Budgeting with the tax cap not easy, officials say
The 2 percent tax cap, signed into office by Gov. Andrew Cuomo in spring 2011, was supposed to bring property tax relief to beleaguered New Yorkers who pay some of the highest taxes in the nation.
But without mandate relief, critics charge that the cap is unsustainable and 25 percent of municipalities have passed resolutions to override the cap as they prepare 2013 budgets.
The tax cap prohibits taxing entities from increasing the tax levy by more than 2 percent year to year. Municipalities can override the tax cap if 60 percent of the board approves a resolution, while school districts need 60 percent of voters to approve an override.
In Westchester, municipalities including Mount Pleasant, Ossining, Lewisboro and New Rochelle have been forced to override the cap or make deep cuts to essential services. Mayors and city managers said that rising pension and health care costs, which are imposed by the state, make meeting a cap impossible.
“It”™s very difficult for local governments to sustain the course without structural changes to state law,” Port Chester Mayor and President of the Westchester Municipal Association Dennis Pilla said. “With the cost of living increasing, you can seldom keep giving employees zero percent raises.”
Pilla said that while the tax cap is a great concept, the cap causes municipalities to take too much from the fund balance. The Westchester Municipal Officials Association has been working with the New York Conference of Mayors to lobby Albany for more mandate and pension relief.
“How can we find ways to generate supplemental revenue without asking the state for more money and asking the taxpayers for more money?” Pilla asked. “We need to make structural changes.”
Despite no mandate relief on the table, Pilla is encouraged that mandate relief will eventually come.
“I am encouraged by state government, but we need to see more,” Pilla said. We need to look to Albany to make structural changes, pension relief and health care reform.”
The city of New Rochelle has been struggling to live within the tax cap since it was enacted. This year, City Manager Charles Strome proposed a budget with a 5.7 percent tax levy increase, blaming the state for sending a bill for pension and health costs double the cap.
“We are starting our budget in an impossible situation,” Strome said. “The only alternative is to propose massive cuts in services and we are not prepared to do that.”
Strome said Albany needs to explore real pension reform. He proposed making employees pay more into their pensions and no longer allow overtime to be included in pensions. He would also like to see reform done on police and fire disability, which costs municipalities thousands.
“The tax cap was a politically popular piece of legislation,” Strome said. “It makes them look good, but they are setting up people to fail. We have done all the things we can do to comply. We have a hiring freeze, we”™ve cut staff, we”™ve used too much of our fund balance. There”™s nothing left but raising taxes or cutting services.”
Despite the needed reform, Strome is pessimistic that Albany will ever pass meaningful mandate relief, especially after hearing Cuomo saying that local governments are on their own.
“I have no confidence,” Strome said. “The best we can do is sink and swim on our own.”
Business groups in Westchester have said that mandate relief is needed if the business community in Westchester is to thrive. Both The Business Council of Westchester and Westchester County Association(WCA) have made mandate relief one of their legislative agendas.
“The cap will be unsustainable otherwise,” Amy Allen, managing director of the WCA said. “A slew of things need to be done or we will live in a community that no one wants to live in. We will have no services.”
Allen said she sees the mandate relief movement gaining momentum.
“It”™s bringing together unlikely partners,” Allen said. “You don”™t (unusually) see businesses, schools and local governments coming together. Hopefully there”™s enough noise by constituents that they will pay attention.”
John Ravitz, COO of the Business Council said that the tax cap was a good first step, but that it”™s time to get serious about mandate relief.
“Without mandate relief, Albany could cap taxes at 2 percent or 20 percent, it wouldn”™t make a difference,” Ravitz said. “We can”™t keep waiting on these blue-ribbon panels. We know that mandates are hurting us, we know how we change it and we have to get it done.”
Ravitz said that mandate relief would encourage businesses to come or stay in New York.
Democratic Assemblywoman Sandy Galef is one of the biggest advocates of the tax cap and believes that despite the outcry from municipalities that the tax cap is working.
“It is forcing a more in-depth evaluation of spending,” Galef said. “We can”™t continue to have high taxes. It”™s causing us to evaluate how we do things. Voters need to speak out and advocate for the programs they believe are important.”
During her time in the Assembly, Galef has been an advocate for sharing services and consolidation. She points to Cortlandt, which has had a self-imposed cap for 20 years by using state and county police and eliminating the position of highway superintendent.
“Their taxes have increased insignificantly over that time,” Galef said. “The cap gives us more of an opportunity to look at doing things together. Without a cap, I don”™t know if these things would be considered.”
In Greenburgh, Supervisor Paul Feiner has been living within the cap, though he acknowledged that it is difficult. Greenburgh has reduced employees via attrition and uses the fund balance when necessary.
“It”™s always a struggle,” Feiner said. “We are constantly looking for ways to tighten up. Due to pension and health care costs, before you start, you”™re close to the cap. It”™s really tough.”
Feiner said he doesn”™t think the law is successful, since many municipalities have been deferring costs and borrowing to pay for pension costs.
“A lot of these gimmicks will catch up,” Feiner said. “You”™re going to have communities charging for sanitation or have more independent libraries. People will end up paying one way or another.”
Galef said the cap is supposed to be tough and hopes it will force municipalities to confront spending.
“If we let go of the pressure, the urgency to look at sharing services will disappear,” Galef said. “We have to be realistic. A lot of things need to change and this forces the change.”