Tax Levy Enhanced

HALF HOLLOW HILLS SCHOOL DISTRICTof Huntington and Babylon

Understanding theProperty Tax Levy “Cap”

Community Budget ForumDecember 6, 2011

Understanding the Property Tax Levy “Cap” 2

HHH’s Revenue Picture

OTHER*(6.3%)

STATE AID(11.2%)

PROPERTY TAXES(82.5%)

* Includes use of fund balance and reserves, charges for services, PILOTs, and interest income

Figures shown represent the percent of the District’s budget which comes from the noted revenue source


• Enacted June 24, 2011 Chapter 97 of the Laws of 2011 Program bill originated with Governor Cuomo

• Establishes a cap on the growth of local property taxes

• Tax levy limit placed on all local governments and school districts (excluding NYC)

• Starts with fiscal years beginning in 2012• Expires June 15, 2016 unless rent control laws are extended

• School district votes must still occur

The Tax “Cap”


• Not really a “cap”

• The law simply sets a higher threshold for voter approval of budgets IF the proposed tax levy increase exceeds the calculated “tax levy limit”

The Tax “Cap”


The Real Impact of the Tax Levy• Mass confusion by residents of what the property tax levy

“cap” is and, more importantly, is NOT Sound‐bites from the State further complicate the situation An informed resident will be every district’s biggest ally!

• Further dividing Long Island communities The impact of the “cap” is so much bigger than “just” HHH The “haves” versus the “have‐nots” will be further separated We need to fight for high quality education for ALL of Long Island If there is an “US” versus “THEM” it should be “US” Long Islanders

concerned about quality education for our children; the “THEM”should be the State which imposes rules which hinder us from reaching this goal

Consider the real‐life example on the following slides


Further Dividing Long Island Communities

• Districts A & B have the same exact budget• School District A = “poorer” as indicated by their heavier

reliance on State Aid as a source of revenue• School District B = “richer” as indicated by their lower reliance

on State Aid as a source of revenue• Assume “other revenues” are the same in both districts• Therefore leaving revenue from Property Taxes as that which

the districts have control over…at least to this point!

YEAR 1Total Budget $ %

School District A $215,000,000 $118,250,000 55% $5,000,000 $91,750,000

School District B $215,000,000 $32,250,000 15% $5,000,000 $177,750,000

State AidREVENUES

"Other" Revenues

Property Tax Levy


"Cap" Following Year's YEAR 2 YOY Budget Budget% Prop Tax Levy Total Budget* Increases Growth

School District A 2.20% $93,768,500 $217,018,500 $2,018,500 0.94%

School District B 2.20% $181,660,500 $218,910,500 $3,910,500 1.82%

difference: $1,892,000

Further Dividing Long Island Communities• Assume for both districts the “cap” formula results in an allowable 2.20%

tax levy increase from prior year and both districts choose to go for a “simple majority” at budget vote time

• That will calculate to the noted property tax levy• Assuming no change to State Aid and Other Revenue, each district will

then have the noted budgets for the following year• But, because School District B is less reliant on State Aid (i.e. “richer”) than

School District A (who is “poorer”), their budget increase will be doublethat of School District B…all while following the SAME EXACT FORMULAS!


When is 2% NOT 2%?• When it’s the Property Tax Levy “Cap”

Prior year tax levyx

Tax base growth factor, if any+

Prior year PILOTs‐

Taxes levied for exemptions during prior year=

“Adjusted prior year tax levy”x

Allowable levy growth factor‐

Coming year PILOTs+

Available carryover, if any=

“Tax Levy Limit”

This is the only part that will be 2% for 2012/13


Levy to Support Proposed Budget

“Tax Levy Limit”(prior slide)

+Coming year exemptions

=“Maximum allowable tax levy”(requiring a simple majority)


Misconception #1

• My taxes will increase only 2% NO! Property tax levy “cap” sets a voter threshold for the district’s tax levy, NOT the individual tax bill of resident taxpayers


Misconception #1 (cont’d)• Tax Levy ≠ Tax Rate ≠ Tax Bill An individual’s tax bill will increase or decrease depending on his/her home’s assessed value – something the District has NO control over

Property Tax Rates are calculated as follows:(Tax Levy ÷ Assessed Value) x 100 = Tax Rate per $100 of AV

How assessed values impact individual homeowners: If assessed values decrease, property tax bills will rise fasterthan the tax levy increase

If assessed values remain exactly flat, property tax bills will equal the tax levy increase

If assessed values increase, property tax bills will rise slower than the tax levy increase

And don’t forget about equalization rates between the Towns of Babylon and Huntington


The State Keeping it Simple (NOT!)

A Prior year tax levy $178,147,658

B Excess tax levy in reserve $0 not applicable in 2012/13

C Tax levy subtotal (A ‐ B) $178,147,658

D Tax base growth factor 1.0 actual # TBD; refer to presentation for description

E Adjusted tax levy subtotal (C x D) $178,147,658

F Prior year (base year) PILOTs $2,540,000

G Prior year (base year) tax levy + PILOTs $180,687,658

H Prior year (base year) exemptions

I capital expenditures $4,569,677 will vary based on finalized rules from State

J court orders $0 not applicable for HHH

H Prior year (base year) exemptions (I + J) $4,569,677

K Adjusted prior year levy (G ‐ H) $176,117,981

L Allowable levy growth factor (lesser of CPI or 2%) 1.02 lesser of CPI or 2%; CPI to be released 1/14/2012

M Tax levy including growth factor (K x L) $179,640,341

N PILOTs for coming year $2,540,000 assumes no growth or reduction in PILOTs

O Tax levy minus PILOTs for coming year $177,100,341

P Available carryover from prior year (base year) $0 refer to presentation for description

Q Tax Levy Limit before exemptions (O + P) $177,100,341 this is a ‐0.59% tax levy increase from prior year

R Coming school year exemptions

S capital expenditures $5,031,292

T pension expenditures $613,621 will vary based on finalized rules from State

U court orders/judgments $0 not applicable for HHH

R Coming school year exemptions $5,644,913

V Maximum allowable tax levy including exemptions $182,745,254 this is a 2.58% tax levy increase from prior year

(Q + R)

This is the # which gets reported to the Comptroller

BUT, this is the number that voters vote on ‐ our "real" tax levy

HALF HOLLOW HILLS SCHOOL DISTRICTCALCULATING WHAT THE PROPERTY TAX LEVY CAP MEANS TO US

FIGURES ARE U

SED FOR ILLUS

TRATIVE PURP

OSES ONLY;

AWAITING CLARIF

ICATIONS FROM

THE STATE


Tax Base Growth Factor

• Actual growth in assessments from “bricks and mortar” increases

• Not changes in market values of homes

• 1 + quantity change factor Only calculated if quantity change factor is a positive number (i.e. cannot “hurt” us)

• Source of data: NYS Tax and Finance Department (ORPS) – Districts to get this info from towns

• Factor to be made available by February 15th


Prior Year Exemptions

• Capital local expenditures Debt service LESS State aid Energy performance contracts permissible? “Transfer to capital” budget line permissible? Equipment purchases permissible?

• Court orders/judgments Arising out of tort actions (personal injury

lawsuits claiming negligence) for any amount that exceeds 5% of total tax levied in prior school year (i.e. $9 million for HHH)

Excludes tax certioraris

Still unknown whether the State will require Districts to include this exemption.

Tax levy “cap” did not exist in prior year, so technically no prior year tax levy “cap”exemptions exist.

The impact of the State’s decision would be significant as districts could see a dramatic increase to the allowable tax levy that falls within the “cap” if these expenditures are to be ignored for year one of the tax levy “cap”.


Allowable Levy Growth Factor

• Law defines the “inflation factor” as: Change in “the average of the national consumer price indexes determined by the US DOL for the 12‐month period ending six months prior to the start of the coming fiscal year”CPI‐U (all urban consumers)

Comptroller will calculate this figure as DOL releases numbers

Inflation factor is never a reduction, even if there is deflation (minimum will be 1.0)


Available Carryover

• Districts may use taxing authority from prior school year to increase the subsequent year’s tax levy if taxes were increased in the prior year by less than the amount allowed by the “cap”

• Not applicable for districts for 2012/13


Coming Year Exemptions• Capital local expenditures Debt service LESS aid (what will 2012‐13 aid be?) Energy performance contracts permissible? “Transfer to capital” budget line permissible? Equipment purchases permissible?

• Court orders/judgments Arising out of tort actions (personal injury lawsuits claiming negligence)

for any amount that exceeds 5% of total tax levied in prior school year (i.e. $9 million for HHH)

Excludes tax certioraris• Limited growth in pension costs Only applicable when ERS and/or TRS employer contribution rates

increase by more than two percentage points over prior year NOT based on actual pension bill


ERSERS Pension Exemption Calculation

‐18.9%2012/13 ERS

Average

16.3%2011/12 ERS

Average

2.6 percentage

points(difference)

=2.6

percentage points

(difference)

2.0local responsibility not excludable

0.6 percentage

points(excludable portion)

‐ =Salary Base

0.6 percentage


Exempt AmountX =

This amount gets added to the tax levy limit

This difference is actually a 16% increase!


TRSTRS Pension Exemption Calculation

‐12.5%2012/13 TRS Employer

Contribution RateESTIMATE

11.11%2011/12 TRS Employer

Contribution Rate

1.39 percentage

points(difference)

=1.39

percentage points

(difference)

2.0local responsibility not excludable

NONOEXCLUDABLEEXCLUDABLEPORTION!PORTION!‐ =

This difference is actually a 13% increase!

Salary Base

0 percentage


Exempt AmountX =

?Which

rates will the State require us to use

2010/11 & 2011/12 OR

2011/12 & 2012/13


Misconception #2

• Will be caused by the difference in “tax levy limit”(which must be submitted to Comptroller’s Office and will likely become a Newsday story) and “maximum allowable tax levy” which is what residents will vote on

• Residents may think: “My district is not being truthful because what I’m voting on is different than what they reported to the State.”

• All districts will be in this same predicament


Misconception #2 (cont’d)Prior year tax levy

xTax base growth factor, if any

+Prior year PILOTs

‐Taxes levied for exemptions during prior year

=“Adjusted prior year tax levy”

xAllowable levy growth factor

‐Coming year PILOTs

+Available carryover, if any

=“Tax Levy Limit” This is what’s reported

to the Comptroller

“Tax Levy Limit”+

Coming year exemptions=

Maximum allowable tax levy(requiring a simple majority)

This is what residents will vote on in May


What Options Do BOE’s Have?• Option 1: Propose a budget requiring a tax levy before

exemptions at or below the Tax Levy Limit prescribed by law (i.e. at maximum allowable tax levy including exemptions) Requires a simple majority (50% + 1 voter) approval

• Option 2: Propose a budget requiring a tax levy before exemptions above the Tax Levy Limit (i.e. above maximum allowable tax levy including exemptions) Requires a “super majority” (at least 60% voter approval) Requires a statement on ballot indicating the required tax levy before

exemptions exceeds the Tax Levy Limit Language such as: “Adoption of this budget in the amount of ________ exceeds the tax cap and must be approved by at least 60% of the qualified voters.”

Override is good for that fiscal year only – Districts cannot “opt out”of the tax cap permanently


Misconception #3

• My BOE must hold a public vote on whether or not the residents want to go for a “simple majority” versus a “super majority” vote Not true!

The BOE makes the decision on whether the budget put before voters is at (requiring a “simple majority”) or above (requiring a “super majority”) the property tax cap threshold


Overriding the Tax “Cap”

• Successful override of tax levy limit means the base for the following year’s tax levy limit calculation is the amount that was levied in the prior year inclusive of the override amount (less exclusions as set forth in statute) If levy is above the calculated threshold, then that new levy amount becomes the starting point for the following year


Budget Failure

• If budget is defeated after two presentations to the voters, or after one defeat where the District decides not to resubmit a budget to voters, then District required to: Adopt a budget with a tax levy less than or equal to the prior year (i.e. 0% growth)

Maintain the administrative cap Eliminate all non‐contingent expenses

• Overall contingency budget spending restriction (lesser of 120% of CPI or 4%) stricken from law

• Contingent budget rules BUT worse since school property taxes would be frozen at prior year level with NO exceptions or allowances!


The Comptroller’s Role

• Districts must submit by March 1st their calculation of the tax levy cap (Commissioner of Education and Commissioner of Taxation and Finance also need this information)

• Comptroller will collect information only, they will NOT certify

• Comptroller will NOT correct inaccurate data or calculations

• Comptroller has the authority to audit districts for compliance with tax levy “cap” – after the fact!


Oops…

• If district enacts a levy in excess of tax “cap”(without a super majority) the excess must be placed in a reserve Good faith mistake in tax levy

All “excess” money, including compounding up to the point when the issue is found, must go back to taxpayers


Summarizing the Property Tax Levy Cap

Electronic copy available on the District’s website:

Home > Discover HHH > Budget Information >

2012‐13 Budget Development


HHH’s Revenue Picture

OTHER*(6.3%)

STATE AID(11.2%)

PROPERTY TAXES(82.5%)

* Includes use of fund balance and reserves, charges for services, PILOTs, and interest income

Figures shown represent the percent of the District’s budget which comes from the noted revenue source


State Aid…the promise• The State committed additional funds to education last

budget year, even while they were projecting a four‐year budget deficit of $9.8 billion! 2011/12: $0 2012/13: $2.4 billion 2013/14: $2.8 billion 2014/15: $4.6 billion

• But, even with projected deficits, an $805 million increase in State aid was written in law Low wealth districts will “benefit” Higher wealth districts will likely see aid reductions continue

Unlikely that any district will be at the State aid levels they were at many years ago before State support began to decline


State Aid…the reality

• Federal funding, which put a “Band‐Aid”on the State’s budget issues, is now gone! End of American Reinvestment and Recovery Act (ARRA)

End of Education Jobs Fund (EJF)

• No real mandate relief


State Aid…the reality

• In mid‐November, the State updated their forecasts and acknowledged “a $350 million deficit in the current state budget” on top of a newly projected “$3.5 billion projected deficit in the 2012‐13 State budget”

• Without a “revenue enhancement”, State budget makers will have a difficult time following through on the 4% ($805 million) increase in school aid scheduled for inclusion in the 2012‐13 State budget.

Understanding the Property Tax Levy “Cap”

Thank You for Participating

An informed resident will be every district’s biggest ally.Thank you for taking the time to become informed!

Tax Levy Enhanced

Documents

proptaxlevy totalbudget

hhhs revenuepictureother

richerthans 8whenis2