NYS Property Tax Cap

As Enacted by State Senate Assembly

and Governor's Office, 2011

What is the Tax Cap

• Ch. 97 of the Laws of 2011– Enacted June 24, 2011– Imposes tax levy limit beginning with FY2012– In effect until June 15, 2016 at minimum

• Tied to NYC rent control

– Note: The law does not place limits on assessed values or tax rates.

– Adds Section 2023-a to Education Law amending provisions related to budget adoption

Definition of Property Tax

• A local tax imposed on real property for the purpose of financially supporting local governments and public schools.

• Real property (commonly known as "real estate") is land and any permanent structures on it.

• Does not include user fees or Payments in Lieu of Taxes (PILOT)

Basic Rule of Tax Levy Limit

• Board of Education cannot adopt a budget that exceeds the prior year tax levy by greater than 2% or the Rate of Inflation, whichever is less.

• However, there are certain factors that are excluded from the limit.

Tax Levy Limit Implications

Total levy requiring simple majority to support proposed budget

Tax Levy Limit

+

Coming school year exemptions

=

Maximum Allowable Tax Levy

Tax Levy Limit Calculation Factors

• Adjustments to Base Levy Limit– Tax Base Growth Factor– Pilot Payments– Carryover Limit from Prior Year

• Exclusions for Budget Year Levy Limit– Court orders/Torts– ERS/TRS – Capital Tax Levy

Tax Levy LimitPrior year tax levy

X

Tax base growth factor, if any

+

Payments in lieu of taxes (PILOTs) receivable during base year

-

Taxes levied for exemptions during prior year (not ERS & TRS)

=

Adjusted Prior Year Tax Levy

X

Allowable levy growth factor (lesser of 2% or CPI)

-

PILOTS receivable during budget year

+

Available carryover, if any

=

“Tax Levy Limit”

(before exclusions)

Tax Base Growth Factor

• Provided by the NYS Department of Taxation and Finance

• Based on economic growth– Adjusts the levy limit for new growth or

increases in property values, not decreases in full value

CodeChautauqua County Districts Tax Base Growth Factor

64603 Forestville 1.00960063001 Pine Valley 1.00960066201 Ripley 1.00830063201 Clymer 1.00750062401 Frewsburg 1.00670064601 Silver Creek 1.00470067201 Westfield 1.00390063801 Falconer 1.00340066601 Sherman 1.00320063601 Bemus Point 1.00290065801 Fredonia 1.00290060300 Dunkirk 1.00280047601 Randolph 1.00280066001 Brocton 1.00250060800 Jamestown 1.00130062803 Chautauqua Lake 1.00120064801 Panama 1.00080062201 Southwestern 1.00050062601 Cassadaga Valley 1.00000047201 Gowanda 1.000000

   Average 1.003730 

PILOT Payments

• PILOT adjustments are first added into the 2011-2012 base levy

• PILOT adjustments are then deducted out of 2012-2013 budget year levy

Levy Limit Add-Ons and Exclusions

• NYS and Local Retirement System (ERS) and Teacher’s Retirement System (TRS) employer contributions

• Court Order/Tort action judgment expenditures greater than 5% in prior fiscal year

• Capital tax levy– Necessary to support local capital

expenditures

ERS/TRS Employer Contributions

Some pension cost increases may be excludable from levy limit if the District’s pension contribution rate increase

exceeds 2%.

ERS Exclusion Factor TRS Exclusion Factor

2011-2012 ERS Rate 16.30% 2011-2012 TRS Rate 11.11%

2012-2013 ERS Rate 18.90% 2012-2013 TRS Rate 12.50%

Difference 2.60% Difference 1.39%

State Set ERS Rate Limit 2.00% State Set TRS Rate Limit 2.00%

Excludable ERS Rate 0.60% Excludable TRS Rate -0.61%

ERS Salaries Used for Calculation

• Salary projection provided by NYS– Uses April 1, 2010 – March 31, 2011 actual

reported salaries– Projects two years forward using actuarial data

• Example:– $100,000 base salary projected two years at rate of 1%

set by the State– 1st year is $101,000 ($100,000 x 1%)– 2nd year is $102,010 ($101,000 x 1%)– The projected increase over two years would be $2,010 or

2.01%

TRS Salaries Used for Calculation

• The District projects TRS reportable salaries for base year 2011-2012

• The calculated excludable factor rate for TRS is -0.61%. Therefore, this pension cost is not an eligible levy limit exclusion item for the 2012-2013 tax levy calculation

Capital Tax Levy

• Applicable only for school districts and not for municipalities or fire districts

• Guidance is still forthcoming from the State…there is much speculation on what are allowable expenses and how the “net of aid” calculations will be performed

Capital Tax Levy (Con’t.)

• Budgeted expenditures for financing, design, construction, furnishing, equipping, or otherwise providing for school district capital facilities and equipment

• Expecting guidance from State Education Department on what “capital expenditures” clearly means– Anticipate the guidance to encompass items treated

as capital assets for accounting purposes

Capital Tax Levy (Con’t.)

• Expenditures anticipated to be included in calculations:– Cost of direct purchase of capital assets

(land, buildings, vehicles, some equipment, etc.)

– Costs for new construction, reconstruction, and renovation of facilities

• Design costs, architect and engineering fees, furnishings, equipment, financing, or “otherwise providing” for capital facilities

Calculating Capital Portion of Levy Limit

Capital Calculations 2011-2012 2012-2013

ExpendituresDebt Service $1,484,032 $1,464,155 Bus Purchase less Reserve Funding 267,598 183,275 Equipment & Leases 0.00 0.00

Total Expenditures $1,751,630 $1,647,430

RevenuesBuilding Aid $1,527,775 $1,475,038 Transportation Aid (Ratio at 0.90) 240,838 164,948

Total Revenues $1,768,613 $1,639,986

Total Capital Costs Net of Aid(Expenditures less Revenues) (16,983) 7,444

Tax Levy LimitPrior year tax levy

X

Tax base growth factor, if any

+

Payments in lieu of taxes (PILOTs) receivable during base year

-

Taxes levied for exemptions during prior year (not ERS & TRS)

=

Adjusted Prior Year Tax Levy

X

Allowable levy growth factor (lesser of 2% or CPI)

-

PILOTS receivable during budget year

+

Available carryover, if any

=

“Tax Levy Limit”

(before exclusions)

Summary of Levy Limit

Levy AmountDollar

IncreasePercent Increase

2011-2012 Tax Levy $5,404,754

2% Increase $5,512,849 $108,095 2%

Levy Limit Without Exclusions $5,556,233 $151,479 2.80%

Levy Limit With Exclusions $5,574,801 $170,047 3.15%

Overrides

• Local governments may override the tax cap limit by resolution or local law adopted by 60%

• School districts may override the limit by the adoption of the budget by no less than 60% of votes cast– A Simple majority is needed to pass the

budget for a levy at or below the levy limit

Levy Reserve and Carryover

• Levy in excess of levy limits must be placed in a Tax Levy Reserve

• Carryover– Allows districts to carryover up to 1.5% of levy

limit and only by the amount that the base year was below the levy limit

– Since 2012-2013 is the first year of implementation, this is not applicable

Tax Levy Limit Important Dates

• February 15th

– Tax base growth factor provided by NYS Department of Taxation and Finance

• March 1st

– District submits to NYS Comptroller tax limitation plus exclusions and intent regarding override option

• 45 days before legal notice– District will have to specify whether it will seek vote to

exceed levy limit

• May 15– Vote on budget levy and BOE elections

Sources

Erie 1 BOCES Finance and Legislative Services

New York State Office of the State Comptroller

New York State Office of Real Property Services

Questar III BOCES State Aid and Financial Planning Services

And from presentations provided by:

Harris Beach PLLC, Mr. Patrick Malgieri & Ms. Tracie LopardiHodgson Russ LLP, Mr. Jeffrey SwiatekMunicipal Solutions, Mr. Jeffrey SmithStatewide School Finance Consortium, Dr. Richard Timbs