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Legislation To Implement A Two Percent Real Property Tax Cap Introduced

Southampton - This week, Assembly Speaker Sheldon Silver introduced his legislation to implement a two percent real property tax cap in New York State. This development was important for two reasons. First, given the fact that the Governor has made the tax cap a high priority on his agenda and that the Senate has already passed his legislation, the introduction of legislation by the Assembly Speaker makes it a virtual certainty that a tax cap will be enacted before the end of the 2011 regular session in June. Second, while there is still room for discussion, the shape of the tax cap is coming into focus. Let's compare the Governor's proposal with the Speaker's.

Where They Are Similar

• Both bills apply to all local governments, school districts, and special districts outside of the City of New York.
• Both bills establish a cap on the property tax levy of two percent or the rate of inflation, whichever is less.
• Both bills would permit a school district to override the cap with a 60 percent supermajority and provide for up to two votes on a school budget. Local governments can override the cap under both proposals, but the Speaker's proposal requires a 60 percent vote of the local governing body without a referendum. The Governor's plan permits a local government to override the cap with a two thirds vote of the governing body, subject to mandatory referendum.
• Both bills provide that in the case of school budgets, if voters fail to approve, the tax levy must be equal to or less than the previous year's levy.

Where They Are Different

• The Speaker's bill would exclude increases in pension costs increases above two percent from the tax cap limit.
• The Speaker's bill would allow the tax levy cap to be adjusted upward to reflect growth in the tax base from new construction.
• The Speaker's bill would permit a carryover by the amount the prior year's levy was below the cap, not to exceed 1 ½ percent.
• The Speaker's bill provides for the cap to sunset at the same time that New York City's rent regulation expires.
• The Governor's legislation has none of these provisions.

Several weeks ago, New York State Assemblyman Fred W. Thiele, Jr. (I, D, WF-Sag Harbor) issued his ideas for a workable property tax cap. The Speaker's legislation includes some of his recommendations, including growth of state aid next year to reflect the growth in personal income and a sunset provision. Governor Cuomo called the revised proposal the "best tax cap in the nation."

However, Assemblyman Thiele still believes they have work to do. He would still prefer a tax cap that has only one vote and requires a simple majority. The school board would make a decision to meet or override the cap (by a 60 percent vote of the school board). If the majority of the voters support the budget, it is enacted, if not, the levy cannot exceed the previous year's tax levy. One vote, majority rules. It is the most direct, straightforward and democratic. Unlike the current contingency budget process, "yes" and "no" votes would really mean something.

Second, this proposal does nothing to control the expenditure side of the budget. Assemblyman Thiele believes pension reform is still needed and mandate relief if we are to not just cap tax increases, but reduce the cost of providing education and government services. Without these reforms, we will run the risk of simply shifting costs from local government to the state, decimating education and important services, or both.