Speaker: Local Govts. Challenged by Sluggish Property Tax Revenue Growth

Chris Gaetano
Published Date:
Jun 9, 2017

Six years after the establishment of the property tax cap in New York state, local government entities struggle with finding adequate revenues at a time of increasingly uncertain federal and state aid levels, according to Tracy Hitchen, Assistant Comptroller, Division of Local Government and School Accountability with the New York State Office of the Comptroller.

Speaking to NYSSCPA members at the FAE's annual Government Accounting and Auditing Conference June 5, Hitchen said that the property tax levy growth rate has not been what it's been in the years before the implementation of the state property tax cap in 2011, which limits growth of property tax levies by either two percent or the rate of inflation, whichever one is lower. She also noted that entities are challenged by the constitutional tax limit, where the maximum tax levy can be no more than about five percent of the total base.

Hitchens said these two things have indeed worked to reduce New Yorkers' tax burden: local tax revenues today consume relatively less of the personal income than they did a decade earlier, and so local entities "become less dependent or less of a drain on personal income than they had been in the early 2000s." However, despite collecting $76 billion in 2015, she said that these limits have also put a lot of strain on local government revenues, leaving them with fewer resources to run themselves effectively. 

"These two statutory constitutional limits put a lot of strain on local government revenues," she said. 

General economic changes have also been stressing local entities, she said, especially upstate. The industrial base there, which had previously provided a great deal of local tax revenue, has significantly contracted, and the companies that are still in the area have been more active in pursuing adjustments to their assessments. She also pointed out that power plants are closing in New York as well, which have long been significant drivers of local government revenue. She pointed out that, even in 2010, property tax revenues were starting to diminish and so while the tax cap and constitutional growth limit have certainly contributed to this situation, they aren't the sole cause. 

"I think there are some folks in Albany that would like to take credit for the limited growth in the tax levy, but in some degree it's an unfortunate outcome of broader economic drivers. In our office we're pretty careful to point out there isn't a clear correlation between the tax cap and the trend in the change in tax levies from year to year," she said. 
While local entities have often relied on state aid to fill the gap, Hitchen noted that spending on the state's main program, Aid and Incentives for Municipalities (AIM), has been flat since 2010, despite employee benefit costs rising at around 5 percent annually (compared to 2 percent annually for other expenses). Instead,  Albany has been gearing its programs towards incentivizing saving and efficiency. For example, the governor's most recent budget outlines a program called the Shared Services Initiative, which mandates that each county in the state, excluding New York City, convene representatives from all of the local government entities in the area in order to develop a plan to reduce taxes even further by this August, with the state government matching any savings they can effectively demonstrate. 

"You can imagine how that's going to be a challenge, given everything else happening, including the summer session," she said. 

She said that while counties are indeed eager to find ways to save money, they have been disappointed by a corresponding lack of mandate relief, as spending required by federal and state governments continue to be a major driver of budget expenses, versus optional or inefficient operations. 

Federal aid is also a point of concern. On the federal level, municipalities collect about $4.7 billion in aid for the provision of services and larger projects. While this sum hasn't seen significant changes yet, Hitchen noted that there has been a lot of talk out of Washington about cutting programs. She said the comptroller's office has been monitoring these developments closely so it can analyze the information and guide local governments to keep on top of these developments so they, in turn, can provide feedback to their representatives and their constituents. She said that her office is working on a report about the impact of federal aid on local governments, which she hopes to release this year. 

This doesn't mean that federal and state aid have, or are, drying up completely, though. Hitchen noted that the latest budget session did create some smaller aid programs for local governments, such as aid for video lottery and gaming facilities, now that casinos have begun to open in various parts of the state. There is also additional funding for extreme weather recovery: to the extent that a local government experiences an emergency, they can make an application to receive funds through this program. She also pointed to the Pave New York and Bridge New York programs, $225 million that were not included in the budget but would be funded through the Department of Transportation. Finally, she said that there's also $2.5 billion set side from the Clean Water Infrastructure Act, which can go to eligible local entities for drinking water projects and clean water projects. 

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