A Tight Fit The Property Tax Cap

Transcription

1 LUMSDEN McCORMICK LLP EXEMPT ORGANIZATIONS CONFERENCE November 12, 2014 A Tight Fit The Property Tax Cap Presented by: Jeffrey F. Swiatek FIRST, A LOOK BACK: THE BASICS OF THE 2011 REAL PROPERTY TAX CAP > Fundamental limitation: The amount of taxes that may be levied by a local government shall not exceed the tax levy limit, which is (a) no more than a 2% increase in the previous year s tax levy, or (b) the inflation factor, whichever is less. However, the permitted increase will not be less than 1%. > Local government is defined as a county, city, town, village, fire district or special district. > In order to adopt a budget that results in a tax levy that exceeds the tax levy limit, the governing board must first enact a local law approved by 60% of the governing board to override the tax levy limit (school districts have similar public vote requirements). 2 Lumsden McCormick Exempt Conference 1

2 EXCLUSIONS FROM THE TAX LEVY LIMIT CALCULATION: > Available carryover : the amount by which the tax levy for the prior fiscal year was below the applicable tax levy limit, up to 1.5% of the levy limit. > Tax levy attributable to tort judgments that exceed 5% of the levy for the prior school year. > Retirement System contribution rate increases that exceed 2% from the previous year. > The capital tax levy excluded for school districts only. 3 ALLOWANCE FOR TAX BASE GROWTH > Calculated by the Commissioner of Taxation and Finance. A measurement of the physical or quality change in the school district s full value taxable real property as a result of new development or redevelopment. > If the Growth Factor percentage is positive, it will be multiplied by the previous year s tax levy to create the new base levy amount then subject to the tax levy limit calculation. 4 Lumsden McCormick Exempt Conference 2

3 THE NEW WRINKLE: THE 2014 REAL PROPERTY TAX FREEZE > Adopted with New York State Budget Bill (Part FF of Ch. 59 of Laws of 2014). > Provides a direct rebate to any property owner who receives a STAR exemption on primary residence. > Generally offsets any actual increase in real property taxes (*Exceptions discussed later) 5 > Effective for school districts in and school years. Effective for other local governments for fiscal years beginning in 2015 and > To qualify for rebate, the property owner s local taxing jurisdiction must stay within its adjusted tax cap during first year of freeze. Each taxing jurisdiction is treated separately. 6 Lumsden McCormick Exempt Conference 3

4 > In the second year the taxing jurisdiction must stay within tax cap and implement programs with savings of at least 1% of levy each year over three-year period (i.e., a Government Efficiency Plan ). > The law allows each municipality to submit a qualifying Efficiency Plan, but strongly encourages development of a single county-wide or BOCES-wide Efficiency Plan for all governmental units within the county or BOCES. 7 > A Governmental Efficiency Plan may consist of savings from cooperation agreements, shared services, mergers, and efficiencies. (7/14/2014 Guidance, NYS Dept. of Taxation and Finance). > Efficiencies are defined as actions taken to improve completion of existing processes or functions or the delivery of existing services that result in lower costs. 8 Lumsden McCormick Exempt Conference 4

5 > For school districts, savings measured over through school years. For other local governments measured over fiscal years beginning in 2017 through > Past activities may be credited towards the Efficiency Plan savings requirements if implemented since effective date of the tax cap (i.e., fiscal year beginning in 2012). 9 > Restricted to property owners with incomes of $500,000 or less. > Rebate checks to be issued (conveniently) in October. > Certification requirement to Department of Tax and Finance and State Comptroller by 21 st day of fiscal year to which the rebate applies for tax cap compliance, and June 1, 2015 for Efficiency Plan compliance. 10 Lumsden McCormick Exempt Conference 5

6 > The rebate amount is equal to the greater of: 1. Increase in taxes (excluding usage charges, new construction, removal or reduction of exemptions, above-average reassessment increases); or 2. The prior year s taxes multiplied by the allowable levy growth factor under the tax cap. 11 BARGAINING STRATEGIES FOR THE POST TAX-CAP/TAX FREEZE WORLD > Educate the union s negotiators on the operation and implications of the tax cap. > Begin with the end in mind Identify the maximum new revenue within the cap, and alternatively under a contingency budget, and then work backwards from that for purposes of bargaining. > Consider whether longer-term bargaining agreements still make sense. > Consider whether wage proposals and other significant financial items must be conditional in some way. 12 Lumsden McCormick Exempt Conference 6

7 BARGAINING STRATEGIES FOR THE POST TAX-CAP/TAX FREEZE WORLD > Contract re-openers upon adoption of a contingency budget? > Include tax cap status in assessment of whether permissible to make regressive bargaining proposals > Consider public and/or union member communications strategies during bargaining. 13 THE TAX CAP/TAX FREEZE AND SHARED SERVICES > Intermunicipal cooperation under General Municipal Law Art. 5-G > Joint service or contract for services > Remember tax cap law contains provisions for adjustment of tax cap amounts upon transfer of programs or functions 14 Lumsden McCormick Exempt Conference 7

8 THE TAX CAP/TAX FREEZE AND SHARED SERVICES > Subcontracting issues that arise from intermunicipal agreements: > PERB standard: Exclusive work substantially similar to that performed by union? If so, balancing test applied to weigh the respective interests of the union and the municipality. > Contractual standards: What does the CBA say about subcontracting? 15 QUESTIONS? Presented by: Jeffrey F. Swiatek, Esq v1 16 Lumsden McCormick Exempt Conference 8