Village Administrator Harold Porr and I recently attended an educational symposium with colleagues from throughout the state, titled “Coping with the Tax Cap.
After one year, the 2 percent tax cap has turned out to be a brilliant political maneuver, but quite disingenuous when it ultimately comes to roost at the local level.
The cap allows our governor to enhance his exposure on the national stage; the legislators who voted for it appear fiscally conservative while at the same time being able to turn a deaf ear to real pension reform or curbing the agendas of special interests.
As illustration, at the same time our Bronxville government was to be “responsible” and adhere to the 2 percent cap on increased spending, we received a bill for unfunded mandates from the state equating to an approximately 5.5 percent village property tax increase. Hence the true hypocrisy. To put in real numbers, the village’s pension obligation alone has risen from $17,103 in 2001 to $1,057,015 in 2012, or an approximately 6,000 percent increase in just a decade.
In essence, our obligations to the state are escalating at an unsustainable pace, so alternative revenue sources must be found or fundamental services and personnel will have to be cut.
To that end, the discussion focused on sharing knowledge about revenue generating ideas that are currently being implemented throughout the state.
Much of the new revenue thinking revolves around the concept of “benefit based financing,” a monetary obligation imposed on those directly benefitting from the improvement or service versus revenue generated by a property tax levy, which is imposed for the support of government without regard to any particular benefit received by the taxpayer.
Some of the incarnations of this new funding approach include:
- Special districts for sanitation services, whereby everyone who avails themselves of the service in a community, whether it be a school, hospital or any tax-exempt entity, pays according to the amount of garbage or recyclables they generate.
- Using the same theory, communities have set up special districts for sewer and water line repair and tax all those benefitting from the water conduit service, regardless of whether they are property taxpayers. There is a fundamental premise of fairness in these iterations in that all of those who receive the benefit, be it garbage pick-up or water and sewage services contribute towards its usage. These separate taxing units have the added benefit of moving the costs of these projects out from under the tax cap as they are not counted toward the 2 percent. In all of these special assessment districts, fees must closely approximate cost and cannot be used as an ancillary revenue generator. These kinds of districts are particularly necessary because the improvement of municipal infrastructure is not exempt from the cap, even done through a property tax levy, even though capital improvements are exempt from the cap when applied at school districts. In a state such as ours, with one of the most aged infrastructures, the state now has given every community a powerful disincentive to undertake capital improvements.
- Some communities are also increasing the staff in their tax assessment offices to vigorously review all existing and new exemption applications submitted by residents.
- Other jurisdictions have also asked tax-exempt entities to enter into PILOT agreements (Payments In Lieu Of Taxes) to cover the cost of services such as fire and police protection that are rendered to their institutions. Syracuse University entered into a novel agreement with the City of Syracuse, offering free technological support in exchange for the many city services they receive.
- Finally, communities are banding together to urge the state legislature to increase the gross receipts tax revenue communities receive from the current rate of 1 percent of the gross operating income of regulated power utilities and telephone utilities to 3 percent. In addition, elected officials are advocating to add cell phone companies, which are currently exempt in this taxing structure, as well as entities such as Cablevision, which now offer phone services along with their television and computer packages.
- The additional income would be in the form of a user tax placed on the utility bill and received only by those contracting for the service. Increasing the local share from 1 percent to 3 percent would provide a major revenue source to decrease the burden on property taxpayers.
- If you include the cable franchise revenues with the gross receipt taxes collected from water, electric, phone and natural gas, the village currently takes in $332,998. A 2 percent increase would provide tens of thousands of dollars in new revenue that would bring relief to the local village property tax.
I believe the most positive aspect of the tax cap is that it has resulted in taxpayers taking notice of how their money is spent, and it allows local governments to shine a light on the unsustainable financial obligations sent to us by the state, from those very same folks who voted for a ceiling on expenses.
Because of the ever increasing state mandates, Bronxville is going to have to look at any and all creative ways to increase revenue so as to provide the services residents expect and desire.