Municipal govs make tax cap errors

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Municipal govs make tax cap errors

An official with the state comptroller’s office told village officials Tuesday that 66 percent of the budgets the office had reviewed to monitor compliance with the 2 percent tax cap had made errors, but in most cases the municipalities still remained under the cap.

“When this legislation first went through I told my boss we were going to be looking at a 90 percent error rate,” said Nora McCabe, deputy assistant in the state comptroller’s office. “However the error rate wasn’t that bad, and most of them, even if they did make an error, didn’t take them over the levy. I think a lot of people are starting to get it once they sit down and do the calculations.”

Speaking at a Nassau County Village Officers Association meeting Tuesday night in Williston, McCabe said the state comptroller’s office had thus far reviewed 798 local government’s handling of the new law. The budgets reviewed were those of governments whose fiscal year begins Jan. 1

The meeting, which was attended by village officials from across Nassau County and some from Suffolk, was intended to help explain how the new tax cap law works.

New York Conference of Mayors and Municipalities executive director Peter Baynes and deputy director Barbara VanEpps help lead presentations on how the tax cap will affect everyone.

Baynes described the new tax cap as one of the most important pieces of legislation in New York for the last 50 years and how his organization has helped to advocate for local municipalities across New York.

“The state needs to understand that the problem is the all the unfunded mandates that the state pushes on the local municipalities,” Baynes said. “There is also a lot of confusion with how this new law will work. The state comptroller’s office has stepped into the void to help.”

VanEpps began her presentation by reiterating the main point of the tax cap law, that it is a cap on the tax levy that municipalities can raise, not a cap on the rate.

“It’s very important that you educate your residents that the cap is on the levy not the rate,” VanEpps said. “You can still have a 2 percent tax cap and your property taxes may go up 10 percent.”

Another issue VanEpps raised was that the tax cap law allowed the carryover of 1.5 percent of a municipality’s tax levy if it raise more than what was needed.

“For example if your levy raises $500,000 but you only used $350,000, you can apply 1.5 percent of that excess towards next year’s levy,” VanEpps said. “However you can’t accumulate it every year and chances are this isn’t going to affect anyone here.”

VanEpps also said many municipalities were misled into believing that the new law let them save 2 percent on the overall rise in pension costs, but they really could only save 2 percentage points.

“For example if the payroll contribution for employee pensions goes from 21.6 percent to 25.8 percent that equals a 4.2 percent increase in rate so 2.2 percent of that is excludable” VanEpps said. “That still equals a 19.4 percent increase in the payroll contribution.”

VanEpps also stressed the importance of municipalities having a local law in place to override the tax cap.

“If there is a clerical error made and you raise more money in the levy then you need, you have to take out that excess and put it in a special reserve fund that you can’t use towards next year’s levy,” VanEpps said. “The controller’s office might not even notice the mistake until three years later and then the money must be retroactively taken out.

Enacting a local tax cap override law can be done on the same night as the budget is being made because by law the override law takes effect immediately after being approved.”

Originally the legislation required municipalities to have to hold a public referendum to enact the override law, said VanEpps, but after lobbying the state the change was made to allow for the override to be made by 60 percent of the governing body of the municipality.

“We’re only recommending that you pass the law to protect yourselves,” VanEpps said. “It is a decision you have to make locally.”

An audience member commented that since the tax cap law limits their ability to raise taxes that it may make them look bad in the eyes of credit rating companies because they can’t raise the taxes to properly pay off their finances.

“We brought this same question up the state, and they figured that giving the local governments the ability to override the law, that it will work out,” Baynes said. “We think that was a very cynical view.”

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