New York Localities Already Struggling Under Cuomo’s Property Tax Cap

As predicted, the bad news about Democratic Governor Andrew Cuomo’s infamous property tax cap is already starting to roll in as local governments begin to grapple with the law’s implications.

In the Town of Southhampton, for instance, the local comptroller told the town board that on top of several years of tough austerity measures, the cap will likely force another $5 million in cuts. Southhampton Councilwoman Bridget Fleming was so frustrated by the cuts that she accused the area’s state assemblyman of “essentially crippling” the town’s ability to provide services.

Over in Canadaigua, New York, school officials are worried that the cap may “severely  limit” their options in putting together next year’s budget. The Superintendent of Canandaigua Schools expressed his own frustration with the cap saying that it addresses “only a symptom” of the state’s fiscal challenges as it does not address decreasing state aid or the increasing costs of mandates coming from the state level.

Looking statewide, a recent report by the credit-rating agency Moody’s noted that the property tax cap could endanger local governments and school districts by putting “additional pressure on local government financial operations already strained by declining state aid, weakened tax revenue, high fixed expenditures and state-mandated services.” The report even pointed to the specific examples of the Town of Fishkill and Monroe and Rockland counties as the governments most in peril from the cap.

To avoid these eventualities, the Wall Street Journal reports that many local governments are devising ways to “stretch” loopholes to increase the amount of money they can raise. Peekskill city for instance is hoping to use two exemptions — one for pension costs and another for debt service — to  raise property taxes as much as 5.9%. The Cuomo administration, however, has disputed interpretations of the cap law that would allow for such extensive exemptions and argues that localities should focus more on cutting spending.

Meantime, the New York based advocacy group Community Voices Heard (CVH) has it right: they say that the best thing the state government could do to improve schools and other public services would be to extend the millionaire’s tax, a move Cuomo opposes.

The Institute on Taxation and Economic Policy concurs with CVH in its own report on how to fix New York’s education funding system, noting that a policy like extending the millionaire’s tax would not only make the state’s tax system more fair, but it could go a long way towards improving fiscal sustainability at the state and local level.