Property Tax Cap Implementation

Property Tax Cap Implementation

July 26, 2011

Components of the Tax Cap• Effective for 2012 county fiscal year

-- Lower of 2 percent or inflation• For 2012 we expect this to be 2

percent

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Components of the Tax Cap• Exclusions from the cap

• Legal settlements in excess of 5 percent of the general fund• Pension growth costs in excess of 2 percent of the “system

average actuarial contribution rate”– For Example, if this law were in place for our 2011

budgets:» 2010 to 2011 average contribution rate growth was

4.4% (increasing from 11.9% to 16.3%), therefore» 2.4% of the total pension increase would not count

against the cap limit (proportionately, just over half of the pension cost increase for 2011)

Components of the Tax Cap• No exemptions for capital costs

except school districts• No exemptions for state mandated

costs• No exemptions for health and safety

reasons or environmental compliance

• PILOTS will be subject to the levy limitation– In effect, growth in a PILOT that exceeds 2

percent will have to be absorbed into the overall 2 percent cap limitation 4

Components of the Tax Cap• Includes an Economic growth factor

adjustment– Computed by NYS Department of

Taxation and Finance, Office of Real Property Tax Services (ORPTS)

– The “Quantity Change Factor” is intended to capture normal economic growth in a community and keep it outside the cap limit

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Components of the Tax Cap• Allows unused cap growth to be

carried over in the next year, not to exceed 1.5% of the total tax levy limit for that year– Carryover will first be allowed in 2013

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Components of the Tax Cap• Property tax levy limit applies

to:– Taxes imposed on real property on

behalf of a county, city, town, village, school district or special districts,

– Special ad valorem levies and special assessments, This could include property taxes assessed related to water and sewer and other similar services, but a final determination is pending 7

Components of the Tax Cap• Each County will have responsibility

for calculating its tax levy limitation– Using state data from the State Comptroller

related to pensions, and– The Quantity Change Factor provided by NYS

Taxation and Finance– Each County is required to submit their levy

limitation calculation to the State Comptroller prior to adopting their budget• State Comptroller does not certify local levy

calculations, but there is an expectation that any errors will be reported back to a county

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Components of the Tax Cap• Override– 60 percent weighted vote of local

governing body is necessary to override the cap• This must be approved by a separate local

law prior to the enactment of the local budget• A local budget that includes a levy greater

the allowable amount can be enacted with a simple majority vote

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What Does This Mean for Counties?

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2% Tax Cap ≠ State Mandated Cost Growth* • In 2012, a 2% property tax cap would allow

the statewide county tax levy to grow by $90 million

• The 9 major state mandates counties must administer and pay for, with virtually no ability to control costs, will grow by $279 million in 2012

• State mandated growth in costs for counties is more than 3 times the level allowed under a 2% cap – only a small portion of pension costs may be exempt

*Not including NYC 11

Reality of 2% Tax Cap vs. 5-Year Average Annual Growth in 9 State Mandates

*State Budget Shifts 71% of SN cost to counties vs. 50%. CW = CW 2012 growth estimate 12

• Medicaid 2.5%

• Pensions (‘09-’13) 31.0%

• TANF (-1%)

• Safety Net 5.6%

• Child Welfare 2.0%

• Special Ed. Pre-K 8.0%

• Early Intervention 7.7%

• Indigent Defense 5.5%

• Probation 6.2%

• Youth Detention 6.9%

Reality of 2012 Adopted Tax Cap vs. Cost Growth in 9 State Mandates

↖2% TAX CAP