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New York State Property Taxes document sample
New York State Property Taxes document sample
New York State Conference of Mayors and Municipal Officials 119 Washington Avenue, Albany, New York 12210 (518) 463-1185 Toll free number for NYCOM members 1-800-446-9266 Fax # (518) 463-1190 Proposed Legislation Addressing Real Property Taxation Issues Testimony of the New York State Conference of Mayors Presented by Barbara VanEpps, NYCOM Director of Intergovernmental Finance Before the Senate Standing Committee on Local Government Hon. Elizabeth Little, Chair and the Assembly Standing Committee on Real Property Taxation Hon. Sandra Galef, Chair June 2, 2008 Albany, New York Good morning. I am Barbara VanEpps, Director of Intergovernmental Finance for the New York State Conference of Mayors. I want to thank Senator Little, Assemblywoman Galef and the members of their respective committees for the opportunity to share the opinions of the New York State Conference of Mayors and the 589 member cities and villages NYCOM represents, on the legislative proposals addressing real property taxation issues that were referenced in the hearing notice. Background As we all know, New York State has been given the dubious distinction of having the highest tax burden in the nation. This is in large part due to the local property tax burden, of which school taxes account for more than 60%. According to the Office of the State Comptroller’s 2007 Annual Report, real property taxes were $1,768 per capita in 2005, or 56% above the national average. This, combined with a sluggish economy and the rising costs of food and fuel, has made living in New York, particularly if you own a home, essentially unaffordable for many of our residents. The issue becomes clearer, and to some extent, even more difficult to resolve when you consider that the property tax is the single most important revenue source for local governments. In 2005, property taxes (outside NYC) accounted for 43% of local revenue, totaling $25.3 billion. (This number includes fire districts and school districts.) Given the rising cost of providing essential municipal services and the limited ability to fund them, there has been an increasing reliance placed upon this revenue source. And then there are our local officials who are caught right in the middle of this dilemma, for they have not only a vested interest, but a fundamental responsibility to ensure that their residents receive essential municipal services in the most cost-effective manner. But they are also the ones who are criticized first, and perhaps most often, when quality services are not provided and when property tax rates continue to rise. I can assure you that no group is more interested in reforming the real property tax system than the local officials who are responsible for the day-to-day operations of the cities and villages of this State. All of this brings me to the first bill identified in the hearing notice – S.1053-a / A. 1575- a – or the “Circuit Breaker” bill. I don’t think there is a single local official who would not support the concept of providing relief to their taxpayers, as this bill would, by providing individuals with an income tax credit when their property taxes exceed a certain level of their income. Furthermore, this bill would effectively hold local governments – whose dependence on this revenue source exceeds any other – harmless from revenue losses since the “costs” associated with this bill would be the fiscal responsibility of the State. It seems like a logical solution on the face of it. However, when you consider the current economic environment and the significant fiscal challenges the state is facing, one has to wonder how this might work. In order for the state to absorb these costs, something is going to have to give. In order to pay for these rebates, important state funding programs would be put at risk, and undoubtedly have a negative impact on communities and their taxpayers. So while local residents are gaining on one side, they might end up losing on another and then are they really better off? Therefore, without a thorough analysis of the fiscal impact of a circuit breaker program and the assurance that State aid and funding for other programs important to local governments will be protected, NYCOM is not currently able to take a position on this proposal. The other important point to be made is that, while a “circuit breaker” program will help to relieve the property tax burden for those individuals who qualify for the credit, it is not going to control the growth in property taxes. That being said, there is the potential that the cost of this program will just continue to grow putting the fiscal health of the State at an even greater risk. An effective strategy to lower property taxes must consider both sides of the equation and include proposals to control costs and reduce spending. NYCOM has long argued that the real root cause of New York’s high property taxes is state mandates. Even if the State provided significant increases in municipal aid, the problem of high property taxes cannot be cured without giving local governments the ability to reduce their expenses, particularly those associated with the salaries and benefits of municipal employees. Since the essential services provided by cities and villages are inherently labor intensive, workforce costs are the largest single component of municipal operating budgets. Obviously, one sure way to achieve significant property tax relief is by giving local officials the ability to control these costs. NYCOM supports the reform of compulsory arbitration statutes and the repeal of the Triborough Amendment to the Taylor Law. While we recognize that these proposals have been, and will continue to be met with great resistance, at the very least the state must reject proposed legislative changes to the Taylor Law that would undermine the collective bargaining process. With respect to the issue of local pension costs, although pension rates have been declining in recent years, the tenfold increase in pension contributions that villages and cities (outside NYC) experienced between 2003 and 2005 continue to plague local budgets. In fact, in many cases, the AIM increases in recent years have been used primarily to fund local pension costs. Although current contribution rates are in the same range as they were in the 1980’s, the base upon which pension costs are calculated – that is, salaries – has risen substantially since then. NYCOM has argued that the State should undertake a thorough analysis of the benefits, funding methodology, governance and oversight structures of our public pension system. We also support legislation that would create a new retirement tier with more affordable retirement benefits for new hires in both the Employees’ Retirement System and the Police and Fire Retirement System. In addition, immediate relief might be obtained by amending the system’s valuation and funding methodologies to ensure that local governments are not paying any more than is absolutely necessary. These initiatives would go a long way in helping to reduce the local tax burden. With respect to the remaining bills in the hearing notice, the following highlights NYCOM’s position on each: S. 2683 / A. 1572 – Would propose a Constitutional Amendment to require: (1) a single statewide standard of assessment developed by the Office of Real Property Services , (2) a uniform three year assessment cycle, and (3) county-wide assessment. The New York State Conference of Mayors is not in favor of this legislation due to its infringement on local home rule authority and its lack of funding to support its provisions. New York is one of the few states that does not have a statewide standard for the level of assessment (LOA). Most states require all property to be assessed at 100% of market value, while other states require assessments at a uniform fractional percentage – for example, 50% or 75% of market value. In New York, the law simply directs each municipal assessing unit to determine its LOA at which all property will be assessed, and directs the State to determine if that LOA was computed accurately within each particular assessing unit. The fact that neighboring communities can have markedly different LOA’s results in both a very confusing and complex system, one that requires the State to establish equalization rates – a concept which I would argue, very few individuals can even begin to understand. Consequently, when property taxes rise, many taxpayers blame their assessments, t heir assessors and the perceived inequities that the current system engenders. NYCOM commends State leaders for the efforts they have made over the years to improve assessment administration, primarily through local aid programs that help assessing units keep their assessments current, accurate and equitable. We believe similar legislative proposals that promote a partnership between the State and local assessing units will go a long way to enhance the quality and uniformity of local assessment administ ration. Similarly, NYCOM sees the value of periodic reassessing provided there is money available to support these local efforts. NYCOM is also in favor of a single statewide standard of assessment as we think it will make the local assessment process easier, enhance a better understanding of assessment administration among taxpayers and will facilitate taxpayer equity. If the desire of the State Legislature is to make the assessment process better, we suggest you give the local assessor the tools necessary to do their job more efficiently and effectively. The imposition of an assessment cycle with a statewide standard of assessment supported by a commensurate amount of state aid is one sure way to accomplish this. NYCOM, however, cannot support the provisions in this bill that mandate county-wide assessment. Current law provides for any County to take over the assessment function after an affirmative vote of the electorate. However, history has shown that this is not what the voters want. Many local officials and citizens alike strongly believe that assessment is, and should remain, the responsibility of the local jurisdiction. They appreciate the convenience and familiarity that comes with having their own appointed or elected assessor right in their community. It is important to note that many of our municipalities have already given up their assessing unit status or share an assessor with a neighboring municipality. The fact is they have done so when it has made sense – both practical and economic sense – based on their individual circumstances. S. 7538 / A. 10613 – Would require local governments to prepare exemption impact reports to be posted with annual proposed budgets. Since the local property tax is the primary source of funding municipal services, it should come as no surprise to anyone that the erosion of the local tax base and the accompanying burden it places on local taxpayers is of paramount concern to local officials across the State. While much of this is attributable to population declines and decreases in property values, particularly in our urban centers, the tax base is also compromised by the imposition of real property tax exemptions. According to 2006 data, approximately 62% of the 5.6 billion parcels in New York State are wholly or partially exempt from taxes. This reflects $738 billion in exempt full value – 32% of the value of all property in the State. While real property tax exemptions do play an important role in New York State’s property tax system, it is important to note that exempting property from taxes does not diminish the need for revenues; it simply shifts the burden of generating those revenues to the remaining taxpayers in the community. Consequently, when you apply a standard 2.5% full value tax rate, these exemptions result in more than $18 billion in taxes shifted to other non-exempt property taxpayers. While this legislation would place an additional reporting requirement on local officials, we appreciate the purpose that it would serve – that is, to heighten the awareness of the true impact real property tax exemptions have on the local tax base, and in turn, the ability, or lack thereof, to fund the essential municipal services that local governments provide without increasing the property tax burden on the remaining property taxpayers in the community. However, we would point out that local governments already have the ability to do this and whether mandating it is really necessary. NYCOM also believes that perhaps a better, more effective solution would be to require that all legislation that would impose a new, or enhance a current real property tax exemption, include a clear and accurate fiscal impact so that both the public as well as those voting on such proposals will understand the true impact on the tax base and local property taxpayers. Furthermore, let me state for the record that NYCOM strongly supports a bill not included in the hearing notice but certainly worth mentioning here. S. 7909 / A. 11172 would authorize property taxing authorities to impose service charges on otherwise tax-exempt property. Sponsored by Senator Little and Assemblywoman Gunther at the request of the Conference of Mayors, this bill would help local governments offset the costs of servi ces they must provide to certain tax-exempt properties in their communities, that these particular properties are not required to fund due to their tax-exempt status. This bill would provide municipalities with the ability to recoup a portion of these costs, at local option, at a fraction of the amount these properties would pay if they were taxable. Proposals such as this one will certainly help slow the growth in municipal property tax rates. S. 7727 / A.10730 -– Would allow municipal corporations to remove the limitations on assessments on condominiums and cooperatives converted or constructed on or after January 1, 2010 for municipalities subject to the provisions of section 581 of the Real Property Tax Law. The Conference of Mayors has been a consistent and strong supporter of this legislative proposal. Existing law requires assessing units to assess cooperative and condominium property based upon its income-producing value, as opposed to its resale market value. Currently, a single family home and a condominium may sell for the same price, but the property tax liability associated with each will differ significantly. This occurs because the condominiums receive the benefit of a valuation limitation while assessments for single family homes are based upon market value. This inequitable mandate results in a de facto partial exemption of approximately 30% for cooperatives and condominiums. This resulting tax burden must then be borne by the remaining non-exempt residents of the municipality. The proposed bill would begin to address the inequitable distribution of the property tax burden, as well as remove the incentive to convert existing housing to condominiums simply for the purpose of reducing taxes. Enactment of this bill, in our minds, is long overdue. Conclusion Again, I thank you for the opportunity to share the views of the Conference of Mayors on these important legisaltive initiatives. We recognize that there are no easy answers when it comes to relieving the property tax burden. However, we strongly believe one essential element is a strong State-local fiscal partnership. We look forward to working with you to strengthen that partnership on these and other issues that will help ensure the prosperity of our communities and the State as a whole.
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