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Council gets presentation on convoluted tax cap law

By Howard B. Owens

It seems like a simple thing -- the New York State Legislature passed, and Gov. Andrew Cuomo signed into law -- a bill capping local property tax increases at 2-percent annually.

Except it's not so simple.

If you think that one of these years, your taxes can't go up more than 2 percent over what you paid the previous year, think again.

The tax cap is actually on the tax levy. The tax levy is the amount of revenue a local jurisdiction needs to help pay its bills. A local jurisdiction determines what the levy needs to be and then calculates the tax rate for that budget year.

The tax cap doesn't touch the tax rate at all, nor does it control assessed value. 

The law caps the levy increase at 2 percent, or that's what you might think.

It really doesn't cap it at 2 percent at all. There are exceptions for changes in assessed value and exclusions for increases in pension costs.

For the City of Batavia, for example, the city council could -- perfectly within the tax-cap formula -- increase the tax levy for 2012-13 and raise the tax levy 4.3 percent.

City Council President Marianne Clattenburg's reaction after seeing a tax cap presentation at the council's Monday night meeting: "Unreal."

"This (the tax cap) is misleading to taxpayers," Clattenburg said. "They’re expecting a 2-percent tax cap when they can get a 4-percent tax cap."

Besides not being a straightforward cap on tax increases, the law also provides local jurisdictions with the ability to override the cap with a 60-percent vote of the governing body -- something New York's cities, villages, towns and school boards seem prepared to do across the board, according to The New York Times.

In fact, because there are penalties for failure to abide by the cap, and because the formulas for calculating it are complex, city staff  New York Conference of Mayors is recommending that the council enact a local law to override the cap every year, even if there isn't an increase in the levy at all. That way, the city is protected if a subsequent audit finds the tax levy increased more than allowed under the law.

For the city, once the calculation is done for the 2012-13 fiscal year, the city's levy could increase more than 4 percent, from $5.8 million to $5.9 million.

It hasn't been determine how that potential levy (there's no recommendation or budget decision in the calculation) will impact the tax rate paid by individual property owners.

In 2009, for example, the tax levy increased 4.2 percent, but the tax rate went up by only 1.62 percent.

In 2011, the levy went up 2.5 percent and the rate increased 1.26 percent.

City Manager Jason Molino was quick to point out at the start of Monday's meeting that in any of the financial presentations made, there were no budget recommendations. The presentations were merely to help the council understand current economic factors affecting the upcoming budget.

Part of the presentation, Molino (pictured) provided an overview of the recent "positive outlook" given the city by the bond-rating agency Moody's.

Though Moody's said the city has some financial challenges -- too small of a reserve fund and an unresolved contract with the police union, among them -- the city has made tremendous progress in going from a municipality having a hard time paying its bills to one planning for the future.

"It’s a good feather in the city’s cap that you’ve done the right budgeting, the right financing, over the past several years to get to this point," Molino told council members.

Also on Monday, the city approved an emergency expenditure of up to $35,000 to replace the roof on City Police Headquarters.  

A proposed donation for a veterans memorial was put off until it's time for the city to discuss the budget.

Mark Potwora

So then Howard what is the point ..Why are all city ,town ,county governments all up in arms about the tax cap if they allready figured ways around it.......

In fact, because there are penalties for failure to abide by the cap, and because the formulas for calculating it are complex, city staff is recommending that the council enact a local law to override the cap every year, even if there isn't an increase in the levy at all. That way, the city is protected if a subsequent audit finds the tax levy increased more than allowed under the law....

The city of Batavia has raised taxes 30% in the last 6 years..7.37 in 2005 and now 10.34 in 2011..The city gets more state aid than 6 years ago...983,000 in 2005 and now 1,863,631 in 2011...Everybodys assessment has gone up in that same period of time..We got rid of a ambulance service that was spose to save money....How high should our tax rate be allowed to go...Cap or no Cap city council need to find ways to reduce rates not worry about ways around this law...Ex above by enacting law to override the cap every year...Its the city managers job to make sure they don't go over the cap and to create a city law to allow him to make mistakes in enacting this is wrong..He should be accountable to follow the 2%Cap law..

In 2009, for example, the tax levy increased 4.2 percent, but the tax rate went up by only 1.62 percent.
In 2011, the levy went up 2.5 percent and the rate increased 1.26 percent...I would think that had to do with increased state aid and higher assessments...Point is that they are spending more money in both of those examples..That should be the focus for city council....Spending increases...

Oct 25, 2011, 1:06pm Permalink
Thomas Mooney

Jason , Why would we want you to run this city if you are going to spend more time on trying to get around the tax cap instead of embracing it and actully try to trim cost and save money . Have we given up on fiscal responsability , so attack what was supposed to be for the people protection of inflated budgets .

Mark , good points . With that said , Why are we supporting any increase in taxes . Everything that has been done to save money is what we are paying Jason to do , but yet he likes to pat himself on the back . Aggresively raising assesments is not in the best interest of this city , unless of course you are one of the many in Batavia living on goverment assistance .

Nothing that has been done is anything that any Joe couldn't do . Keep making excuses as to why we keep raing taxes and lowering our level of service .

Frank Ferrando we won't forget how you vote on issues , now you want to put the County under .

People of Genesee County wake up before you have one of Batavia finest meddle in your affairs .

Oct 25, 2011, 2:10pm Permalink
Howard B. Owens

Um, the city just got high praise from Moody's for fiscal responsibility.

Also, did you read the article? No where does it say that Jason or anybody else is "trying to get around the tax cap."

Oct 25, 2011, 2:19pm Permalink
Mark Potwora

Howard what does enact a local law to override the cap every year mean.....It means to me to get around the tax cap.....When will Molino have a speech on how to lower the city tax rate.....Um getting high praise from Moody's for raising taxes ...Isn't Moody's also the ones who gave good ratings to all the banks before the housing sub prime mortgage failure..Didn't they rate all those bonds that were being issued as triple A debt.....

Oct 25, 2011, 2:51pm Permalink
Mark Potwora

You got that wrong Chris...We pay to have those potholes fixed allready..We don't spend zero dollars ..in fact the city budget is almost 6 million dollars a year..That doesn't seem like zero dollars to me...

Oct 25, 2011, 3:04pm Permalink
Howard B. Owens

Mark, voting to override the tax cap is not, per se, getting around the tax cap. If the tax levy doesn't increase more than allowed by law, then nothing has been gotten around. There's nothing duplicitous about it.

It amazes me how you repeatedly miss the point. Albany is the problem. Not Batavia.

This tax cap is nothing but a sham created by Albany politicians to avoid responsibility for their own spending and lack of discipline. It's a total scam to get voters to misplace the blame on local elected officials.

Oct 25, 2011, 3:45pm Permalink
Mark Potwora

Howard how i am i missing the point..In not blaming Albany for Batavia's budget issues...I would like to know what exactly is Albany doing to effect the City's tax rate..My whole point is saying that Molino and city council did some great deed by getting city fiances in order is BS....They did it on the backs of the tax payers by raising the tax rate by 30% in that time frame...Give me a 30% raise and i can wipe out all my debt....How is that Albany's problem...If the city was in debt it was because of mismanagement on the local level..City council and past Manager of which Molino was the assistant at the time ,,Plus the fact that some of the same people were on city council at that time..There is no way that the city can keep raising the tax rate instead of worrying about some tax cap ..Maybe the tax cap will making a little harder....The city needs to find ways to cap spending and lower it..Or expand the tax base...Maybe a study is in order...Thats a joke....To me this a local issue..The state has increased aid to Batavia over that same time period.....Somebody going to pay one way or another...On the state or local level ..And that will be the property owner...

Oct 25, 2011, 4:07pm Permalink
John Roach

The budget defecit and deep debt we were in around 2005, was the result of mismanagement by Council President Frank Ferrando and the Republican majority on Council at that time. The Democrats won the majority on Council and Charlie Mallow took over as Council President. They made the tough decisions and now the City is operating in the black.

The new 2% tax cap has nothing to do with that $3 million hole Mr. Ferrando put us in. This is, like Howard said, a way for Albany to hide its mandates. Remember the story line they gave us, the mandates would be addressed if the tax cap was passed? Anyone think they lied?

Oct 25, 2011, 5:58pm Permalink
Charlie Mallow

Mark, from what I recall things were a little tougher than just raising taxes. There were a lot of fundamental changes made and a lot of good people are no longer are on the city payroll. I also don't see anything above that leads me to believe Jason is looking to raise taxes. Also, there's a bunch of good people on council and I know for sure they are watching every dime.

Maybe if you have forgotten what took place, go search back in time on this very website.

Oct 25, 2011, 8:26pm Permalink
Howard B. Owens

To add a little context to the city's tax rate increases:

The tax rate in 1998 was $7.67 per $1,000

In 2011, the rate is $10.48.

That's a a 2.4 percent annual rate increase.

The annual rate of inflation since 1998 has been 2.38 percent.

Oct 25, 2011, 8:50pm Permalink
Mark Potwora

Howard add into that assessments have gone up..Also what was the city budget in 1998 ......and what is it now in 2011..My assessment in 1998 until 2011 has gone up 32% over that same time period..So that 2.4 percent annual rate doesn't hold water for me..

Oct 25, 2011, 9:00pm Permalink
Charlie Mallow

Mark, gas prices in 1998 were $1.50, today its far more than double. In 2003 a gallon of milk costs $2.09 today the average price is 30% higher. Have you been to a car dealership lately? How much more are snow plow trucks and police cars? You seem to forget your tax rate is based on the amount of money it costs to provide a service. Your also not giving much thought to how much health care and retirement costs have escalated out of control.

It's easy to say government waste but, I know for certain my private expenses are a lot higher today than 30%, at least double. The problem is our real incomes have not risen over the last 10 years for most of us. You know, us 99%...

Oct 25, 2011, 9:25pm Permalink
Howard B. Owens

If you're a home owner, you should WANT your assessment to go up. That's called equity. I've never understood people around here complaining about their assessment going up.

Oct 25, 2011, 9:36pm Permalink
Charlie Mallow

Mark, just checked the assessment of my house and the ones near me. Values went up 51% since 1998. I'm positive my neighbors wouldn't sell their houses for what they are assessed at right now either. Sounds like your getting off easy in Batavia.

Oct 25, 2011, 9:49pm Permalink
Mark Potwora

Howard why would i want my assessment to go up...It causes me to pay more in property tax..If the tax rate stayed the same over that time period it wouldn't be so bad,But when you add in a 30% hike in the tax rate and a 30% increase in assessment my city tax has doubled in that time period..In a ten year period my city tax has doubled giving me a 100% tax increase over that time period......Charlie you might be one of the 99%ers..But i am what you might call one of the 53%ers..you know the ones that pay federal income tax...Also Charlie how much has their tax rate gone up since 1998..Maybe you are getting off easier......Also Howard what was the city budget in 1998 and what is it now in 2011...You know the spending part...It has more than doubled in that time frame...If i am not selling my house i could care less what the government thinks my house is worth..the lower the better..But Charlie we miss you in Batavia....

Oct 25, 2011, 10:24pm Permalink
John Roach

The problem was not with the tax rate or the assessments. It was the excessive spending over what was coming in. They raided the water and sewer funds to keep the excessive spending going until there was no money left. Remember, we had to borrow money to even meet payroll. That's what happens when you don't know who to read a budget.

Oct 26, 2011, 7:19am Permalink
Howard B. Owens

Mark,

Your assessment is tied to the fair market value of your home. If your assessment goes up, it means the value of your home has gone up, which means you have more equity in your home.

Let's say your house was worth $80,000 in 2010. Now it's worth $100,000 (of course, houses in Batavia rarely jump that much in one year, but just for math purposes). You've gained $20,000 in equity for a $200 annual fee (property tax, based just on the city tax). If you owned your home for another 20 years, your extra taxes on that $20K in equity would be about $4,000 (at the current rate).

There are investors on Wall Street who would kill for that kind of return -- $4,000 to get $20K back.

It's insane not to want the value of your house to go up. What you pay in taxes on the assessment increase is a fraction of the return on your money.

Those consultants awhile back pointed out that people in Batavia seem to do everything they can to keep their assessment from going up. They're cutting their noses to spite their faces. They're robbing their own retirement accounts when they fail to make improvements for fear their assessments might go up.

If you're assessment goes up $1,000, you've got $1,000 in the bank, for which you're only paying $10.48 a year to get. Why the hell wouldn't you want your assessment to go up? You should be begging for home values in Batavia to increase.

Jeez, I wish I could find people to give me $1,000 for only $10.48 (or even $200 spread over 20 years) -- I'd make that deal each and every day.

And when you have equity, you don't necessarily need to wait until you sell to get the cash. There's plenty of banks willing to let you borrow against that equity to make improvements, go to Europe, buy a nice car, etc. Equity increases are your friend.

Oct 26, 2011, 4:02pm Permalink
Mark Potwora

Howard..The value you of your home is only worth anything when you sell it..Why would i want to pay high taxes every year if i am never on planning to sell...What good is an asset unless you sell it...

And when you have equity, you don't necessarily need to wait until you sell to get the cash. There's plenty of banks willing to let you borrow against that equity to make improves, go to Europe, buy a nice car, etc. Equity increases are your friend...Howard isn't this why so many people are in the jam they are in this county because they borrowed against the equity in there house ...This whole tax rate issue is about the city off Batavia doubling taxes in the last ten years..Like i said look at the city budget ten years ago and look at it know......The city spends too much....Think of all the people on fixed incomes who haven't had any increase to income ...How are they paying this high tax rate..

Howard your example of a 20,000 dollar gain in assessment it wrong....Between school county and city we pay about 45 dollars per thousand..Thats a 900 hundred dollar increase in taxes and that is only if they don't raise the tax rates over that period of time...So if as you say you owned your home for another 20 years it comes out to 18,000 dollars...I think your wall street ex is wrong...I have to spend 18,000 to get 20,000 back...and thats over 20 year...I would say that sucked..Hope you don't have investments that pay like that....18000 dollars over a 20 year period in the stock market should of at least doubled...

Oct 26, 2011, 4:38pm Permalink
Howard B. Owens

Mark, I don't know what all of the other assessments add up to, but even if your numbers are right, it still argues for an assessed value going up at least the rate of inflation, otherwise you'd be losing money.

You could move to the town and not pay any town property tax.

And if your city tax is only about $10 and your county tax is only about $10, that means (if your numbers are right), that means you're paying $25 for schools -- and you're mad at the city?

Oct 26, 2011, 4:47pm Permalink
Mark Potwora

Thats correct Howard...You were debating the issue of higher assessments being a good thing ..I was trying to show you why they are not..I not mad at anyone...I just don't want to see any of these tax rates go up... The county has been pretty stable in fact they have pretty much stayed the same since 2005..The school is another issue..To me if your assessment is going up then your tax rate should stay stable...So do you still think higher assessments are a good thing..Property owners understand this alot more than renters..nothing against renters...We pay 45 dollars per thousand in Batavia..If .I am wrong someone correct me..10.34 city ,22.88 school,1.50 library.3.94 medicare mandate,and 5.87county.......Alot of taxes for a piece of property....That why you want a lower assessment...That something that 55,000 dollar study didn't understand either..Owning a house isn't the greatest investment in New York State........

Oct 26, 2011, 5:17pm Permalink
Charlie Mallow

Mark, after all that counting of dimes and nickels, I think your a lot closer to being one of the 99%. I'm pretty sure the 1% isn't concerned about the value of their homes going up, that's just more money that can be leveraged. The "job creators" must laugh their asses off when the rest of us fight over the scraps.

Oct 26, 2011, 5:47pm Permalink

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