GC Village Auditor Clarifies How New Law Will Affect the 2012-13 Budget Process
As Governor Andrew Cuomo signed the landmark 2 percent property tax cap legislation on the lawn of a Lynbrook homeowner this summer, many Long Islanders became hopeful for a future without rising property taxes. But what effect will the new legislation have on the village’s budget for the fiscal year June 1, 2012 through May 31, 2013?
According to Governor Cuomo, the tax cap essentially limits the increase in property taxes each year for school districts and local municipalities to just 2 percent, or the rate of inflation, whichever is lower. If a community chooses to increase taxes more than the tax cap allows, a 60 percent vote in a school budget vote or a 60 percent vote by a local legislative body can override it. A school district would be required to submit a tax levy proposition for approval by voters at the district’s annual meeting on the third Tuesday in May.
Garden City Village Auditor Jim Olivo stated that the legislation will have an impact on the village’s 2012-2013 fiscal budget. He said he recently attended a Government Finance Officers Association session, where Peter Baynes and Barbara Van Epps of the New York Conference of Mayors (NYCOM) presented their viewpoints on the cap and raised several matters of concern, including the lack of mandate relief.
“What was passed was a 2 percent tax cap that is indexed to the CPI (Consumer Price Index), however, there’s questions as to which CPI they’re using,” Olivo said at the most recent board meeting.
“The early indications are that the cap is going to come in at 1.8 percent…That’s not necessarily good for the Village of Garden City because the inflation rate in New York City metro area may be substantially different than the upstate index so the index is important,” Olivo said. “We don’t know what they’re going to use yet.”
There is a mitigating exemption put into the legislation for retirement contribution rate increases that will raise the cap, according to Olivo. He said a complex formula is in development, and will be applied to each unit by the State Comptrollers Office. Retirement rates are to be released around Sept. 1. “Only then can a government anticipate its cap level.”
It was stressed by Olivo that the most important concept for people to understand is that the law is for a tax levy cap, not a tax rate cap. “The levy is a product of the budget; the rate is the product of the assessed value,” Olivo said.
Garden City has a tax levy of $44,560,340 and a 2 percent increase would represent $891,206.80, according to Olivo. He maintained that should the village assessed value drop, the tax rate may easily go higher than 2 percent and still be considered compliant.
One of the major cost drivers in the budget has been the loss in assessed value through certiorari settlements, he explained. “That effectively will make the tax cap higher than 2 percent in the rate to the homeowner,” he said. “While we will be limited as to how much we can raise overall, an individual’s tax bill might go up 2, 4, 6 or 8 (percent) and still be considered tax cap compliant,” Olivo said.
The one piece of legislation that is important for the local boards is that it is a cap that can be exceeded through a local law being passed with a 60 percent majority, Olivo said. In Garden City’s case, that is a simple majority of 5-3 [votes]. “So that is the one overriding factor that continues to give the local board the control to provide the services that they desire as long as the public is willing to pay for it. So these are all considerations that we all need to be thinking about as we go forward in the next six months into the next budget process,” he said.
Mayor Donald Brudie emphasized that if the super majority is used to vote to override the cap, it could be very costly to the village. “If the board votes to exceed the cap, everything goes up with it,” he said.
Olivo said it’s very early in the process. “That is a consideration that’s likely to have to come before you as a board and you’ll have to consider those things because that’s one of the determining factors,” he said.
“To stay within the cap, we may have to cut services. Right now, it’s an unknown quantity at this time,” Brudie added.
