New York\'s First Property Tax Cap
July 6, 2011
On June 30, 2011, Governor Cuomo signed into law one of the most sweeping and restrictive property tax caps in the country. It applies to “taxes imposed on real property” by all local governmental entities (counties, cities, towns, villages and special districts) and by public school districts. The law will take effect in the 2012 fiscal year for local governments and in the 2012-13 fiscal year for school districts, and is currently scheduled to expire in June of 2016. However, for what appear to be purely political reasons, it will remain in effect beyond its scheduled expiration date as long as the “temporary” New York City rent control and regulation laws remain in place.
Under the new law, year to year growth in property tax levy increases will be capped at 2% or at the rate of inflation, whichever is less. However, the law provides that the tax levy cap will not apply to taxes necessary to:
- support voter-approved school capital expenditures;
- cover the expenses of an approved legal settlement of a tort action where such costs exceed 5% of the prior-year’s tax levy;
- cover the costs of responsibilities shifted to the taxing jurisdiction from another local government;
- cover the costs associated with pension contributions where there was growth in the annual required pension contribution exceeding two percentage points of payroll; or
- cover the cost of added taxes generated by physical changes to assessed property values due to new construction.
If a taxing entity is fortunate enough not to utilize the entire available tax levy capacity in a given fiscal year, the law provides that unused tax levy capacity of up to 1.5% may be “carried over” to the following year. For example, if the cap is 2% for two consecutive years and a local government increases its tax levy by just 1.0% in the first year, the local government could apply a carryover of 1.0% and thereby permissibly increase its tax levy up to a maximum of 3.0% in the following year.
Although the law caps the available tax levy increase from year to year, local governments are authorized to exceed the cap in a given fiscal year if at least 60% of the members of the governing body (e.g., County Legislature, City Council, Town Board, etc.) approve such an increase. School districts are allowed to exceed the tax levy cap if the budget is approved by 60% or more of those voting on the budget.
