Property Tax Cap Becomes Law
The New York State Legislature enacted property tax relief law that caps the growth of local property taxes. The Governor signed the law passed by the Senate on June 24, 2011. The law caps school and local government taxes to two percent or the Consumer Price Index (CPI), whichever is lower. The new law also includes $127 million in mandate relief savings to local governments, in addition to the creation of a Mandate Relief Council to identify and repeal unsound, unduly burdensome laws and regulations.
This tax levy cap would shift the focus from total spending to the actual property taxes levied to support school district and local government expenses. The law includes the following provisions:
- The law limits tax levy growth to the lesser of two percent or the annual increase in the CPI. The law does not apply to the “Big 5” school districts of Buffalo, Rochester, Syracuse, Yonkers and New York City. Those School Districts are funded through their respective city budgets.
- The exceptions for a tax levy above two percent or CPI are funds needed to support voter-approved capital expenditures, pensions, torts over five percent of the prior year’s levy, and an override of the cap.
- This law also allows the growth in the levy due to physical and quantitative change, such as new construction.
- A school district would be required to submit a tax levy proposition for approval by voters at the district’s annual meeting on the third Tuesday in May. If the proposed tax levy is within the district’s tax levy limit, then a majority vote would be required for approval. If the proposed tax levy seeks to override the cap and exceeds the district’s tax levy cap, the threshold required for approval would be 60 percent of the vote.
- A school district that does not levy an amount up to the cap in any one year would be allowed to carry over unused tax levy capacity into future years. However, this carryover levy capacity cannot be used to increase its tax levy by more than an additional 1.5 percent above the cap in any single year.
- In the event a district’s actual tax levy exceeds its authorized levy due to clerical or technical errors, the erroneous excess levy must be placed in reserve to offset the levy for the next school year.
The law also provides for the same cap to apply to taxes levied by municipal governments. Local governments that do not levy an amount up to the cap in one year can rollover that amount up to 1.5 percent in the following year. Local boards can exceed the cap with a 60 percent vote of the governing body. Exceptions include the pension and tort judgments in excess of five percent from the prior year’s levy. The law takes effect for the 2012-13 fiscal year.
The purported mandate relief component is estimated to provide real cost savings in the form of $127 million in savings to local budgets. The law establishes a Mandate Relief Council which will:
- Determine if a statute or regulation is unsound, unduly burdensome, or costly;
- Establish procedures for repealing unfunded mandates in both statute and regulation;
- Provide a mechanism for direct appeals by a municipality from the State Administrative Procedures Act petition to a Mandate Relief Council to review mandates and regulations enforcing the same;
- Require the state Comptroller to issue a detailed report on the cost and effect of unfunded mandates;
- Require that all bills that require a local government or a school or special district to take any action contain a fiscal note; and
- Be comprised of 11 members nominated by the Governor and Legislature: two nominations for each of the legislative leaders, and seven nominations for the Governor, including the Secretary to the Governor (who would serve as chair), the Governor’s Counsel, Secretary of State, Director of the Division of Budget, and three additional members from the Governor’s executive chamber staff.
If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members in our Real Property Tax & Condemnation practice area.