 2% in their 2012-13 levy.
No problem. The Tax Cap Law Lets Them Override it.
All the Common Council has to do is simply vote by super majority (5-2) to override the cap and the 2% restriction is finessed away. The city does not have to take an override to the voters.
The school district however does have to take an override to the voters. According to new tax cap law (viewable complete at
http://assembly.state.ny.us/leg/?default_fld=&bn=A08518&term=&Summary=Y&Actions=Y&Votes=Y&Memo=Y&Text=Y
— the district can resubmit the budget twice after it is defeated, however after 2 submissions, the district has to adapt a budget no larger than the precious year. That would mean big layoffs for this school district, and cost cutting. The bottom line is the district will need to really sell to get the 60% override on the first budget they send out.
The bill says:
(9) If the budget is defeated after two presentations to the voters,
or after one defeat where the school district decides not to resubmit
a budget to the voters, then the district would be required to adopt a
budget with a tax levy less than or equal to that of the prior year;
Replacing another $3 Million decrease in assessment roll erosion would be a budget haymaker to the city’s jaw, meaning the city would have to tax or cut to the tune of $537,000 to recover the lost revenue from this trend.
Genito told me today the assessment revenue loss from declining assessment rolls is not even addressed by the law. Only an increase in assessments is addressed as being able to expand the levy cap(like that–an assessment roll is really going to happen.)
Of course expenses from torts and capital expenditures could also be excluded from the cap amount, as yet undefined.
Assemblyman Castelli told WPCNR the local city government can override the 2% property tax cap by voting by a super majority (5-2 ) to override with no need to go to the people for referendum.
The legislation has dumped the finance problems caused by assessments and pensions squarely on local leadership, thus the legislature has cleverly passed the buck down to you and me Mr. and Mrs. and Ms. New York State and White Plains. There is no penalty for overriding the cap. Only the tax payer is penalized.
Passing the Buck on Down.
The Common Council and most cities, towns and counties next year may suffer a severe public relations problem with the public should they vote through a 7% or higher property tax increase to cover pensions, assessment revenue and a labor settlement of 3%.
Three per cent! Impossible? Should the council go to arbitration again, that is what they might end up with as inflation heats up the rest of this year.
After Friday’s firings, it would appear people are being sacrificed so the council does not have to pass a big property tax increase next year. Another issue that comes in play is tapping the fund balance restoration fund to bankroll labor peace by pumping out some raises to the police, fire, teamsters and CSEA. Mr. Genito said that fund is an option next year.
Meanwhile over at Education House.
Down at City School District Headquarters, A 2% property tax cap would mean the district could only increase the levy $3,080,000 (the budget levy is $154 Million for 2011-12).
On pensions, the district is helped that 2.9 % of the pension cost increases for 2012-13 may be added to the district property tax increase they can legally execute next year. But that is a pittance, increasing the property tax cap 2.9% of the pension increase. This is token relief from the legislature on the pension burden.
This coming year, starting Friday, the school district will pay 21% more in pension costs into the Teachers and New York State Workers funds. If that trend continues next year, budget anxiety will ratchet up under the new tax cap law.
It gets worse. In 2011-12 fiscal year, the district is paying $1.7 Million in increased teachers and New York State employee pensions and faces negotiating a new contract.
Think what this means: For the district (as presently constituted going into 2011-12) in expenses to be maintained at $185.5 Million, with 2011-12 personnel, the district has to raise the tax levy by a possible $3.4 Million to cover the pensions, plus perhaps a $4.2 Million salary increase for the teachers alone (Estimated 5% total increase,that’s what they generally get in the last five years.)
The district could face (just doing rough calculations) an assessment revenue shortfall of $1.65 Million, another $3.3 Million pension increase, and their teachers new contract (estimated $4.2 Million more) – a total of $8 to $9 Million without facing other increases in health insurance, bus transportation, fuel, and of course raises for other unions and administrators. Budgeting is not rocket science. It is simply a matter of projection and looking at the possible scenarios, if you are leveled with by the state legislature.
To recoup the lost assessment revenue of $1.65 Million, the possible pension hit ($3.3 Million if it is the same as this year’s) and accommodate the teacher’s contract hopefully without a 5% overall increase, which if they give them 5% total that adds $4 Million or so you come up with– $8 to $9 Million in pensions, assessment recovery and union wage increases.
Say all the rest of increased expenses amount to $3,000,000 plus the $8 Million to 9 Million we are guessing at will be taken up by pensions, assessment shortfall and the teachers contract. The district increase in spending would be a potential $12-$13 Million on the high side.
A 2% property tax cap would mean the district could only increase the levy $3,080,000 (the budget levy is $154 Million for 2011-12).
Now if the district keeps the budget scope of the district where it is and decides to fund the present teacher staffing, give them a new contract with say a 5% raise (includes longevity, steps and salary raise), has to face similar pension payments next year (2012-13), and has to make up the ever dwindling grains of the White Plains assessment hourglass–
This rough cut would bring the district to the $197.5 Million level, and require a 9% property tax increase, increasing the tax rate from $549/per thousand dollars of assessed valuation to $599/per thousand to reach the $166 Million levy required.
The district could cut expenses by layoffs or more cutbacks to get in under the 2% for public relations sake, or they could bank on the district voters voting to approve a 9 % tax increase, with hopes the district voters would hit the magic override of the cap – 60%. This plurality of approval was what the voters approved the district 2.67% tax increase this year.
For the new school fiscal year starting Friday, the district increased the budget .9% and the levy 2.67% so increasing the levy 9% and taking a chance that they can convince the school “stakeholders” to come on out and approve an increase that would increase the taxes on a median priced assessed home ($650,000) to over $9,100 compared to $8,400 you will start to pay Saturday when your tax bill arrives, Mr. or Mrs. Median Home Owner.
Where’s the Relief?
The Tax Cap bill is nothing of the kind it is a pass the buck bill.
The legislators are forcing the cities and districts to cut expenses while continuing to keep decreasing the revenues cities and school districts receive by ignoring the evil of certiorari tax challenges and refusing to negotiate strong pension reform that cut the pension problem now not when we are all dead.
The tax cap bill makes two important exceptions to keep the money train rumbling for retirees of the state, the certiorari lawyers, commercial property owners, and the construction industry.
These groups are the major culprits in increasing White Plains property taxes: assessment declines and pension cost increases, capital expenditures and tort settlements have been allowed to continue unchecked in their rampant looting of taxpayers’ pockets with this bill.
The legislators have taken care of their pals who give them the campaign contributions that keeps them getting reelected, while making you believe they are working to give you tax relief. Money talks if you don’t want to walk.
Instead of say 2% tax cap, no ands, ifs, or buts, the allow the cities by vote of the majority to override the cap with no voter say. They allow the school districts to override too but by popular vote and to override, the district has to get 60%.
The city and the school district, unless the pension and assessment commits are remarkably lower next year (2012-13), and unless unions can be appeased, both entities will have to cut expenses substantially to even approach the 2% cap.
For the School District this will mean at least the same number of firings next year if not more (50 firings could save the district $5 Million, 90 firings would enable them to save them $9 Million and get them under the 2% property tax cap and keep the school budget under $190 Million.
For the city, this week they fired 8 people saving $625,000, but hired another for $104,000. They can’t get their hands on the fund balance stabilization money fast enough.
Sales tax don’t fail us now.
