Local tax cap drops to 1.66% for 2014

by E.J. McMahon |  | NY Torch

Tax CapReflecting the drop in overall inflation over the past year, the state-imposed cap on property taxes will be 1.66 percent for counties, cities, towns and villages with fiscal years that start Jan. 1, state Comptroller Thomas DiNapoli’s office has informed local officials.

Under the law passed in 2011, the cap on tax levies is set at the lesser of 2 percent or the rate of the growth in an “inflation factor,” calculated as the average monthly change in the Consumer Price Index (CPI) for the 12-month period ending six months before the start of the fiscal year.

The actual cap will differ by locality, depending primarily on the amount of allowable exclusions for growth in the local property values. Localities also will be able to exclude the amount by which the change in pension contributions exceeds two percentage points. DiNapoli will be announcing 2014-15 contribution rates any day now.

A 60 percent supermajority vote of the local governing board is required for a cap override at the county, city, town and village level.  For localities whose legislative bodies have seven or fewer members — which would include virtually all town boards and many village boards — a supermajority is the same as a simple majority required to pass a budget.  The hurdle is also relatively easy to overcome in the vast majority of local governments in which one party controls 60 percent or more of the votes on the local board or legislature. Nonetheless, during the first two years the cap was in effect, most local governments (with a few significant exceptions) kept their levies within the cap.

The cap is more difficult for school districts to exceed, since school budgets (outside the “big five” cities) are subject to approval in a public referendum.  Their cap is based on the average of 12 months ending in December — a number that won’t be known until mid-January.  Based on current inflation trends, however, schools should also be ready to deal with a starting-point cap of less than 2 percent next year.  This time around, their pension exclusion won’t kick in, so the average effective school tax levy cap will be much closer to 2 percent than it was in 2013-14.

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- E.J. McMahon is the Research Director at the Empire Center for Public Policy.