Superintendent Feirsen calls property tax cap law a ‘game changer’
The tone of discourse was serious as Garden City Superintendent of Schools Dr. Robert Feirsen provided some answers and discussed the many questions that remain about the newly passed New York State property tax cap and its effects on the school district’s 2012/2013 budget at a recent board of education work session at Garden City High School.
With only a handful of residents in attendance, Feirsen opened the discussion by stating that the Garden City Board of Education has always supported tax relief for the members of the community. He maintained that the board has consistently sought to develop budgets that reflect an appreciation of the need to limit tax increases on property taxes.
“The tax levy cap does not offer meaningful solutions to address the biggest cost drivers in school district budgets… It’s a misguided attempt to control expenditures,” Feirsen said. “It will have, I think, some significant impact on the district going forward not just this year but in years after that…it is what’s referred to as a game changer.”
In Chapter 97 of the Laws of 2011 tax cap legislation (Part A – Property Tax Cap) establishes a tax levy limit that affects almost all levels of local government and school districts, including Garden City. The law is effective for the 2012-13 school year. Feirsen stated that under this law, “the growth in the property tax levy… which is the total amount to be raised through property taxes charge on the school district’s total assessed value of property. So that’s the community as a whole property and the amount that the school district can raise will be capped at 2 percent or the rate of inflation, whichever is less, with very few exceptions,” Feirsen said, adding that it does not mean that an individual’s property taxes are capped. “It means the total tax levy,” he said.
Those exceptions include adjustments and exclusions. Adjustments include the tax base growth factor, meaning it will adjust for increases in “brick and mortar” development, actual growth in the number of properties in the school district. Also costs and/or savings from the transfer of function (s) from one local government to another to be determined by the Office of the State Comptroller (OSC).
According to Feirsen, three very narrowly defined types of expenditures are excluded. He stated, “School districts can increase the property tax levy above the levy limit (the base year levy as adjusted for growth and inflation) for extraordinary high costs resulting from court orders or judgments arising out of tort actions that must be paid in the coming fiscal year (the judgment must exceed 5 percent of the total prior year’s tax levy).
The second adjustment can be for extraordinary high growth in pension costs. “No exclusion is made for pension costs increases of 2 percent or less. However, the school district can exclude the portion of costs that go beyond 2 percent. Thus, if the pension contribution rate increases from 10 percent to 12.2 percent only .2 percent may be excluded from the cap.”
According to Dr. Feirsen, the third exclusion is slated for the cost of capital projects (bonds, transfers to capital fund for big projects), which he originally thought can excluded. “Today one of my colleagues said ‘no, that’s not what I heard.’ So I am unclear and I have to leave this as a question mark,” Feirsen said.
The inflation rate will be calculated by the OSC and will be based on the U.S. Bureau of Labor Statistics date. He said it appears that inflation rate information for school districts will be available in mid-January 2012.
Another point of contention is that school districts may soon be responsible for tax certiorari payments even though the county establishes the assessments. Dr. Feirsen raised the question if these tax certiorari payments will excluded from the cap? “The Office of the State Comptroller has expressly stated that tax certiorari actions are not excluded from the cap. So the payments that we have to make for incorrect assessments that has been challenged and supported are not excluded,” Feirsen said.
“Unless the county’s decision is overturned it is likely that the school district will need to start to accumulate funds in a tax certiorari reserve, which Feirsen said will place another burden on the budget,” he added.
Will the community still be able to vote on the school budget? Feirsen said that residents will still vote on May 15 and every year thereafter in May. “Obviously that budget will be profoundly shaped by the tax levy cap law,” he said.
As before, the board will have the option, if the budget is voted down, to be put up for a second vote in June. “Just as before, that’s not mandatory,” he said.
Feirsen summarized the options that the board has with the budget: “Option one is to propose a budget requiring a tax levy before the exemptions at or below the tax levy cap (2 percent or less). The actual tax levy increase could be higher than 2 percent. It would need a majority vote required for passage. Option 2 is for the board to propose a budget requiring a tax levy before exemptions that exceeds the tax cap.” It requires a “supermajority” of 60 percent for passage and requires a statement on the ballot indicating that the tax levy before exemptions exceeds the cap, according to Feirsen.
Feirsen stated that if the budget is not approved, a contingency budget must be put into place. It does not matter if the original budget proposal was over or under the cap. The contingency budget may not include a tax levy higher than the prior year’s levy. The cap would be zero.
“In Garden City’s case, this would mean that the district could raise through property taxes no more revenue than raise for the current school year (approximately $87.3 million),” he stated.
In the presentation, Feirsen cited a statistic of significant impact in a hypothetical chart of a ‘capped’ GC Public Schools budget. Had the tax levy cap been in effect over the last five years, $20,000,000 less in available resources would have been available to be used for school programs.
Feirsen again hammered home his point that the new law was a “game changer.” “The discussions that I’ve heard and been privy to with legislators…nobody has at least admitted that they understand the ramifications of this,” he said.
School Board Vice President Barbara Trapasso maintained that the bigger question is that the public may not clearly understand the law. “I think there’s a lot of misconceptions about the 2 percent cap and what it is and what it does and how it affects us,” she said.
Trustee Angela Heineman pointed out that the tax cap legislation does not address the issue of pension reform and mandate relief. “If every employee contributed the same 3 percent to that pension system, we would reduce this obligation substantially and that would make a difference…that one action would have given us the ability to deal at least without both hands tied behind your back,” she said.
