How can we get a list of all the properties on a PILOT? How much, how long and since when?
Treatment of PILOTs – the current bill includes payment in
lieu of taxes (PILOTs) and similar tax agreements under
the calculation of the cap. Counties use PILOTs and other
tax abatement tools as economic development incentives
to draw new businesses to New York. These PILOTs
usually provide an exemption or reduction in required
property taxes in the early years with an increase in later
years as the project matures. By including PILOTs in the
calculation of the cap it could eliminate a very powerful tool
for local economic development agencies to attract new
businesses to New York. We recommend that PILOTs be
removed from the calculation of the property tax cap
completely.
Property Tax Cap Testimony
presented by the
New York State Association of Counties
to the
Assembly Standing Committees on
Ways and Means, Education,
Real Property Taxation,
Local Governments and Cities
March 1, 2011
Hon. William J. Ryan, NYSAC President
Stephen J. Acquario, Executive Director
Property Tax Cap Testimony
New York State Association of Counties 1
http://www.nysac.orgIntroduction
Thank you to the Chairs and Members of the various
Committees represented here today. We appreciate the
opportunity to discuss one of the most important current
issues facing homeowners, businesses, our counties and
local governments and New York State.
I am Stephen Acquario, the Executive Director of the New
York State Association of Counties (NYSAC) and I am joined
today by William Ryan, NYSAC President and member of
the Westchester County Legislature. Again, we thank you for
your time and consideration.
Counties Provide and Fund State Services Locally
NYSAC represents all of the counties in the State and New
York City with its five boroughs. Our member counties act, in
large part, as an arm of state government to deliver Medicaid
and other social services at the local level.
We provide the programs and services that are initiated right
here and in the State Capitol, and then mandated by the
policies and laws established by the Governor and the State
Legislature.
Counties are where the forms are filled out, services
provided and the needs are met for millions of New Yorkers
across the state. We are also where the property tax that
pays for these programs is levied.
Unlike most states, counties pay for the delivery of these
human services mandates though the county property tax—it
is the only major local tax counties retain control over today.
Property Tax Cap Testimony
New York State Association of Counties 2
http://www.nysac.orgWhat concerns counties these days is the impact that
decades of unfunded state mandates have had on county
government.
The role and capacity of county government is a shell of
what it once was. Counties are slowly losing their identity as
a local government as more and more of the services
counties deliver are an extension of state and federal
government programs. Counties are now paying for the
problems of the state and the federal government, and local
services and quality of life programs continue to suffer as a
result.
Why have I chosen to begin my statement this way?
Counties are a shell…We are an extension of State
government…We are losing our identity. These are not
positive things to say, but they do highlight that counties
function much differently than other levels of government in
New York because counties deliver state and federal
programs at the local level using local tax dollars.
Our approach to the proposed property tax cap, therefore,
may not be the same as our colleagues in local government.
The Need for Property Tax Relief—and Mandate Reform
We believe there is a need for property tax relief. But we
cannot have real property tax relief unless we address the
cause for those high taxes. For counties, the primary cause
is State mandates—starting with Medicaid.
And we know that mandate relief can result in property tax
relief.
Property Tax Cap Testimony
New York State Association of Counties 3
http://www.nysac.orgIn 2005, counties advocated for a Medicaid cap, which
limited the growth of the county share of Medicaid. Every
year we pay 3 percent ($182 million) more toward the State’s
Medicaid program.
Prior to this cap counties generally paid a set percentage of
total Medicaid costs incurred by the State. As Medicaid costs
grew by double digits because of generous expansions in
eligibility and benefits enacted by the State—county property
taxes grew quickly as well.
In the 4 years leading up to the enactment of the local
Medicaid cap (which mirrored the expansions in benefits in
Medicaid), the average annual growth in the county property
tax levy was 7.4 percent. In the 5 years since the
implementation of the local cap on Medicaid growth, the
average annual growth in the county property tax levy was
3.3 percent. This cap was the primary reason for a 55
percent reduction in the rate of growth in the county property
tax levy.
So we know we achieve property tax relief if we have
corresponding State mandate relief.
County Concerns with the Proposed Property Tax Cap
The fact that a large share of the county property tax levy is
effectively imposed by the State through human services,
public protection and public defense mandates we believe
that in lieu of, or until such time that major reforms in these
programs can be implemented and local cost reductions can
be verified, the cost of these programs should be removed
from any property tax cap calculation.
Property Tax Cap Testimony
New York State Association of Counties 4
http://www.nysac.orgThe Senate and Governor have already recognized that
counties do not have direct control over state imposed
human services costs related to TANF and Safety Net and
their property tax cap proposal removes these state
mandated costs from the tax cap calculation. It is also
plainly clear that counties do not control the costs of the
other 8 major state mandates identified later in our testimony
and their respective costs should also be removed from any
property tax cap calculation.
To illustrate, under a two percent property tax cap, the
allowable increase statewide in county property taxes would
be about $90 million (outside NYC). The State requires that
counties’ Medicaid costs grow by three percent annually,
nearly $60 million. This equals two-thirds of the allowable
growth under the proposed two percent property tax cap.
Additionally, pension costs for counties are expected to
increase by nearly $250 million next year—consuming 277
percent of the allowable growth under a 2 percent property
tax cap. Just two state mandates will consume 350 percent
of the allowable growth under the cap.
These Medicaid and pension costs cannot be avoided by
counties and further, by 2014 total county Medicaid and
pension costs alone will consume over 70 percent of the
entire county property tax levy statewide (outside of New
York City) under a two percent cap scenario. Extensive
reform and mandate relief are absolutely essential in order
for counties to have any success at all in achieving the goal
of controlling property taxes, let alone managing these
programs and services under a two percent property tax cap.
Property Tax Cap Testimony
New York State Association of Counties 5
http://www.nysac.orgThe current property tax cap proposal passed by the Senate
does raise some additional concerns for counties that we
think need to be addressed as well.
Definitions – the bill calls on the State Comptroller to define
each local government’s levy and allowable growth. OSC
data tends to run with a 2 year lag, which will compromise
the accuracy of this analysis. Local governments also do
not control the overall property tax exemption process
which could skew some of the tax levy calculations in given
years.
Capital Expenditures – The current bill would remove voter
approved capital projects or expenditures from the cap
under certain circumstances. Counties do not use a local
voter referendum for capital projects like other local
governments. However, counties have extensive capital
programs that they pursue each year. In many cases the
largest capital expenditures that a county may pursue in
any given year is mandated by the State (i.e., required to
build a new jail, or upgrade a jail; nursing home, etc.), or
possibly by the Office of Court Administrator (OCA)
requiring a new courthouse or upgrade. Any bill must
clarify how capital will be treated when local referendum
has not been historically used for capital expenditures, but
should be removed from the cap calculation as intended by
the proposed legislation.
Timing – In direct relation to the above issue, it is also
unlikely that OSC could provide these local government
cap thresholds for all local governments far enough in
advance for a 2012 implementation, especially for counties.
County fiscal years begin on January 1, and accurate data
Property Tax Cap Testimony
New York State Association of Counties 6
http://www.nysac.orgwould be necessary at least 6 months prior to the start of
the fiscal year to correspond with counties normal budget
cycles which often begin in the early Summer months. We
would recommend that calculations be provided by OSC to
local governments at least 180 days prior to the start of
their respective fiscal years and no sooner than the 2013
local government fiscal year to ensure proper procedures
and appropriate and accurate data analysis can be
completed.
Treatment of PILOTs – the current bill includes payment in
lieu of taxes (PILOTs) and similar tax agreements under
the calculation of the cap. Counties use PILOTs and other
tax abatement tools as economic development incentives
to draw new businesses to New York. These PILOTs
usually provide an exemption or reduction in required
property taxes in the early years with an increase in later
years as the project matures. By including PILOTs in the
calculation of the cap it could eliminate a very powerful tool
for local economic development agencies to attract new
businesses to New York. We recommend that PILOTs be
removed from the calculation of the property tax cap
completely.
Normal Economic Growth Should be Accommodated in the
Cap Calculation – the current bill does not appear to
accommodate normal economic growth in a community.
The bill appears to establish a hard cap of two percent
growth in the total levy regardless of new construction or
property improvements. New housing developments, retail
centers, manufacturing facilities and capital
improvements/expansions of existing businesses and
homes should be encouraged and the natural growth in
Property Tax Cap Testimony
New York State Association of Counties 7
http://www.nysac.orgproperty valuation that results should not be counted
against the 2 percent cap.
Reducing Property Taxes – NYSAC remains concerned
over the current language which, in effect, may prevent
local governments from actually reducing property taxes.
This would lock in New York’s existing status as one of the
highest property tax states in the nation and runs counter
to the Governor’s drive to reduce property taxes. As you
continue to deliberate the merits of the tax cap, please
carefully consider the necessary elements to enable a local
government to actually reduce taxes.
Voter Referendum – There remains questions concerning
the Senate bill text and legislative memorandum as to
which units of local government are subject to referendum
to override the proposed property tax cap if necessary.
This must be clarified.
Property Tax Cap Testimony
New York State Association of Counties 8
http://www.nysac.orgThe County 9 for 90 Campaign
Recently, county leaders have drawn the public’s attention to
the fact that 9 state mandates consume 90% of an average
county’s property tax levy. Nearly all of the taxes that
counties raise from our homeowners and businesses...are
consumed by just 9 state mandated programs.
In 2010, the entire county property tax levy outside of
New York City was about $4.4 billion—this represents
about 1 in 6 property tax dollars levied statewide (schools,
towns, cities, etc.). For counties, 9 state mandates
consume nearly 90 percent of the statewide county
property tax levy (outside New York City).
These state mandates break down as follows: (does not
include NYC)
Medicaid -- $2.1 billion
Pensions -- $550 million
Public Assistance and Safety Net -- $340 million
Child Welfare -- $270 million
Special Education Pre-K -- $140 million;
Indigent Defense -- $125 million
Probation -- $116 million
Early Intervention -- $60 million
Youth Detention -- $29 million
The cost and impact of these programs took years of State
action to develop. Extensive overhauls of these programs
will take years to achieve.
But if property tax relief is our common goal—and I believe it
is—then two things need to take place.
Property Tax Cap Testimony
New York State Association of Counties 9
http://www.nysac.orgThe first is that we need to fundamentally reform existing
mandated programs and services (or remove them from
county property tax payer responsibility). This could actually
empower counties to actually reduce property taxes. We
should remember that for county government the mandate
comes in the form of a “bill” from the State – in order to
provide mandate relief the county needs relief from the “bill”.
Flexibility to manage State programs will not often suffice as
mandate relief for counties.
The second is to prevent the creation of any new unfunded
mandates.
Reforming Mandates, Reducing Costs
A properly constructed property tax cap, combined with
mandate relief and state spending controls can help reduce
local property tax burdens.
New York should be working to cut property taxes—not just
cap them. Core to this goal is addressing the many
unfunded mandates facing counties and other local
governments in New York.
These state-imposed mandates cost counties billions of
dollars annually and county officials have little to no control
over how these services are delivered at the local level or
flexibility to control the cost of these programs. These
mandates are the number one reason for the growth in
county property taxes over the last several decades.
We must reverse the impact of these mandates if we are to
reduce the property tax burden.
Property Tax Cap Testimony
New York State Association of Counties 10
http://www.nysac.orgTwo weeks ago, NYSAC presented the Governor’s Mandate
Relief Team with nearly 250 ideas for reforming mandates –
to the tune of billions of dollars in savings for county and
State governments. Those proposals begin with our largest
mandate: Medicaid.
Medicaid: The Top Mandate on Counties
This year, counties and New York City will spend $7.2
billion as the “local contribution” to support the Medicaid
program. This is more than what 46 states spend out of
their general fund for their respective Medicaid programs.
It is more than what 35 individual states spend in total
funds for their Medicaid programs.
This local share of Medicaid is a major contributor to New
York’s ranking as the highest local tax burden state in the
country 17 of the last 20 years, and a leading contributor
to economic and population decline in this State.
Fundamental reforms to Medicaid service delivery and
reimbursement methodologies are essential to make this
program fiscally sustainable for the State and localities
over the long run.
More importantly, a long term plan must be implemented
by the State that achieves a full State takeover of county
and New York City Medicaid costs. This is the best way
to actually reduce the county property tax levy in New
York.
Property Tax Cap Testimony
New York State Association of Counties 11
http://www.nysac.orgPrevent New Unfunded Mandates
In addition, the State must end the creation of new unfunded
mandates and stop the expansion of existing mandates
immediately. A primary tenet of responsible governing is that
fiscal responsibility for services should reside with the level
of government that has decision-making authority over those
services.
New York State, in effect, has implemented an “off-budget”
financing scheme over the last several decades by forcing
counties and other local governments to fund an increasing
share of State controlled and designed programs as a way to
mask the cost of these services to State taxpayers.
The major flaw in this scheme is that counties must obey
state law and implement, administer and pay for these State
programs using the only local revenue source under their
control today—property taxes.
This results in the local property tax base being relied upon
as a primary source of funding for both Medicaid (the largest
single expense in the New York State Budget and most
county budgets) and K-12 education—this inevitably leads to
the highest property taxes in the nation.
New York must restore these fundamental principles of
governing in order to control the State budget and bring
some semblance of control to property taxes. This can
begin to reverse the economic and population declines
linked to out of control property taxes—that are largely
driven by State policies and Laws coming out of the State
Capitol.
Property Tax Cap Testimony
New York State Association of Counties 12
http://www.nysac.orgNYSAC is participating on both the Mandate Redesign Team
and the Medicaid Redesign Team established by Governor
Cuomo to help rein in uncontrollable costs in these areas.
NYSAC will share our recommendations on preventing
future unfunded mandates directly to the team and
Legislature in the near future.
Conclusion
Do counties support a property tax cap?
Yes. Counties support property tax relief.
Our communities can no longer maintain being part of the
state that has the highest local tax burden in the country. We
cannot prosper and offer our citizens real economic
opportunity.
New Yorkers have been voting with their feet for too long
because of excessive taxes and the limited economic
opportunity that has fostered.
NYSAC and our counties will continue to work with the
Legislature and Governor to provide meaningful property tax
reduction to New Yorkers and improve the overall economic
climate of the State.
We believe a property tax cap can be a useful tool to help
deliver positive change in this area, but any cap needs to be
carefully constructed and include significant mandate relief
that gets at the root cause of New York’s highest in the
nation property tax burden.
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