When is a tax cap not a tax cap. The answer is when, as with our New York State cap, bonded interest is exempt from the parameters of the cap.
Thus, we hear of Port Jefferson schools proposing a bond of $29 million, which will not be counted in the cap calculations, yet will raise taxes by 5 percent a year, costing each household about $200 annually over and above the regular increases that will come with the budget that will supposedly be within the 2 percent cap.
So, in essence, the school taxes will increase by 5-7 percent or more, while the press release will proclaim that the budget is within 2 percent.
This is nothing to sneeze at. The same residents will be paying an almost 5 percent increase in their police taxes next year. Yet the county says the increase is within the 2 percent cap, because folks in the Southwest Sewer District in Babylon will get a return of some of the millions that were improperly taken from them after the bonds for the sewer district had already been paid off. (Residents outside the sewer district, including Port Jeff, will not see any of those offsets.)
Expenditures dedicated to paying off the skyrocketing pension costs are also exempt. That is significant when you consider that the county has borrowed over $300 million for pension costs over the past five years (even though the recession has abated).
At least in the county, when the operating budget, upon which the tax levy is based, is put together, the budget crafters already know the size of the capital budget and the extent of the bonds and interest to be incorporated into the general fund.
Schools, on the other hand, can craft an operating budget in May, citing a specific tax levy, and thereafter float a bond that dramatically increases that number. Voters are duped into believing they are voting for a 2 percent increase in May, only to have an extra 5 percent piled on them in a bond vote in September.
There are two potential solutions:
The first is having the state legislature revise the law and remove the exemption of bonded indebtedness from the cap. But that, admittedly, is a heavy political lift.
The second, more realistic, proposal is to require that any such bonding referenda be voted upon on or before the school’s operating budget is put up to a public vote in May of each year. If a bonding referendum is floated, it should contain wording clearly alerting voters to the extent that the bond would have on the cap and the real dollar tax impact upon the average household.
The good news is that there is such an amendment that has been introduced in the state legislature. Our Center has been promoting its adoption. The bad news is the state legislature continues to bottle this reform up in committee.
Once again, the status quo is winning in Albany. If you are tired of paying a 7 percent tax increase when your school is telling you the budget is within the 2 percent cap, give a nudge to your state rep to change this madness.
Steve Levy is Executive Director of the Center for Cost Effective Government. He served as Suffolk County Executive, as a NYS Assemblyman, and host of “The Steve Levy Radio Show.”