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					                                                                         December 13, 2007
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                               December 13, 2007


Female Speaker:           --    Deputy        Director     of     the    Division       of
            Budget and know many of the folks in the room and
            this is part of the series of events we have been
            holding       as    part    of     a    more   open    and     transparent
            budget process that the Governor promised this year.
            And    what        that    process       has   consisted       of,    is    us
            listening to commissioners as the first part, about
            their priorities, secondly going out in around the
            state to hear about the priorities of New Yorkers
            and    where       they    think       the   state    budget     should     be
            headed and now, hearing from groups that we have
            talked to and consult with an awful lot throughout
            the year, but in a more public and open way.                               And
            what -- our event today is being webcast and after
            today's       event,        all     the      testimony       that's       been
            submitted will be posted on the Division of Budget
            website and we look forward to hearing from all of
            you.    I think you all have a list of who is going to
            testify in what order.                 And I just invite you to one
            after the other, come up and offer your testimony.
            We did ask everybody to keep to a 10-minute time
            limit today and we do have a timer who will give you
            a signal if we start to go overtime.                          And then, I
            would like to ask my colleagues up here with me to
            introduce themselves.


Ed Ingoldsby:    Ed Ingoldsby with the Division of the Budget.                           I
            am     head    of     the    intergovernmental              group    in    the
            division.
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Bob Megna:   Yeah,      my    name    is    Bob    Megna    and   I    am     with   the
             Division of the Budget on the economic and revenue
             group.


Lora Lefebvre: My name is Lora -- can you hear me?


Bob Megna:   Turn it on.


Lora Lefebvre:     -- turn it on, that would help, yeah, hello.                       My
             name is Lora Lefebvre and I am the Deputy Secretary
             for Public Finance and Local Governments with the
             Governor's Office.


Female Speaker:         And     our   first       speaker    is   (unintelligible)
             with (NYSAC).


Male Speaker:    Good    afternoon.           Rather       dangerous     to    give    a
             microphone here to me, public setting.                     I would ask
             the timekeeper to please keep an eye on me, clock
             for me.         It's a pleasure to be here.              Thank you Kim,
             Ed, Bob and Lora, congratulations coming to state
             government and Mr. Megna, congratulations to you on
             your recent nomination.                I would like to start off
             my remarks by acknowledging the Governor, Division
             of the Budget for the difference in the way the
             state budget is being constructed.                   The transparency
             is welcome news for both the taxpayers in the state,
             but     certainly        for     the    governmental           units    and
             governmental partners, it is a welcome process and
             as you know, we have been involved with the Division
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of the Budget for some time now, really never stops
the communication between the counties and the state
as an administrative arm.          I just left a meeting
with sheriffs and made a presentation down there and
one of the comments is why can't we get more revenue
to do more road patrol?           Why can't we give more
revenue to staff our jails?         And I had to sit and
explain to them, new elected, why that is.             And why
the property taxes are being used to finance the
state mandated programs at the county level.               It's
not something that you have created here in your new
capacity in this administration, but it is a fact
that the overwhelming majority of a county's budget
is state mandated and I had to explain to them why
property taxes are used to pay for those mandated
programs and which programs they are meaning that
there is very little discretion that a county had to
use with property taxes or other sales taxes for
discretionary    programs.          Sheriff       patrol      is
discretionary, that is -- and road and bridge is
discretionary.       So,     it     was    an     interesting
conversation.    At the January meeting, the Governor
-- I am only going to be able to make a few points
in light of the time constraints.         So, I will try to
get through it briefly and I have got my time clock
there who give me the heads up.             At    our recent
conference, Governor Spitzer gave counties a clear
message that the days of balancing the state budget
on the backs of counties are over.         And thankfully,
his first budget resisted the temptation to unwind
some of the things that we have all collectively
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worked for, many of you on the dais and certainly,
all of us in this room on the county and local
government side resisted the temptation to shift the
burdens from the state to the counties.                          And we
applaud    the    state     leadership       for     their    apparent
focus on property taxes.                We want to make one thing
clear that the road to any substantial property tax
relief -- and this is a property tax form, certainly
runs    through   a    county.          Counties     are   unlike    the
other units of government, the administrative arm of
state    government      locally        delivering    your     services
locally    and    it   is    our    hope    that     the   Governor's
second budget will adhere to his same commitment
that he made to us.              If your goal is to reduce the
burden of property taxes on the residents, don't
balance your budget on local governments.                     Critiques
of local spending as I mentioned a minute ago, often
don't realize that most of what we do, as high as 80
percent in many counties is mandated in fixed costs
and while state policy makers try to address the
problem    by    providing       property     tax    relief      through
rebates    and    various        exemptions     to     home      owners.
Counties just spend years working to lower their
property tax levies.             When we can control the cost
of a service our program, then we have been very
successful.       However, all of that effort no matter
how    cutting    edge      we    are    effective     means      little
because we have no control over the largest cost
drivers.         It    is    the     Governor       and    the     state
legislature who has direct control over the growth
of counties real property taxes through the many and
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numerous state mandated programs and services.                 To
the credit of the Governor, in his first budget, he
advanced several initiatives designed to address the
real property tax burden across that state.                Middle
Class STAR was rebate checks was certainly one and
Wicks reform was the other.          Middle Class STAR may
help 90 percent of New York's homeowners who receive
a rebate, but does not address the core growth of
property taxes.    Even with the modest check send to
state's    residents,       their    ongoing      school      tax
liability which is over 60 percent in many cases of
our   property    tax,   counties     typically       being    15
percent or 20 percent of a property tax bill.                  If
the Governor seeks to continue the Middle Class STAR
rebate approach, NYSAC would suggest that we ensure
that rebate checks go only to those who have paid
their property taxes.        There is a loophole in the
law right now, where a delinquency exists by way of
property   tax   payment,    the    rebate    check   is   still
mailed.    That's outrageous.        We would ask that an
interstate mechanism be implemented to capture this
deficiency in the current law.               Building on this
concept, we could follow the lead of other states
who have developed cutting edge partnerships with
local governments to match computer -- certainly for
the commissioner designee, to match computer records
of taxes and fees both at the local level and simply
intercept income tax payments and other refunds on
behalf of the locality.       Concept would provide state
tax department with offsetting revenues for their
services and put the onus on resolving disputes at
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the local level.             Last North Carolina's version of
this program collected over $10 million to local
governments to help offset unpaid local taxes and
fees.     With regard to the Wicks Law, a significant
statute has been on the books for many years.                                    The
Governor      worked       hard       to    his      credit    to      advance     a
legislative         proposal.              It   is     an    important          first
step.         His     bill       is     an      important          first        step.
However, his bill is deficient in that it does not
significantly         affect          the       county      projects.             Our
recent    survey,          our    analysis           of     this     program       is
county projects range between two and $5 million and
certainly       not     an       acceptable            proposal           for     the
counties, the current Wicks proposal.                          We have asked
that    you    reconsider             that      legislation          to    address
county projects based on something a little bit more
meaningful for the membership of our organization.
The     state        and     county             partnership           that        was
established to cap on the local share of Medicaid
provide       immediate           relief          to        county        property
taxpayers.          We view this as a model for additional
reform.       You know what they are, we have presented
these concepts to you.                     The reason why we believe
that Medicaid cap work is, it allow the state to get
its arms around and improve the service delivery of
Medicaid,       arguably          one        of      the     most      important
programs that the state provides to its residents.
By having skin in the game or able to get your arms
around reforming this program, and improving this
program while capping the county's cost, everybody
want, the taxpayer, the counties want, the state
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            want because it achieves significant reforms in the
            program.      We ask that that same model be used in the
            pre-school        special        education      program    which      the
            counties unlike every other state in the union are
            administering in the State of New York.                       It simply
            makes no sense.            We have no education departments at
            the county level, we have assumed this obligation
            for    decades       and    if   you   want     to   reform     property
            taxes, we strongly, strongly believe this must be a
            top priority from the county's perspective.                      I will
            stop there.         Any questions or --?


Female Speaker:         No.   We will move on to our next speakers.


Male Speaker:    Thank you very much for the opportunity.


Female Speaker:         And thank you for all the help you provide
            us throughout the year.


Male Speaker:    Thank you.


Female Speaker:         Peter    Baines      and    Barbara      (unintelligible)
            from the conference of Mayors.


John McDonald: Good     afternoon,       I'm    Joe      McDonald   Mayor    of   the
            City of the Cohoes I'm filling in PRBs our Executive
            Director is out of town.                I'm also the first vice-
            president of the congress of Mayors.                       I want to
            thank you for the opportunity for the conference to
            speak on some of the important concerns that we have
            as    you    know,    everybody        can    present   problems,      we
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hopefully are going to present some solutions as
well.    As you know the property tax is the single
most important revenue source for local governments.
In 2005 property taxes accounted for over 43 percent
of local revenue, totaling $565 billion -- oh $56
billion.           Giving       the     rising      cost       of    providing
essential     municipal          services      in      terms        of    limited
revenue to fund them along with continued unfounded
mandates, there has been an increasingly reliance
placed   up     on       the   property       tax.         Well,         the   most
fundamental changes facing our upstate communities
is diminishing tax basis, much of this is due to
population         decline,       and        decreases         in        property
values, particularly in our urban centers, whatever
the tax basis also compromise by the imposition of
property tax exemptions, exempting properties from
taxes    does       don't       diminish       the       need       for        those
revenues, it simply shifts the burden of generating
those    revenues         to     remaining         tax     payers         in    the
community.          For example, according to 2005 data,
approximately 62 percent of the 5.5 billion houses
in New York State are wholly or partially exempt
from taxes, this reflects $678 billion and exempt
full    value       or    32    percent       of     the    value         of     our
property      in     the       state,    if      you     just       apply        the
standard      2.5    percent          full   value       tax    rate,          these
exemptions         result       nearly       $17     billion         in        taxes
shifted to other non exempted property taxpayers,
this proliferation the tax base is a concern and
(NYCOM) will continue its efforts to prevent attempt
to create new exemptions that would further eat away
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at the already diminished tax rate base.                     Well the
tax base continues to diminish local expenditures
are on the rise, the cost associated with pensions,
health   insurance         benefits,      and    infrastructure       in
particular    continue          to   present     significant     fiscal
challenges for local governments.                 There are no easy
answers to this property tax dilemma we all know
that, I can rest assure you that no one more group
is interested in finding a solution for the local
government, we are on the ground every day face to
face with our constituents.                   We get the cost when
things are not going right, we understand they do
not now want their services diminished, in Cohoes
annually,     I     have    city       finance    101   programs      to
demonstrate what the budget is all about and for
those of you who show up, they go away a little bit
more informed.        At the same time there is always the
question asked in these forms, and day-to-day what
services do you want removed to lower your taxes,
the   hands       don't    go    up,     so    therefore    we     local
officials are left trying to find other a solutions
and other revenues.              Fortunately we have had some
help in the past, specifically in New York State due
to AIM, the increases of AIM are appreciated, and
are clearly a step in the right direction, (NYCOMs)
annual City budget survey, has shown that the recent
AIM   increases      have    helped      us    slow   the   growth    in
property taxes.            In fact according (NYCOM) survey
results the average property tax increase in 2007
was 4.6 percent, which although significant reflects
a decrease of 20 percent compared to 2006.                       Clearly
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these additional funds are being used in the way
they were intended to reduce the local property tax
burden.     Despite this however, there needs more to
be done to make up for the queen of reductions and
revenue    sharing,       that    our      local       governments        have
enforced    to    absorb    for       nearly       two    decades,        when
adjusted for inflation approximately 80 percent of
our cities and a 100 percent of our villages are
receiving less aid than in 1989.                       I always say that
to our resident saying, where does anybody work for
less money than they couldn’t make 20 years ago, it
just    doesn’t    happen    and       we       need    that     additional
support.    We do recognize that the state is facing a
very significant financial crisis of its own, and
that additionally it is going to be difficult to
combine, we hope at least that the state will uphold
its commitment to the additional $50 million in aid
for the next three years.                   And we can assure you
that    that      commitment          if    met        will     meet      your
expectations and pay great dividends.                      In regards to
some solutions mandate relief, nothing new here, we
have long argued that state mandates are equivalent
to hire property taxes, and that the most onerous
mandates are both our (unintelligible) and provide
no     public     benefit        at     the      end      of        the   day.
Unfortunately, efforts by local governments to limit
those mandates are continually obstructed by special
interest groups, relief from the constrains imposed
by     statues     like     the        Wicks       law        and     binding
arbitration       is    essential          to    more     efficient         and
effective       local   government          operations.              That    we
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appreciate the support of the Governor to put the
step forward in regards to which reform and (NYCOM)
has been on board in support of this, and hopefully
we will see that day coming sooner or rather than
later.     In regards to binding arbitration as one who
personally negotiates all of their unions contracts
it's very difficult to negotiate with one arm tied
behind your back.        And therefore it puts communities
into     very    difficult     situation.        In     regards     to
managing the workforce costs, in addition to mandate
relief there are some areas in which a state can
provide assistance, workforce cost are the single
largest component of local budgets.              One sure way to
achieve significant property tax relief is by giving
local officials the ability to control those costs.
We appreciate the governor’s help in this regard
through his vetoes of several labor mandates passed
by the state legislature, that if they were enacted
would     have    greatly      increased    employer      cost     and
undermined the collective bargaining process.                       We
expect the legislature to follow suit and continue
to push these bills in the 2008 session, and we hope
and I will thank the governor ahead of time for
continuing to veto all these costly endowers.                       In
regards to pensions, with respect to the issues of
local    pension      costs,   although    pension      rates     have
started    to     decline   slowly   in    the   last     couple    of
years, the ten-fold increase in pension cost that
villages        and   cities    outside    of    New     York     City
experience between 2003 and 2005 continue to plague
our budgets, the Cohoes example going from $40,000
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to a million dollars in one year, and we are still
at a million dollars.               In fact at many cases the AIM
increases and this happened in Cohoes have been used
solely to pay the retirement endowment.                             Although
current rates are in the same rate as they were in
the   80s,    the    base       up    on   which      that       pension      is
calculated has increased greatly, for several years
(NYCOM) has argued that the state should undertake a
through      analysis          of    the   benefits,         the        funding
methodology,        the        governance       and        the     oversight
structures     of    our       public      pension        system,       and   we
support legislation that creates a new retirement
here with more affordable retirement benefits for
new hirers and both the ERS and the police and fire
system.       In    addition,         immediate       relief       might      be
obtained     by     amending         the   systems        evaluation          and
funding      methodologies.                To   ensure           that    local
governments        are     not       paying     anymore           than    it's
absolutely necessary, these initiatives will go a
long way in controlling and reducing their local tax
burden.      And we recognize this as an issues that is
for the most part under the guidance of the state
comptroller        and    (NYCOM)      will     be    also       instituting
meetings     with        the    comptroller          to    address       these
matters, regards to health insurance the cost of
providing      the        health        insurance          to      municipal
employees also continues to cripple local budgets.
According to the state’s comptroller’s data between
1999 and 2005 the cost provided medical benefits to
employees and retirees increased by 77 percent, in
cities and 75 percent in villages.                         Although local
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officials are trying to take steps to manage these
expenses by various negotiations the fact of the
matter is the Triboro amendment to the Taylor law
essentially        discourage          unions         from      offering
concessions       or      give      backs      by        assuring      the
continuation of a current contract provisions even
after    the     contract       expires.        Currently,          health
benefits    municipal       employees       often     vary     by   local
government, a class of workers within those local
governments       even    by     the   units    within       the     these
classes.       The state maybe able to assist by creating
one defined municipal health benefit plan.                      I have a
little    quote    that     I    say   that     all      employees     are
created equal when it comes to health insurance,
when they have diabetes, hypertension, obesity, we
are all the same.               And therefore the concept one
define benefit plan may prove to be a great cost
savings.       Other, initiatives to consider and I will
go over these briefly is the gross receipts tax,
cities and villages are authorized to impose it, GRT
and the sale of utility services is equal to one
percent of gross income as currently written the
statue    governing       in     position,     exclude       sell     your
telephone services.             We here at (NYCOM) feel that
that    really    needs    to     be   reviewed       and    looked    at,
competitively bidding limits, now that's an example
of our cake, the state had the privilege of having
their    limits        increased       couple       of      years     ago,
unfortunately local governments were left behind and
we feel that they should be raised as well.                             In
conclusion, I'm sorry one more quick item, before
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            the bouncer gets to me.             Property tax exemption for
            municipally owned property many of our communities
            do own property on other communities which there is
            a double taxation in the standard.                 Our members feel
            very strongly about this that they should be in this
            one situation exempt from property tax since that
            property is being used for municipal use, municipal
            purposes.        That would provide a significant amount
            of savings to our communities.                  In conclusion, and
            as an executive I know what it's like to hear about
            all    the     problems    where    are   the     solutions,    I   can
            pledge to you that, we know Governor Spitzer is very
            much focused on reform has been and will be, we the
            mayors the people on the ground running are also
            very much focused on reform and are very excited for
            the opportunity to work, to help reduce our taxes.
            Thank you very much.


Female Speaker:       Thank you Mayor, Jeff Haber.


Jeff Haber: Thank you very much for the opportunity to be here.
            This    July     will     mark     my   23rd    year   as   Executive
            Director of the Association, and I was a young guy
            like Steve Quarrio and Peter Baines back in those
            days, but the interesting thing about it is that
            those 23 years ago, I was talking about the same
            issues that I'm going to talk about today.                      And I
            think we all know the problems, and it boils down to
            whether we have the -- excuse me, the political will
            to     solve     these    problems.            Basically    from    the
            association town’s perspective, it breaks down into
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three        areas,      restoring       revenue       sharing         and
infrastructure          aid,    fully    funding       mandates        and
reforming the real property tax system, you know,
and prior to 1988, there was a fairly decent revenue
sharing program in effect although, even at that
time I don't believe it lived up to what the law had
originally said it should, but we got -- we got cut
down at that period of time, I think we went from
5.62 percent of total -- our total revenues to 0.7
percent.       And I never had anything to -- to make up
for that, and it should be a stable and fair across
all    classes     of    local    government.          In   terms       of
infrastructure aid, CHIPS another program that is
under    funded         the    amount     never       changes,        find
different       ways     to    fund     it,     and   the    cost      of
maintaining our local roads and bridges increases,
increases and the funding doesn’t.                    And it covers
only    25    percent    of    the    cost     of   local   roads     and
bridges leaving 75 percent to be funded from the
real    property       tax    base.     And     I   think   if   memory
serves me that -- that's I don't have it written
here, but I think in previous testimony I recall
that    being    the     second      highest    percentage       in   the
country that maybe the state of Wisconsin has to
quit the towns and Wisconsin had to pick up more
money than we do locally.                 We would like to see
CHIPS, not only made permanent and fully funded, but
there are reform proposals such as, the Reform Act
that    was     introduced       by    Senator      (unintelligible)
would face out non capital expenditures from the
dedicated highway bridge trust fund over a five year
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period.      There is no question when we look at it, we
think of the cost, and we say it ourselves well,
that's a lot of -- that's a lot of money, but I
think   we    have    to   look   at    it     as    an     investment.
Experts have found that for every dollars spend on
street improvements it results in $5.40 in economic
benefits.      And we are already spending $3.2 billion
or   $285     per     motorist    and        vehicle        repair    and
operating      cost    resulting       from     deficient         roads.
Water and sewers in other area, the America Society
of Civil Engineers 2005 infrastructure report card
found that New York’s drinking water infrastructure
needs   $13.15      billion   over     the    next     20     years   and
20.42 billion the same period of time the fund our
waste water treatments infrastructure needs.                      In the
MS4 program municipal separates storm water.                      The US
EPA has estimated that MS4 to spends three dollars
to $60 per capita to comply with the storm water
regulations, and last year the State provided $16
million in a competitive grant program, which was
designed to serve that program.                All this just adds
on to the property tax crisis that we have, and you
know, getting over to the mandate area, I mean, you
are all familiar with them, I don't have to lay them
out for you, but prevailing wage and the Wicks Laws
as I mentioned before, these wages are -- prevailing
wage can drive up a public works contract 20 to 30
percent.      Which law is an equally onerous you know,
you have to question, I mean I -- what is the -- if
private industry doesn’t have to comply with the
Wicks Law why does a municipality have to comply
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with the Wicks Law, again it goes back to political
will, somebody has to look everybody in the eye and
say     this         is     not      good,      it's    not       good       for    the
residents not only not good for local governments,
it's       not       good      for       residents     who     pay       for       local
government.               So, you know, and that's the pension
reform       I        think         Mayor       McDonald          mentioned         the
Association of Towns we need pension reform in that
area,       there         is    you       know,    a    new       tier       for    new
employees is an option, perhaps some choices that
could      be     offered           to    employees     such       as    a    defined
contribution plans or defined benefit plans, there
is the -- an issue that's been on the association’s
resolution list for probably almost 10 years now as
the    207       C    Disabilities             benefits.          That    not      only
would help out the property it will helps out the
property tax system because what happens as a result
of    it    now       as       we    often      funding      an    extra       police
position that we wouldn’t have to if the person was
allowed to do the retirement.                          And code enforcement
that is a fairly you know, insignificant number I
think,       state         wide,         the   state    raises          revenue      by
collecting two percent surcharge in all commercial
player, and we received this revenue, it was a trade
off at the time, and all of you are probably too
young to have been around for that trade off, but
the certain things we are agreed to in the building
code area and the commitment was at that surcharge
would be given to local governments to offset that,
and then 1991 it was diverted to the general fund.
It's a $10 to $20 million bill and it could easily
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                                                                       Page 18




be    transferred        back        to    where        it     should        go
maintenance, low maintenance for -- maintenance for
low volume roads, is another area that would save
taxpayers    money,      there       are    roads    in      some     of    the
towns in New York State that are barely used and yet
legally are required to be kept to ASTO standards
and it would take billions of dollars to upgrade New
York's    90,000    miles       of    county     and    town       roads     to
those standards and years ago or a decade ago the
New York State local road classification tax force
made recommendations to allow the road standards to
be set based upon customer usage but they were never
codified.    So, we are asking let's codify them and
they will not only save your property taxes but it
will help those communities who want to                             preserve
their road character.            The real property tax system
and this is everything right I mean this is what's
driving    every    single       thing      we   talk        about    today,
whether     it's        the     local       Government          efficiency
commission or this and we rely heavily, towns rely
heavily    upon    real       property      taxes.        More       than    50
percent of our town revenue is derived from that.
We also derive revenue from sales tax from mortgage
recording tax as user fees pyramids grants and state
in their revenue sharing.                  More than one third of
the real property in New York State is tax exempt.
It was referred to either by (unintelligible) or
Mayor    MacDonald      but     these      tax   brakes       of     the    tax
exemptions they just shift the burden and they shift
the     burden     to     the        people      that        are     already
overburdened and the association forever has had a
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policy that, that in our legislator resolutions that
we   are    not    opposed      to    them,    we     don't      argue     the
merits of many -- of any of these tax exemptions but
they should be financed through some type of income
tax break or something that applies to everyone in a
broader based tax based in the real property tax
system     and    you    know,       there    are    incentives        being
given for let's say if a volunteer is -- well not
everybody whose a volunteer is a real property tax
you know, payer.             So, those things should be --
should somehow or another be allocated through the
State income tax and not through the real property
tax and most everything that's exempt on a property
tax base now should be restored to the rolls and you
know,      if    you    added    a     third        that    would     be     a
considerable amount.             As I said before I want to
touch on one another thing and it is a real property
tax issue but it hasn't occurred yet.                        So, we have
an opportunity, there is no bigger crisis looming
out there for the real property tax based tax payers
in   New        York    State    than        the     disappearance          of
volunteer        emergency      services.            It's     harder       and
harder     to     recruit    people      to    serve        in   volunteer
ambulances        or    volunteer       fire        companies       and     we
partnered with (unintelligible) on a study a couple
of years ago and I believe that the number was $7
billion that if all of the -- now volunteer fire
companies and ambulances were to go paid the cost on
the real property tax system back in 2004-'05 was $7
billion a year added to the real property tax.                            Now,
as I said I have been around a while and I think --
                                                                  December 13, 2007
                                                                            Page 20




I know how we all have looked for economic growth
and development in the New York State as the key to
our    regeneration            to    the       number     one    state       in    the
nation.          And there's probably no bigger detriment to
that to than you have to pay real property taxes and
I just returned from a national board meeting of my
association and I listened to my fellow executive
directors complaining about high property taxes in
their States and I'm saying to myself I wish that's
all I had to pay here you know.                            And if we want to
remain      competitive             or    become     more       competitive         we
have to be careful of the real property tax we have
to    do    something          about       it    and      this   is     something
coming down the road it's going to be here every
year       the    number       of    paid       personnel        and    what       was
previously         volunteer             emergency        services      increases
and when that day happens to us in New York State
there aren't any of us that are going to want to
live here and that's the sad fact of it so, this is
the time in which we have to seriously address that.
And    I    would       like    to       say    in   conclusion         that       the
Association has always enjoyed participating in any
of the philosophical discussions or any commissions
or anything that were around studying the next thing
and we have some very good people on our staff they
are    very       expert    in       many       areas     and    as    this       goes
forward and as we talk about things and we study
things      as     we   inevitably             do,   we    would       ask   to     be
included and tap into our strengths as you do that
and I will go back to what I said and open with and
that is these problems have been a long -- around
                                                                         December 13, 2007
                                                                                   Page 21




            for a long while.               I think that the Governor is a
            person who is willing to take on challenges and in
            order to solve these problems and go after curing
            the ills of the real property tax system, it takes a
            lot of political will non-partition by partition and
            we want to say a political will on all sides to say
            what's good for New York State.                       Let's face it and
            go after it, thank you.


Female Speaker:      Thank           you,    Mr.         (unintelligible)            Frank
            (Morrow).


Frank (Morrow):      Good afternoon, thank you for doing this.
            So, you have been all around the State getting worn
            out.


Female Speaker:      Yes we have.


Frank (Morrow):      Okay, I'm going to focus on the property tax
            from a different perspective from the -- the broad
            view    of    how     services      are      paid     for    and    my   most
            important         point    is    that       New    York     State   divides
            responsibility for the financing of important public
            services between itself and it's local governments
            in ways that places great pressure on the property
            tax    and    sales       tax   basis       because    it    doesn't     take
            differences         in    ability      to    pay    into    consideration
            except       in     school      aid.          This     is    particularly
            problematical            for    those        localities        that      have
            relatively weak tax basis compared to their needs.
            For example, to cover the local share of Medicaid
                                                      December 13, 2007
                                                                Page 22




cost in 2003, it took the equivalent of almost $6
per thousand of taxable full value in Montgomery and
Fulton counties but only $1 per thousand of taxable
full value in Nassau and Putnam counties to do that.
That's        because     New      York     State     divides       the
responsibility for the financing of the non-federal
share of Medicaid cost between itself and it's local
governments on the basis of a one size fits all
basis, rather than taking the relative ability to
pay at various localities into consideration.                       The
result is that most of the counties for which local
Medicaid costs are high relative to the tax base are
also    the    counties     that    are     very    close   to     their
constitutional tax limits and they are the counties
in which the county government tax levy accounts for
a much larger percentage of the total real property
tax bill for all purposes than it does in other
places.       Most of the place -- of the -- well heavily
populated places in the State and well represented
places    in    the     State,   you      will   always     hear    that
school taxes are 50-60 percent of the property tax
bill.     But in Montgomery County the county tax is 50
percent of the tax bill.                 So I -- you know, that
sort of fits in with a policy proposal, I will come
to it later but I think that a property tax relief
mechanism that just focuses on one kind of property
taxes like the star which faces just on school taxes
is by definition not fair to places with relatively
high concentrations of poor people relative to their
ability to pay.          In the short run the Governor and
the     legislature       can      and     should     provide      more
                                                                      December 13, 2007
                                                                                Page 23




effective        and       efficient                 property      tax     relief      by
replacing the Middle Class STAR Program with a real
property tax circuit breaker that targets aid to
those      who       are           the        most    overburdened           by     their
property        tax       bills          and       both    the    current         circuit
breaker         in        New        York,           which       is      increasingly
irrelevant because the $18,000 income limit and the
property tax circuit breaker bills that are getting
a   lot    of    discussion                   now    are    based     on     all     your
property taxes and not just your school property
taxes.           So,           I     think           in    the     short      run      my
recommendation is to replace the Middle Class STAR
Program with a Middle Class Circuit Breaker.                                      In the
long      run,       however,             more        systematic         changes      are
needed in the fiscal policies that place pressure on
the local property and sales tax basis in the first
instance.            So, in the long run I think that the
things that New York has to do and I think this has
to be programmed to take effect over 10 or 15 years
gradually.                It        is        restoring      New      York        State's
commitment           to        revenue             sharing       where     its       sole
performance           is       to        do    a     transparent         needs      based
formula that's added over time and this past year
the legislature adopted the Governor's proposal to
base the increase in revenue sharing on a fairly
transparent formula but not the base.                                    So, I think
over time the base has to be related to a formula
also and I think that the commitment is to -- the
important thing is to honor the commitment over time
not to have these big ups and downs -- ups and
downs.      Second, fully implementing the State wide
                                                                December 13, 2007
                                                                          Page 24




solution to the campaign for fiscal equity lawsuits
that     was     proposed         by     Governor         Spitzer       at    the
beginning of the year and which was a enacted by the
State legislature as part of it's adoption of the
2007-2008 budget.            That is going to be phased in or
I think it's for four or five years and I think that
the     way     that's      structured           where        it's    based    on
determining a foundation amount and then dividing
the foundation amount before State and local creates
the -- a very good framework for gradually over time
increasing the State share because the way it works
is the State share varies with both your property
tax     base     because         it's        a    dollar       per     thousand
requirement, $16 per thousand but that varies up and
down based on income so I think that that once the
phase in of the adequacy level is achieved, I think
that     over     time       then       on       an    annual        basis    the
legislature and the Governor should put in place a
plan to increase the local share each year and to
gradually reduce the pressure on the property tax.
Third,        gradually      increasing           the     State       share    of
Medicaid       cost   in     a    way    that         basis    each    county's
share of Medicaid cost on objected measures of it's
relative ability to pay.                 And we have a table at the
end,     which       shows       how     it      --     what    the     current
situation       is    and    the        very      last    page       shows    the
differences that exist in New York State.                               It says
local    Medicaid        expenditures             in     --    you    know,    in
Montgomery County it's $5 and 91 dents per thousand
in 2003, and you know, they happen to be at 98
percent of their constitutional tax limit that's not
                                                   December 13, 2007
                                                             Page 25




on this table but, you know, it's just a one size
fits all approach.           So, we think that the federal
government in dividing responsibility for Medicaid
between State and local takes the ability to pay
into consideration in a formula that we in New York
do not think is sufficient, it's based just on per
capita income and there should be other variables in
it as well.      So, you know, we would suggest per
capita income in poverty but at least the federal
government does something to take into consideration
about their differences and ability to pay.                And you
know, I think it still should be a priority of New
York to work on that because on a per capita income
basis we are very close to our neighbors, New Jersey
and Connecticut but our poverty rate is twice New
Jersey's.     So,    it's      not    sufficient    just    to   be
looking at per capita income but I think we should
divide responsibilities between State and local in a
better   formula       but    still      taking    that     in    to
consideration.       Fourth,         eliminating   this     --   the
disparities in the STAR tax exemption program.                   The
disadvantage school districts with high percentage
of renter occupied dwellings and high concentrations
of needy children.           SO, STAR is -- the basic STAR
exemption I'm talking about now, provides aid to
school districts to write down the property taxes on
owner occupied dwellings only and it pays it based
on the number of owner occupied dwellings not the
number   of   pupils    and     how    expensive    those    owner
occupied dwellings are on average compared to the
State average.      And one of the things I say in the
                                                             December 13, 2007
                                                                       Page 26




details in the testimony, which I'm going to -- skip
over the details for each of those four proposals,
one of the things that say in the details is that we
think that there needs to be greater integration of
how    we    think      about       the   basic    STAR    exemption       aid
money and school aid.                My conclusion of that section
was     the       Governor          and     the    legislature          should
undertake a comprehensive reevaluation of all the
State's real property tax relief programs and work
towards integrated circuit breaker like variation of
STAR    that      is     consistent         with   the     principles       of
horizontal and vertical equity.                     In addition, since
STAR is both a property tax relief mechanism and a
way to deliver State revenue to school districts, it
should      also        be     integrated      with    the      State     wide
solution to the CFE decision that is currently being
implemented to ensure that STAR is made fair to the
upstate cities.               In the short run, while we can say
that an integrated approach of the kind that we just
discussed is necessary to rationalize the current
hodge-podge of property tax relief mechanisms, the
Governor and legislature can and should provide more
effective         and        efficient      property      tax   relief      by
providing the Middle Class STAR Program with a real
property tax circuit breaker that targets aid to
those       who    are        the    most    overburdened        by      their
property tax bill.                  It is important to acknowledge
that the Middle Class STAR Rebate Program is better
targeted than the original STAR exemption and that
it takes (unintelligible) into consideration but it
is still not adequately targeted to be an effective
                                                            December 13, 2007
                                                                      Page 27




and efficient property tax relief mechanism since it
does not take the size of a home ownership property
tax bill into consideration, it's almost like an
income tax relief mechanism.                     And it should not be
and it is still based on county and school district
averages rather than on your situation.                          So, while
there     might    be        more    people      with     incomes         of     a
$100,000        property        taxes       of     $10,000       in        West
(unintelligible)             there        are     still        people           in
(unintelligible) with that mix and what we have done
is we have created a system where depending on how
you -- where you live you get treated differently.
I don't understand how that can be morally sustained
over time to be giving out money based on a formula
that doesn't treat people equally based on their
circumstances,          which        treats      them    based       on        the
averages of where they happen to live.                           A circuit
breaker     like       the     one    proposed      by     Assemblywoman
Sandra    Galef        and    Senator      Elizabeth       Little         would
address both of these shortcomings.                        The way that
their bill works is it applies to homeowners who
have    lived     in    their       current      homes   for    10    years,
which in my testimony I look at I don't think it
makes sense to do that to have a 1o year residency
requirement.       In the -- I should mentioned that when
the senior citizen -- the optional senior citizen
property tax exemption was enacted in 1967 it had a
residency       requirement          of   five     years.        And       very
shortly thereafter there was all kinds of changes in
fact one of the changes was when it was cut to three
years, it was then changed to three years either in
                                                                          December 13, 2007
                                                                                    Page 28




            your own house or another house in the same taxing
            jurisdiction.           So, we came sort of silly, I think
            people         should        be         treated       based        on      their
            circumstances.           What we have in here is we have a
            bunch of stimulations of the cause of varying the
            various    parameters             of     the    Galef-Little        Bill     and
            think that by limiting the home value that's covered
            it wouldn't be a cliff but it would say that this
            applies    only     to    the          first    $500,000      of   your     home
            value.     So, if your home value was $600, you would
            not be completely ineligible and you wouldn't go
            from     being         completely            eligible        to    completely
            ineligible, it would be on the first 500,000 but I
            think    for     the    most       part      the     other    parameters     of
            their program work I think the 70 percent is better
            than     the     current          50     percent      and     I    think     the
            thresholds could be a little higher if we want to
            save    cost     but    if    we       did     the   $500,000      limit     our
            estimate is that we cost just about as much as the
            Governor's Middle Class STAR was originally proposed
            at Boston.       Thank you.


Female Speaker:       I don't see Betsy (unintelligible) from CBC.
            Is somebody else here representing CBC?                                 Laurence
            Quinn and Tom Fray -- representatives of the Retail
            Council.


Ted Potrikus:   Good afternoon.            My name is Ted Potrikus I'm the
            Executive Vice President and Director of Government
            Relations for the Retail Council of New York State.
            We represent some 5000-member stores of all sizes
                                                          December 13, 2007
                                                                    Page 29




through     out     the      State     and    we    applaud     Governor
Spitzer in the division of the budget for bringing
to    the   table     the      stakeholders        in   this   important
pubic    policy       discussion       regarding        property    taxes.
Thank you for including the retail industry in these
talks.      Obviously property taxes affect retailers
small and large, ultimately have an impact on the
prices our customers pay in the goods and services
resale.     The margins in today’s retail economy don’t
give much room for absorbing increases in bottom
line expenses, so when property taxes increase, it's
very hard to hide that hit from the shopper.                          It's
not the most favorable situation but more often than
not, it can't be avoided.                    But we also recognize
that outside of metropolitan New York, the property
tax is one of the two fundamental revenue streams
for the funding of essential services provided by
local governments.             The other of course is the local
sales    and    use    tax     which    New    York’s      property    tax
paying store front merchants are required by law to
collect from consumers and remit to the state.                        It's
a formidable and costly burden for the retailer,
particularly when state government tolerates neither
error nor delay in sales tax filings.                     Retailers are
caught right in the middle of the rapids formed by
the     confluence        of    these    two       turbulent       revenue
streams.       Winning an argument against an increase in
the property tax means that a retailer might just
have lost the argument against increasing the sales
tax that he or she must collect from the valued
consumer.       Either way, the burdens fall ultimately
                                                            December 13, 2007
                                                                      Page 30




on    the   storefront         merchant.        These       are     the       same
stores upon which state and local governments rely,
not just to generate collecting sales tax dollars,
but retailers are the linchpin to every community.
They provide good jobs to hundreds of thousands of
New    Yorkers,        contribute       to    and    support       community
organizations and schools, attract other businesses
and set a standard for downtowns, neighborhoods and
suburbs       throughout          the    state.             And        everyday
storefront merchants are called upon to do more, to
pick up more of the work that once was provided
through       the      services     paid       for     by     those           ever
increasing        property        taxes,       whether       it's        simple
sidewalk         maintenance        or       new      proposals           under
consideration, that would force storefront retailers
to act as plastic bag, bottle and (unintelligible)
reclamation centers, storefront merchants are losing
the    time      and     the   resources      they    need        to    do     the
things they do best sell stuff, that’s why it is
distressing         to    the     industry      as    a     whole        to     be
(unintelligible) left out of the picture.                              When the
conversation turns to property tax credits, this was
illustrated all too clearly earlier this year, when
the city of New York sought to renew its industrial
and commercial incentive program, but wanted to save
money by removing most retailers from eligibility
for this important credit.                   Let me interrupt my own
testimony for a moment to thank Governor Spitzer and
the state legislature for recognizing that The hasty
effort      by    the      city    narrated         greater       study        you
rejected      the      initial     renewal      appeal        and       instead
                                                       December 13, 2007
                                                                 Page 31




approved the one year extension of ICIP, comprising
its    decades       old     retail        inclusive   rules,         that
extension terminates June 30th 2008, so this matter
certainly will be among our industries legislature
priorities for the upcoming session.                      And despite
this one year extension we are smart enough to know
that our industries collective neck is squarely on
the ICIP chopping block, the problem in this seems
to    extend    to   any    time     the    conversation       turns    to
property       tax   credits    is    the     pervading    and       short
sighted notion the retailers large and small have to
be where the people are.               The retailers will build
regardless of property tax incentives or abatements.
A retailer today can be wherever there is a computer
with internet access, no property necessary, no jobs
for New Yorkers, no bricks or mortar, no presence in
the community and at this time no requirements to
charge     collect     or    remit     sales     taxes.         In     the
specific case of the ICIP, retailers can show the
importance of the abatement in corporate decisions
to locate, build, redevelop and invest in various
parts of New York City.               The impact and importance
is dramatic and as the city continues to grow and
transform more and more people will demand more and
more retail close by.                The ICIP remains a vital
ingredient to make that happen.                   As you and your
colleagues look at property tax incentives over the
years ahead, we urge you to remember the important
role that retailers play in the composition of the
communities of the state.              A favorable property tax
climate    means      jobs     for    New     Yorkers,     a    greater
                                                                December 13, 2007
                                                                          Page 32




contribution to the tax base, a better fulfillment
of all the other roles I had mentioned so far today.
This    of    course    stands         in    start       contrast        to   the
internet based merchants who provide no jobs for New
Yorkers, and frankly in many cases advocate their
lawful responsibility to collect and remit state and
local    sales      taxes    do    and       owing.         I    mentioned     a
moment ago the two fundamental revenue streams for
local government, the property tax and the sales of
use tax, the second of these well not the topic of
today’s discussion, narrates special mention thanks
in part to a proposal floated a few weeks ago by the
States       Department      of    Tax        And       Finance.          I   am
referring of course to the shortly (unintelligible)
to     interpret      certain          business         relationships          to
establish      an    excess       in        New    State,        for    certain
merchants      today    located         only       on    the     internet     or
otherwise      outside      of    New       York    State.           Well,    the
timing of this plan may have been a lot out of skew
the     underlying         concept          is     worthy        of     further
investigation.         Well, this may sound rather contrary
coming from a representative of the retail industry
during the busier shopping time of the year.                                  We
believe it is inevitable that New York State will
one day successfully require that these merchants
collect from shoppers the sales and used tax on item
shipped      into    New     York.           That       inevitability         may
require strict regulation and a dedicated effort to
enforce       the    same,       but    we        think     it       absolutely
essential      and     supported.             I     could       be     here   all
afternoon explaining the what’s, when’s, how’s, and
                                                         December 13, 2007
                                                                   Page 33




why’s of the collection of sales and used tax on
purchases made over the Internet.                   That it's not a
new tax it's simple and proper application of an
existing one.           The failure to collect the tax on
such purchases puts our brick and mortar property
tax     paying      retailers         in     enormous      competitive
disadvantage, all over a levy that those brick and
mortar     stores       would    rather      not    be   required       to
collect in the first place, that our personal income
tax return now seeks to collect from New Yorkers a
quasi voluntary estimate of the sales and used tax
is due and payable as a result of purchases made
either    on     the     internet     or     from   other      merchants
located out of New York.                   The state law already
requires      these     merchants      outside      of   New    York    to
collect and remit the sales and used tax and the
technology available to every Internet user lasts
easily through thousands of requirements across the
country on sales tax and defeats the barriers to
(unintelligible) cited by the supreme court, in it's
1992     Qill     versus     North     Dakota       decision,      if    a
(unintelligible) like me can use a search engine to
determine the sales tax rate for a product sold and
shipped to Albany, to Grand Rapids, Michigan, to
Yuma Arizona or to North port on any state, and
surely the high tech wizards developing and guiding
the    business         operations     of     these      sophisticated
internet merchants can do the same.                   But we are not
here to talk about sales tax and I do hope that in
the    busy     weeks    ahead   as    you    grapple     with   budget
numbers and solutions that we can return to a full
                                                                   December 13, 2007
                                                                             Page 34




            and robust discussion about the sales and used taxes
            and the importance of leveling the proverbial excuse
            me, playing field not just for retailers but for the
            localities facing the similar pressures as they have
            sales         tax      collections          dwindle         and       Bob
            (unintelligible) say every word of this for the past
            five years in a row.           Again, on behalf of the member
            stores of the retail counselor, thanks to you for
            the outreach we really do genuinely appreciate it,
            and we are available at any time if you have any
            questions or would like us to discuss property sales
            or any other taxes.          Thank you very much.


Female Speaker:          Thank you our next speaker is E.J. McMahon.


E.J. McMahon:   Thank you, and good afternoon.                    Thank you for
            this     opportunity         and    I      also     want    to      offer
            congratulations        to    my    former    colleague      Bob     Megna
            whose appointment and I wish you the best of luck.
            I     have    given    you     testimony      I     won't   read      the
            testimony.          I will summarize just my own angle on
            this -- this is a whole lot of areas where we could
            touch on obviously, that other witnesses have.                          I
            would certainly endorse much of what has been said
            on the issue of mandate relief in particular, the
            necessity for pension reform and reform of Taylor
            Law     provisions      that      affect    municipal       cause     and
            ultimately effect the tax base.                   I'm going to chose
            to focus today on -- on the property tax outside New
            York City and on the largest and -- and perineally
            fastest growing portion of that tax which is the
                                                              December 13, 2007
                                                                        Page 35




school property tax, which ultimately brings us to a
large discussion of STAR, which is the aspect of the
property tax that has the most direct, nexus a word
that will soon become even more favorite of Bob’s
with     the    state        budget.           STAR       I     just     note
parenthetically         to       begin    with     is     --     is    really
something remarkable on the fiscal history of New
York, we have gone from zero to $4 billion in the
space    of    10     years.        I    did     nothing        other    than
Medicaid in the beginnings has ever done anything
like that.       It's on page left alone to grow to over
$6 billion in the next four years it now soaks up
well    over    10    percent      of    our    personal        income    tax
receipts which is a dedicated source of funding for
it, and after all that spending and with all that
projected growth nobody is happy.                   Nobody feels that
you     have    gotten       permanent         lasting        relief,     the
criticism      of    STAR    I    think    have    been        pretty    well
documented      and     discussed        widely    around         --   around
(unintelligible) I go besides some of them in my
testimony.          Generally, STAR approved the old maxim
that when you subsidize something you get more of it
and you subsidize it in a big way, and what you got
was -- was a large underlying increase in school tax
levies that people began to feel one STAR had been
fully faced in, as it happens coincidentally right
at     the     moment       when     real        estate        values     and
assessments were beginning to sky rocket again.                           And
when     pension       contributions           required         of     school
districts were moving up five, six, seven and eight
fold in a space of a couple of years, all of which
                                                             December 13, 2007
                                                                       Page 36




has led to the situation where we now have renewed
pressure, lots of frustrated people.                         Some of them
were so frustrated they began to seriously advocate
the     complete      evolution          of     the    property      tax    on
schools and to advocate in its place an income tax.
And again I have made some arguments against that I
think their frustration is understandable, but that
their    preferred      solution          is    both    administratively
unworkable and would be economically destructive and
you -- you certainly know the math as well as anyone
in terms of what types of rates would be required on
accounting regional or even statewide basis just to
begin completely replacing the residential property
tax.     It's not a wise maneuver so the question is if
-- if STAR isn’t the answer what is and two other
things I would like to note parenthetically, it's
interesting      that       New     York       city    actually      got   the
short end of the stake on STAR the New York city got
disproportionally little from STAR however, the only
residents       of    New     York         state      who     have    gotten
permanent lasting tax relief from STAR are residents
of New York city because they all gotten across the
board cut in their income tax rate which has saved
them literally billions of dollars over the last ten
years     and    operating          a    different          way   than     the
property tax.         A second point is, and I might depart
from the majority you speakers on this is that I
think the means testing element of the middle class
STAR program has not made the program better but
worse,    because      it     has       introduced      developments        of
complexity      and     new       inequities          albeit      unintended
                                                               December 13, 2007
                                                                         Page 37




inequities      towards         already        a    --    a        very    flawed
program.       So the question is, what do we do now,
what is the -- what's the solution well, I think
first of all it's important to note and I think to -
- to promote the point that a well administered and
reasonably limited property tax is a good thing and
indeed a necessity.              And that it has three virtues
that   would    be      widely    recognized             in    a    tax    policy
sphere, it's stable, it avoids economic distortions,
it's economically neutral and it's visible.                                     And
it's    visibility         is     what     causes             the     political
pressure     but     it    also    is     --       is    among       its    chief
virtues.     And so the question becomes what do we do
about it.      Well, we know the administration -- that
the administration of the property tax in New York
has    its   own     problems,      our    system             has    a    lot   of
inequities     and        we   don’t     have       a     good       assessment
standard, we are unique among states and failing to
have a uniform assessment standard of market value.
There is a lot of basic reforms that need to be
undertaken         to     professionalize,                to        rationalize
property tax administration.                   But what do we do in
terms of truly limiting taxes well, what I advocate
is a cap on property tax levies, and I would like to
stress again something I believe the budget division
is particularly familiar with from having worked on
the original STAR proposal.                    But I want to stress
the difference between capping property tax levies
as opposed to capping spending, capping assessments
or capping property tax rates all of which I think
are -- are problematic and are not something I would
                                                         December 13, 2007
                                                                   Page 38




-- I would recommend or that I think others would
recommend based on what's happened elsewhere.                          The
capping   levies   is    the     best      approach       to    limiting
taxes across the board it's by no means perfect but
it has the fewest unintended consequences and it's
to brought us on the simplest to administer.                           And
that we would benefit from following the example
generally the Massachusetts proposition 2½ program.
Basically,    following         up    some        of     the    original
language in Governor Pataki’s original STAR bill we
should cap property taxes that are either 4 percent
or -- cap tax levies rated 4 percent of the rate of
inflation    whichever     is    lower       with       allowance      for
growth in the property tax base, and with allowance
for   overrides     on     specific          spending          items    by
residents of the school district.                       This basically
follows the basic guidelines of mass prop 2½ albeit
mass prop 2½ is a general municipal property tax,
the schools or the principal element that they are
spending also.      What's happened in Massachusetts is
also -- almost is remarkable in its own way as STAR
is in New York budget.           Massachusetts is one of two
states in the nation over the last thirty years to
have gone from the top ten on the list of state and
local taxes relative to income to the bottom half of
all those states.        It's fact it's gone from the top
three regularly in the 70s to the bottom half in
recent decades.     The other state to accomplish that
was   California,       which        did     an        extremely       ugly
inequitable way through proposition 13, which is not
a program to emulate.          And I think that -- that the
                                                            December 13, 2007
                                                                      Page 39




experience with prop 2½ again is worth emulating
here,    because      it      also    anticipates          some       of     the
criticisms that we sometimes hear property tax caps
for     instance,      one     common        criticism       is       that     a
property tax cap would be undemocratic somehow, but
again    the     override       position          has    been     exercised
hundreds of time in Massachusetts even thousands I
believe over the past 25 years.                         So, I think that
gets around the -- the antidemocratic angle.                                  It
also is I think the only proven way to bring about a
shift in the share of school expenses from the local
level    to     the   state    level    which       seems       to    be     the
universal goal of everybody who talks about this.
If a property tax caps such as the one I have just
described had been enacted in 1998 around the time
Governor Pataki had proposed it.                        By 2005 with the
rest of the STAR program intact New Yorkers would
have saved about $2.9 billion in property taxes.
Now the state would have had to absorb that amount
of money or more or likely might have done something
to lessen the impact of that amount of money on the
state budget, which again the chief -- brings about
the     chief    virtue       of     this     idea.         It       improves
accountability         by     making        the    Governor          and     the
legislature fully conscious of the physical impact
of those statutory mandates of having affect on the
cost of operating school districts.                      Therefore and -
- one other piece of this, I would like to mention
is that, as you may know New Jersey has now capped
its school property taxes and New Jersey is the only
state that can seriously rival the level of property
                                                                               December 13, 2007
                                                                                         Page 40




            taxes in New York, and that’s after many years of
            trial and error in New Jersey which got Started a
            little earlier than we did with various state level
            financial         dodges     like     STAR        that   in    the       long   run
            didn’t workout for New Jersey.                       In closing relative
            to     the     executive         budget       that       you       are    putting
            together now I would suggest two things -- two steps
            one as part of as on Article 7 bill obviously impose
            an immediate cap on school property tax levies under
            the terms I described.                    Two, repeal the STAR rebate
            redirecting a portion of the amount spend on the
            rebate       to    the    sort       of    circuit       breaker         that   was
            discussed by some Frank Morrow particularly earlier
            although not as much I would suggest using the rest
            of the money for broad-based tax relief.                                  I would
            want    to        add    that    I    do     actually,         I     think      this
            addresses some of the concern Frank raised about
            equity, especially among upstate counties which I
            think is well founded and I find -- I sympathize
            with you look at Montgomery County in particular,
            most of the counties particularly in Montgomery that
            have     the       problem      he        cited    are    literally          dying
            economically and demographically and are in severe
            distress.           And I think though you could design a
            circuit       breaker      program         that     would      benefit       those
            types of situations.                 In closing, I think the rest
            of the details of what I have to offer are cited
            here and now I will happy to address any followup
            questions at any time you choose, thank you.


Female Speaker:          Thank you.         Charles Storrow.
                                                                           December 13, 2007
                                                                                     Page 41




Duncan McKenzie:      Hello,      Charles           Storrow       is     not        available
            today so I am filling him for him and coming at the
            last bit of this proceeding today is kind of good, I
            won't take up the full time so you can relax a
            little bit you want to hold your sighs.                            Well, good
            afternoon      and    thank        you    for       this    opportunity        to
            speak,    in    the    years           that    I    have    been        with   the
            Realtors this is the first time we have been invited
            to     participate      in        a      forum       like     this,       so    we
            appreciate the opportunity to -- to add our thoughts
            at least on this very important issue.                             My name is
            Duncan McKenzie and I am the incoming CEO for the
            New York State Association of Realtors.                             We are an
            Albany based real estate trade group representing
            nearly 67,000 members across the state.                            New York’s
            Realtors       had    been        in     the       forefront       of    seeking
            property taxes reform for many years.                          We were that
            leading private sector force behind enactment of the
            original STAR program, and I will mention that for
            historical accuracy although, I would say that we
            are not bragging about it at this point.                                 NYSAR’s
            leadership on these issue is derived from the first-
            hand     observation         of        Realtors      across        the    state.
            Their reports was that high property taxes lead the
            reasons that make New York state a less attractive
            place    to    live    compared          to    other        regions       in   the
            nation.        It's frustrating and sad that meaningful
            property tax reform continues to elude resolution
            year after year.             Government has acted relatively
            quickly to the sudden foreclosure crisis dominating
                                                        December 13, 2007
                                                                  Page 42




the     news    recently.           The     lawmakers      and     school
officials continually fail to stem the problem of
property taxes that has existed for so many years.
Certainly, the rising foreclosures is a very serious
matter    and    we    look    at     as    such.       But      overtime
increasing      property      tax     the    property      taxes    will
undoubtedly drive many more New Yorkers from their
homes than predatory mortgage loans.                     In spite of
the owners tax burden the status of New York housing
market is not really all bad news.                  I am pleased to
report that high property taxes have not caused a
full-blown housing affordability crisis in New York.
But instead fast there is an ongoing story of what
might    have    been.         Even       though    statewide       sales
through the third quarter of this year down about 8
percent as compared to the same period last year,
2007 is still shaping up to be the best year for
sales in New York state history.                    Imagine however,
how much better the housing numbers in the state’s
overall economy might be with lower property taxes.
The housing market must rank near Wall Street and
agriculture as a major economic engine for New York
state, the state’s fiscal picture would undoubtedly
be more stable if lower property taxes fueled a more
robust housing economy plus less near dependence on
the stock market.             Increased second hand vacation
home sales could be an added boost to the economy as
well,    but    this   segment      of     the   housing      market   is
particularly      vulnerable        to     the   high   property       tax
issue.     In addition to help lower property taxes,
the state could take a number of actions to promote
                                                            December 13, 2007
                                                                      Page 43




housing and thus the overall economy, for example
one result of the high rising foreclosures is return
of     lending        markets       to    more      stringent      lending
practices, the days are -- easy to find zero down
mortgage       product       for     example,        the     106   percent
mortgages that we saw even recently really are I
think the past, main lenders are now going back but
most    lenders       that    we    can   see       are    going   back   to
acquiring      a   down      payment.          We   are    proposing      and
proposed    for       many    years      and   we    have    spoken     with
folks in budget as well about a proposal that we
have advocated that would create a first time home
buyer savings account program, it would allow folks
to put up to $5,000 individually and $10,000 as a
family into a savings accounts and deduct that from
their state taxes.            In this way we create at least a
market based way for folks to put the money inside
that they would need for closing cost now, she is
not    going     to    be    that    easy      to   get    into    a   house
without those kinds of moneys in the bank.                             NYSAR
and    local     Realtor      organizations          across    the     state
have been involved in government sponsored forums
where    new     ideas      for     cutting      property     taxes     have
abounded these include and you have heard them all
today E.J. touched on a bunch of them as well, and
even though these ideas are out there, it seems that
they -- they tend to just fester and not really
happen and it seems like today a lot of what you
hear is, if there is a scale it's kind of like from
frustration to desperation and I suppose if you were
to put the realtors on that scale we would -- way
                                                        December 13, 2007
                                                                  Page 44




over on the frustration side because we are just not
in a position to create these changes that we see
clearly every day how much they effect home buyers.
As I talked to you before briefly about the STAR
program as people have said school taxes make up the
lion    share     of    the    property       tax     bill,       yet     the
cornerstone of the state’s property tax relief the
STAR program really has no appreciable benefit, our
folks talk to us constantly about how STAR is really
been    used    by   the   local      school   districts           to    mass
(unintelligible) little above the rate of inflation,
and in the end there is really no net benefit for
most home buyers and home owners.                   So we would agree
with many of the other the other folks earlier today
who said that it's worth really may be scrapping the
whole program taking a fresh look at it and finding
a way to -- to make it work better and actually I
would also defer to what E.J. said we went back and
I    remembered      the   STAR    program     happened           before   I
worked for the Realtors and in our testimony we talk
about the need to cap spending, but it may well be
stemming the tax rates just the way they go so we
don't mean to try and be experts in that area, we
would defer to those but wherever you put the cap
and it seems that there needs to be some type of an
institutional restrain whether it be on spending or
on   taxing,    because       there    doesn't       seem    to     be   the
ability or the willingness on a voluntary basis to
achieve that, it was interesting to us that in the
press    release       announcing      this    here,        Mr.    Francis
accurately noted that unexpected revenue from Wall
                                                               December 13, 2007
                                                                         Page 45




            Street    have   allowed     law   makers   to   put    off   tough
            fiscal choices, and small business people weave you
            every single expenditure as a tough fiscal choice
            and it's sad from our perspective to see that it
            takes a crisis situation to think about spending
            retrain as opposed to having it be the priority when
            you are doing budgeting, and I guess that's where we
            would end our comments.


Female Speaker:       Thank you.


Male Speaker:   Thank you.


Female Speaker:       That   was   our    last   scheduled     speaker       for
            today I really want to thank everybody for coming
            out particularly, recognizing that looks like it's
            getting    dangerous       outside    and   safe       travels    to
            everyone, thank you.

				
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