DIVISION OF LOCAL GOVERNMENT SERVICES & ECONOMIC DEVELOPMENT / Municipal Structures

TEXT 8: Revenues

Major urban towns such as Islip and Cheektowaga face issues similar to big cities, and yet these towns cannot diversify their revenue base in the way cities can. Cities, for example, can impose a consumer utility tax. Also, the variety of special laws and distribution agreements that apply to sales taxes treat similar communities very differently. While cities can “pre-empt” a portion of these revenues, other municipalities cannot. The original theory behind the limits on local governments’ levy and distribution of sales tax revenues has long been forgotten, while most of the State operates under “temporary” provisions allowing for local sales taxes exceeding 3 percent.

A major example of the differing rules applying by class is that cities and villages have constitutional tax limits, whereas towns do not. The provisions making this differentiation among classes of local government have essentially been in place since 1938, despite the complete change in demographics and relative positions since that time. Moreover, the “big” cities—those above 125,000 in population—also have fiscally dependent school districts which must be provided for within this limit. Buffalo, Rochester and Syracuse (the three upstate big cities) are all running up against their tax limits—and the fiscal stress these cities are now under has led to great tension between public education and other municipal services (police, fire, sanitation). Other cities, villages and counties have also been running up against their tax limits in recent years, but only in the big cities do these tax limits cover schools (in other cities and villages, public education is provided through school districts that are separate local governments).

In towns, not only are the schools separately funded, there are no tax limits to begin with. Historically, tax limits were imposed only on municipalities with concentrations of population (and also wealth). Today there are large concentrations of population in many areas other than cities and villages, and the underlying relative economic circumstances are almost reversed among the various classes. It should be clear that, for better or worse, the original intent behind the tax limits is no longer being served. Despite the quantum changes in our world since the late 1930s, the concept simply has not been revisited in the modern era.

Since there are many major urban towns which share the characteristics of the big cities, it is also relevant to ask—what would happen if “big city” rules were applied to those towns? To answer this question, we reviewed current school and municipal expenditures in towns exceeding the population threshold for large cities (125,000). The analysis showed that these towns (and school districts within their boundaries) generally could not operate under the big city rules without exceeding the tax limits that apply in such cities. That is, if these towns had fiscally dependent school districts and a tax limit set at 2 percent of taxable property value, virtually all would be exceeding such limits by a very wide margin. This begs the question — are the limits right? And if a tax limit is right for Syracuse, why not Hempstead (a municipality more than five times its size)? Regardless of whether tax limits are seen as a positive or negative feature of our municipal structure, the fact that they were applied to a subset of local governments based on conditions in 1938, rather than the very different conditions applying today, suggests that it is a topic worthy of re-examination. This is almost analogous to not having revisited our vehicle and traffic law since automobiles became the primary means of transportation.

DIVISION OF LOCAL GOVERNMENT SERVICES & ECONOMIC DEVELOPMENT / Municipal Structures

Date: 2015-01-12; view: 772