Property Tax Cap Roundup

Posted July 19, 2011

Tax Cap: Will it Stop the Exodus?
By Jon Campbell, Gannett (Ithaca Journal)

Just 10 miles south of the parking lot at National Pipe & Plastics sits Pennsylvania, where the average resident pays 60 percent of the property taxes New Yorkers pay.

National Pipe & Plastics, whose PVC piping is known and used nationally, has called Vestal its home since 1970, but the temptation to set up shop across the state line is constant.

With the state's property taxes skyrocketing over the years, some New York residents and businesses are faced with a perpetual dilemma: tighten their belts or flee to a state where their dollar goes further.

"If we see that the state Legislature does not want to continue cutting the budget and cutting taxes, then there would be no reason to continue having a business in upstate New York aside from having our families here," said David Culbertson, president and partial owner of the piping company.

Gov. Andrew Cuomo and most state lawmakers, however, are confident the state's newly enacted property tax cap will force local governments and school districts to cut their spending, in hopes of passing on the savings to taxpayers.

The cap, which takes effect next year, will limit annual increases to property tax levies at 2 percent or the rate of inflation, whichever is less.

"I think it says to our residents, it says to people all across this country, it says to businesses that New York gets it," Cuomo said earlier this month at a ceremonial bill signing in Lancaster, Erie County. "We're not going to be the tax capital of the nation."

Cuomo and the Legislature hope the cap's effects are quickly noticeable.

A 2009 report by the Empire Center for New York State Policy found that from 2000 to 2008, about 1.5 million New Yorkers had moved to other states, the highest rate in the nation.

Census data this year showed that population losses in parts of upstate were profound. Seventeen upstate counties shrank in population over the last decade, as did most cities outside New York City. Buffalo decreased by 10.7 percent, Rochester decreased by 4.2 percent, Yonkers decreased by 0.1 percent and Syracuse decreased by 1.5 percent.

A NY1/YNN-Marist College poll in May found that 26 percent of adults planned to move out of the state within five years. Of those people, 62 percent said they were planning to move because of economic reasons.

For Vaughan Smith, it was too little, too late. The High Falls, Ulster County, resident watched the yearly property taxes on his four-bedroom home jump from $3,300 in 1994 to $12,200 two years ago, when he successfully fought to lower his assessment.

But Smith had already reached his breaking point. He and his wife bought a similar home in the Canadian province of Nova Scotia earlier this year, where they will pay less than $1,600 a year in property taxes, though sales taxes are higher. By Nova Scotia law, property assessment can only increase up to the rate of inflation.

Now, Smith has been fixing up his High Falls home in hopes of selling it.

"It was all financial," said Smith, who earns about $40,000 a year as a ceramics maker. "I love it here. I really love this area, but with the way property taxes were going up it just didn't make any sense to stay."

It was a similar story for Darryl Carr, who moved two years ago from Gardiner, Ulster County, to Virginia. Until that point, New York was the only place his family had called home for four generations.

"My son and his wife had a couple of kids, and they realized they weren't going to be able to purchase a home and raise a family there," Carr said. "The taxes are just so high that it's another mortgage payment.
"And if you want to keep your family together, you have to move too."

Whether the cap will alleviate property-tax burdens and keep people in the state remains to be seen, but some businesses and residents believe it's a good first step.

Others, including a number of municipal and county officials, say the state hasn't done enough to ease mandated costs on local governments and that residents can expect a downgrade in important services as a result.
Most agree, however, that something had to be done.

Culbertson has seriously considered moving the National Pipe & Plastics plant in Vestal to Pennsylvania several times over the years, the most recent time being 2005.

There were two reasons Culbertson said the company decided to stay: the owners didn't want to alienate employees and their families, and an upstate-focused business advocacy group -- Unshackle Upstate -- was launched.

Still, when he runs the numbers, Culbertson has reason to pause. He estimates the potential move to Pennsylvania would slash the company's property tax bill by two-thirds. Not only would property taxes be cheaper, but the income taxes as well.

Pennsylvania's state income tax is a flat rate of 3.07 percent, though local governments typically tack on an extra percentage point. New York's is a sliding scale, with the lowest earners charged 4 percent and the highest taxed at 8.97 percent, though that rate will drop to 6.85 percent at year's end.

"People that are in charge of site location for businesses look at the income tax in New York and see that their money and their employees' money would be worth more in other states," Culbertson said.

That said, Culbertson sees the state's new property tax cap as a good start, but quickly adds it won't mean much unless it leads to a decrease in spending. He said he has been encouraged by Gov. Andrew Cuomo's first six months in office, but wants to see the trends of lower state spending and no new taxes continue.

At the same time, Dan Buerkle, owner of the Rug Market in Rochester and a homeowner in Irondequoit, Monroe County, said he thinks highly of New York schools and wants to see the state do more to relax their mandates.
The schools, however, need to do more to rein in their costs and become more efficient, he said.

"It's going to take many years to make things affordable, and we are definitely not going to be able to stay in our house if we don't have some relief," Buerkle said.

Between 2005 and 2009, New York had the fourth-highest property taxes in the nation, a median of $3,755, according to the Tax Foundation, based in Washington D.C. During the same time period, Westchester County paid the third highest taxes in the nation at $8,160, slightly behind Hunterdon County in New Jersey and Nassau County in Long Island. Rockland County ranked fifth.

Conversely, upstate counties pay the most taxes in the nation compared to home values over the five-year period, with Orleans, Niagara and Monroe counties ranking first through third in the nation, the Tax Foundation found.
The group this year also ranked New York last in the nation for its business climate.

"In and of itself, (the tax cap) is not a solution," said Al Samuels, the president of the Rockland Business Association, but "before we had nothing that was forcing us to take hard steps to reduce costs. Now we do; we have this tax cap."

Cuomo is banking on the cap as a tool to keep New Yorkers living within the state boundaries.

"I'm tired of young people, especially in upstate New York, saying they're going to get on a plane and find their future elsewhere," Cuomo said. "Their future is right here in New York, the Empire State. We're going to keep them here, and this is a step in the right direction."

Stand Up for Tax Cap
Buffalo News Editorial

Gov. Andrew M. Cuomo held fast to his pledge on Wednesday (July 13th), vetoing a transparent effort to undermine the state’s new property tax cap only days after the cap was approved. That the bill even made it to his desk demonstrates that our legislators still aren’t fully committed to fixing a problem that is killing upstate. Voters should pay close heed.

The bill was approved separately from the legislation that created the long-sought property tax cap. That law, which Cuomo signed in Lancaster, limits growth in property taxes to 2 percent or the inflation rate, whichever is lower. It exempts some costs, such as growth in employee pensions, and allows for an expanding tax base.

With the highest cumulative tax bills in the nation, New Yorkers needed this relief. Those bills are largely driven by property taxes, and school taxes in particular. Their impact has been to help drive jobs, population and tax base out of upstate to other, more business-friendly, regions of the country. Cuomo, who just completed an extraordinary first budget season as governor, won passage of the cap.

It’s a game-changer, but it wouldn’t have been if Cuomo had let the Legislature complete its end run around the law. The just-vetoed bill would have allowed school districts to borrow up to 125 percent of their actual growth in employer-paid pension costs without having to bother asking for voters’ approval. Rather than facing up to financial problems now, that would have left a bigger burden on our children and grandchildren, hardly an admirable move.

Why the Legislature passed the bill is a minor mystery. Maybe lawmakers thought Cuomo and the media and New Yorkers wouldn’t notice. Maybe they wanted to be able to show their masters in the teachers unions that they tried to protect them from the same economic forces that are buffetting all New Yorkers.

Whatever the reasons, the fact it passed should set off alarms in the minds of voters. Cuomo was able to secure the tax cap and a conservative budget, but in the end, lawmakers remain who they have been: slavishly devoted to spending tax dollars to the benefit of their big-dollar donors.

Cuomo did right by New Yorkers in vetoing this bill, but both can be sure there will be more coming down the pike is the coming months and years. If the gains that were made in this legislative session are to be preserved and built upon, the governor and his constituents will have to remain alert.

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