State mandated formula is complex
By Michael Mell
In an effort to slow the increase in property taxes caused by school district budgets, Gov. Cuomo pushed through the state legislature what has come to be called the “2 percent tax cap.” Originally presented as a simple, seemingly straightforward and universal tax levy cap for state school districts it is, in its implementation, anything but. Rather each district follows a complex formula (which includes exemptions) of which the “2 percent” is only a part. The result is a permissible tax levy limit that may be above 2 percent and that will be unique to each district. Further complicating the matter is the ability of a district to exceed its “tax levy limit” if the budget is approved by 60 percent of voters. As a result there has been much confusion among parents, administrators and public officials.
The Capitol Region BOCES Communication Services and Questar IIIs State Aid and Communications Services have jointly developed a white paper called Understanding New York’s Property Tax Levy Cap as it relates to public schools. The paper describes many of the new terms and procedures now in place. The following FAQs are taken from that paper (which can be found on the Capitol Region BOCES website.
Q. Does the new tax cap law mean school tax levies can’t increase by more than 2 percent?
A. No. The law does not prohibit tax levy increases greater than 2 percent. The legislation requires every district to calculate its own “tax levy limit.” Two percent (or the rate of inflation, if less) is only one of eight factors used in the calculation.
TAX LEVY LIMIT
A calculated tax levy amount (determined by a state formula) that sets the threshold needed for 60 percent voter approval. Despite its name, it does not set a limit on the tax levy a school district can propose. The new law applies to the tax levy and not to tax rates or individual tax bills.
Q. What is the “tax levy limit?”
A. It is the highest allowable tax levy (before exemptions) that a school district can propose as part of its annual budget (which will only require a simple majority for passage.) A proposed tax levy above this limit would require approval by 60 percent (or more) of voters.
The total amount of property taxes a school district must collect to balance its budget, after accounting for all other revenue sources (including state aid.) The tax levy is the basis for determining the tax rate for each of the towns or villages that make up the school district.
Q. How is the “tax levy limit” determined for school districts?
A. The law dictates an eight-step formula that each district must use to calculate its individual “tax levy limit”
TAX BASE GROWTH FACTOR
The year-to-year increase in the full value of taxable real property in a school district due to physical or quantity change (i.e. new construction, additions and improvements.) Part of the eight-step formula, this figure is determined by the New York State Office of Real Property Service.
Q. Does the law take into account that some expenses are currently outside a district’s control?
A. Yes. Taxes that school districts levy to pay for certain expenses are exempt from the “tax levy limit” calculation. After calculation of a district’s tax levy limit, these exemptions are added to the [budget amount.] This allows a district to propose a tax levy greater than the amount set by the “limit” without triggering the need for 60 percent voter approval.
ALLOWABLE LEVY GROWTH FACOR
One factor in the eight-step tax levy limit calculation that accounts for inflationary change. It is limited to 2 percent or the change in the consumer price index (CPI).
Q. What will the property tax cap law mean for my tax bill?
A. This remains to be seen. The new law applies to the tax levy (not tax rates or individual tax bills) and does not impose a universal 2 percent cap on taxes (nor any other specific amount.)
Q. Does the public still vote on school district budgets?
A. Yes. District residents will still vote on the proposed budget on the third Tuesday in May (this year on the 15th.) Under the new law, the level of voter approval needed to pass a budget will now depend upon the amount of tax levy required (by the proposed budget.)
Q. How will I know if my district is proposing a tax levy above its “tax levy limit,” requiring 60 percent voter approval?
A. Any district proposing a budget in excess of its “tax levy limit” must include a statement (to this effect) on the ballot.
Q. What happens if the budget is not approved by voters?
A. As in the past, if a proposed budget is defeated, the district has the option of putting the same or a revised budget up for another vote, or adopting a contingency budget. If a budget proposal is defeated twice, the district is obligated to adopt a contingency budget (which does not allow increases by any amount.)
Q. Will the tax cap legislation affect all districts equally?
A. The legislation will affect all school districts to varying degrees, but some will be affected more than others.
Q. If the new law doesn’t actually cap tax levy increases at 2 percent, how will it provide property tax relief?
A. The law seeks to control increases in school tax levies, not to help curb escalating expenses. The law may result in some measure of tax relief for residents, but the extent that it will also result in loss of school programs depends upon state aid and possible mandate-relief.