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January 22, 2017

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Budget news & information

Navigating Through New York's Property Tax Levy Cap publication
Capital Region BOCES, in partnership with Questar III BOCES, has released the publication "Navigating Through New York's Property Tax Levy Cap." Please take a few moments to read through the publication (PDF) to learn more about the property tax levy cap and its implications for school district and taxpayers throughout New York State.

Understanding the property tax levy "cap"...
Why can the tax levy increase by more than two percent?

 

Jump to "A closer look at Guilderland's calculation"

Jump to a brief video about the "cap"

Jump to FAQs about the "cap"

 

New York’s property tax levy “cap” has often been referred to as a “2 percent cap” on taxes by some politicians and the media. However, this is incorrect. The law does not restrict any proposed tax levy increase to 2 percent—or any other amount. Instead, the legislation requires each school district in the state to calculate its own "tax levy limit" to determine what level of voter support is necessary for budget approval. The figure “2 percent” (or the rate of inflation, if less) is just one of eight variables that factor into each district’s calculation of its individual tax levy limit as prescribed by law. If the tax levy increase is above the tax levy limit—after accounting for exemptions—the support of a supermajority (60 percent) of voters would be required for budget passage. If the levy is within the limit, a simple majority (50 percent + 1) is needed for budget approval.

Definition: The tax levy is the total dollars that a school district raises from property owners within the district in order to balance its budget. The levy is determined after accounting for all other sources of income, including state aid.
 
Definition: The tax rate is used to calculate what each property owner will pay in school taxes based on assessed value.

 

Essentially, the “tax levy limit” sets a threshold that, if exceeded, requires districts to obtain a higher level of community support to pass a proposed budget. However, the legislation does
not place a limit on the taxes a school district could levy to pay for expenses related to specific “excluded” items, including some court orders, some pension costs and local capital expenditures. The costs of these excluded items are added to the “tax levy limit” to come up with the “allowable tax levy” limit. (see "A closer look at the calculation" below) The calculation recognizes that due to their nature, certain expenses should not be subject to a capped CPI-based growth index as our other expenses are capped.

Under the state’s calculation, for 2014-15 Guilderland Central School District has a lax levy limit including exclusions of $66,803,142. This is our maximum allowable levy limit to pass the budget with a simple majority of voters.

It is important to note that:
    Tax levy limits will vary by school district;
    The new law does not limit an individual’s tax bill.

A closer look at Guilderland's calculation

By law, each school district’s tax levy is determined by a complex, eight-step formula that was developed by the state. The formula takes into consideration a number of variables, including growth in the local tax base (if any), exclusions, the previous year’s tax levy, as well as the current and coming years’ PILOTs (Payment In Lieu Of Taxes). The rate of inflation or 2 percent (whichever is lower) is also part of the equation.

Note: For 2014-15, the rate of inflation is lower than 2 percent (1.46 percent). This is reflected in the chart below.

Individual school districts will each have a unique tax levy limit, which must be submitted to the state by March 1 each year.

After a school district calculates its “tax levy limit,” it then adds exclusions into that amount, allowing a district to propose a tax levy greater than the amount set by the “limit” without triggering the need for approval by 60 percent of voters. These exclusions include:

    Voter-approved local capital expenditures (i.e., debt for construction projects and bus purchases);
    Increases in the state-mandated employer contribution rates for teacher and employee pensions that exceed two percentage points;
    Court orders/judgments resulting in any amount that exceeds 5 percent of a district’s current levy. However, tax certioraris are not exempt.

As a result, a district’s final tax levy (after the levies for these exclusions are added in) could be greater than its published “tax levy limit” and yet still be considered, under the law, within that limit. In addition, a district may actually propose a budget with a tax levy increase that is higher than 2 percent and still be within its "cap" under the law.

To learn more, please see the example below which outlines a simplified version of the eight-step formula explaining how GCSD arrived at its tax levy limit for the upcoming school year:

 

  2013-14 Tax Levy Excluded from
2% Limit
Subject to
2% Limit
Adjustments to Levy 2014-15
Tax Levy Limit
  $65,517,950        
           
Tax Base Growth   $301,383   n/a  
Guilderland Public
Library Debt
  $0   $0  
Payment in Lieu of Taxes   $277,700   $0  
Capital Exclusions (debt)   ($2,375,468)   $2,151,242  
Pension Rate > 2 pts   n/a   $0  
           
Totals $65,517,950 ($1,796,385) $63,721,565    
      x 1.0146    
      $64,651,900 $2,151,242 $66,803,142

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Want to learn more? Watch a short video about what the property tax levy "cap" means for NY schools:

 

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FAQs about the "cap"

 

Q. What is a “tax levy limit?”

A. For school districts, the tax levy limit is the highest allowable tax levy (before exclusions) that a school district can propose as part of its annual budget for which only the approval of a simple majority of voters (more than 50 percent) is required. Any proposed tax levy amount above this limit will require budget approval by a supermajority (60 percent or more) of voters.

Essentially, the tax levy limit sets a threshold requiring districts to obtain a higher level of community support for a proposed tax levy above a certain amount. However, the 2011 legislation does not place a limit on any taxes a school district would levy to pay for expenditures related to specific “exempt” items, including some court orders, some pension costs and local capital expenditures. These items are then added to the tax levy limit to arrive at the maximum “allowable” tax levy limit.

It is important to note that:

Tax levy limits will vary by school district;
The law does not limit an individual’s tax bill.

Q. How is each district’s tax levy limit determined?

A. The law dictates an eight-step formula that each school district must use to calculate its individual tax levy limit. In particular, the calculation adjusts a district’s tax levy to reflect growth in the local tax base (if any) and the rate of inflation or 2 percent (whichever is lower). Learn more about the formula (PDF)

The formula takes into consideration a number of variables, including growth in the local tax base (if any), exemptions, the previous year’s tax levy, as well as the current and coming years’ PILOTs (Payment In Lieu Of Taxes). Consideration is also made for any allowable “carryover” funds from previous years, as districts are allowed to “bank” some unused portions of their tax levy limits to use in future years (details on this are still emerging from the state).

Individual school districts will each have a unique tax levy limit, which must be submitted to the state by March 1 each year. Once the tax levy limit is determined, the district will then add coming school year’s exemptions to the tax levy limit, creating a “maximum allowable levy.” As a result, a district’s final tax levy (after the levies for these exemptions are added in) could be greater than its published “tax levy limit” and yet still be considered, under the law, within that limit.

Q. What does a district's "carryover" refer to?

A. Districts whose current-year budgets carried levies below their tax levy limits will have to factor that difference into their upcoming school year tax levy limit calculations. This so-called “carryover” is determined by subtracting the actual current-year total tax levy (in dollars) from the calculated current-year tax levy limit (before exclusions). This figure, which can be no greater than 1.5 percent of the prior year’s tax levy limit, is then added into the eight-step mathematical formula used to determine the tax levy limit for the upcoming school year.

Q. Does the law take into account that there are some expenses that are currently outside a district’s control?

A. Yes. Taxes that school districts levy to pay for certain expenses are “exempt” from the tax levy limit calculation. In other words, after a school district calculates its tax levy limit, it then adds these exclusions to that amount, allowing the district to propose a tax levy greater than the amount set by the “limit” without triggering the need for approval by 60 percent of voters. These exclusions include:

Voter-approved local capital expenditures;
Increases in the state-mandated employer contribution rates for teacher and employee pensions that exceed two percentage points;
Court orders/judgments resulting in any amount that exceeds 5 percent of a district’s current levy. However, tax certioraris are not exempt.

Far from being “loopholes,” these exclusions are an acknowledgement among lawmakers that schools have no ability to simply limit cost increases in these areas to the rate of inflation As a result, a district’s final tax levy after the levies for these exclusions are added in) could be greater than its published tax levy limit and yet still be considered, under the law, within that limit.

Q. What will the property tax cap law mean for MY tax bill?

A. It’s important to remember that the tax cap law only determines how much voter support is needed to pass a budget. It does not impose a universal 2 percent cap—or any other specific amount—on taxes. It applies to the tax levy, not to tax rates or individual bills. Keep in mind, there are several factors that dictate how an individual’s school tax bill is calculated after a school district sets the final tax levy—including changes in property values and equalization rates—none of which are within the district’s control. This calculation process did not change under New York’s property tax cap law. Tax bills continue to be calculated by using a property’s assessed value (as determined by the local town assessor) and the tax rate—or the amount paid in taxes per $1,000 of assessed value. Tax rates are not solely determined by the tax levy approved by voters; they are often adjusted by the state using equalization rates, designed to equally distribute the tax burden across municipalities within a district. Tax bills can also be affected by STAR or other exclusions for which individual taxpayers may qualify.

Q. Does the public still vote on school district budgets?

A. Yes, school district residents will still vote on a proposed budget on the third Tuesday in May. Under the law, the level of voter approval needed to pass a budget depends upon the amount of the tax levy required by the proposed budget. If the tax levy (before exclusions) is at or below the tax levy limit, a simple majority (50 percent plus one) is needed for budget approval. If the tax levy (before exclusions) exceeds a district’s tax levy limit, the support of a supermajority (60 percent or more) of voters is required for budget approval.

Guilderland Central School District residents will vote on the 2014-15 proposed spending plan on May 20, 2014. Polls will be open from 7 a.m. to 9 p.m. at all five GCSD elementary schools.

Q. How will I know if Guilderland is proposing a tax levy above its “tax levy limit,” requiring 60 percent voter approval?

A. By law, any school district that proposes a budget that requires a tax levy (before exclusions) above its tax levy limit must include a statement on the ballot indicating this to voters.

Q. What happens if the budget is not approved by voters?

A. If a proposed budget is defeated by voters, a school district—as in the past—has the option of putting the same or a revised budget up for a revote, or adopting a contingent budget. If a proposed budget is defeated twice by voters, a district must adopt a contingent budget. Adopting a contingent budget prohibits a district from spending any money in certain areas, including community use of school facilities (unless all costs are reimbursed to the district); new equipment purchases; non-essential maintenance; capital expenditures (except in emergencies); salary increases for non-instructional, non-unionized employees; and certain field trips and student supplies Contingency rules also cap the growth of the administrative component of the budget. These requirements existed prior to the tax levy cap and remain in effect.

More significantly, under the law, a district that adopts a contingent budget must kept its 2014-15 tax levy the same as or less than its 2013-14 tax levy —which in effect is a zero percent cap. 

In other words, a district that adopts a contingent budget would have to levy the same amount of taxes as in the current year—or less—without any adjustments for state pension rate increases, contractual obligations or any other costs, whether or not they are mandated. View a fact sheet containing information about a contingent budget (PDF)

Q. How can I get more information?

A. For more information about the property tax levy "cap," please contact Assistant Superintendent for Business Neil Sanders at 456-6200, ext. 3125.

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