Group Pushes to Make Tax Cap Permanent

By: David Winzelberg May 21, 2018

A coalition of Long Island business and civic leaders are supporting an effort to make the controversial 2 percent tax cap permanent.

The state law, which is slated to sunset in two years, limits suburban school districts municipalities and other local taxing districts from annually increasing their property tax levies to 2 percent or the rate of inflation, whichever is less.

First in effect from 2012 to 2016, the state legislature voted in 2015 to extend the law through 2020.

The group, called Make NY Affordable, is urging state elected officials to pass legislation that would create a permanent 2 percent cap now, before the balance of power shifts in the state senate.

“If we don’t get it this year, the cap is in jeopardy,” says Steve Levy, the former Suffolk County executive who is leading the effort. “We don’t want to have to do this every four years. They have to go to the mat this year to make it a top priority.”

Levy, who also heads a political consulting firm called Common Sense Strategies, claims the tax cap has been very successful, saving “billions of dollars” since its inception.

“From 2002 to 2012, the average tax increases for Long Island school districts was 6 percent a year,” Levy said. “That’s just unsustainable.”

Laura Pandelakis and Anita McDougal, leaders of Long Islanders for Taxpayer Reform, who have joined Levy’s effort, agree that the cap is especially essential here, where property taxes are some of the highest in the nation.

“If school districts and municipalities are allowed to raise taxes to whatever they want, it’s fiscal suicide,” McDougal said.

Pandelakis said the cap isn’t restrictive enough.

“We need to tighten it further, she said. “We need to make it permanent, otherwise there’ll be 7 to 8 percent increases. People will push it up and up.”

Taxpayer advocates also point out that specific exemptions, such as brick-and-mortar development that increases the value of a school district’s taxable property, contributions toward employee pensions above a certain amount and the local portion of capital expenditures, allow districts to pierce the cap. Last week, voters in the East Islip School District passed a $59.9 million bond for capital improvements, which wasn’t governed by the state’s cap restrictions.

Andrea Vecchio, who heads the East Islip TaxPAC, said those loopholes in the cap are a hard thing for people to understand.

“I’m against this exemption because it allows the districts to exceed the cap,” Vecchio said. “We’re now obligated for 18 years. It’s like another mortgage and it’s on the backs of all the taxpayers in the district.”

Other supporters of the effort to make the cap permanent say the situation will only worsen after this year, when Long Island homeowners can only deduct up to $10,000 of their property taxes.

“This is the most important challenge facing Long Island that we can ever imagine,” says Paul Wernersbach, a member of the Long Island Board of Realtors’ Board of Directors. “As a member of LIBOR, which has some 28,000 members, our goal is to keep home ownership and real estate investment affordable for everyone.”

David Pennetta, strategic officer for the Commercial Industrial Brokers Society of Long Island, said commercial property owners in the area are also under extreme tax pressure, needing a permanent tax cap to try to keep in from getting any worse..

“On the commercial side, you have property owners paying $10 a foot and the taxes are more than what the landlord is making on the building,” Pennetta said. “The tax cap is something that’s essential. We’ve always had a broadening tax base. We don’t have that anymore.”

Though the tax cap has made school budget votes easier to pass, Brian Fessler, deputy director of the New York State School Boards Association, said his group’s membership is generally opposed to the tax cap.

“Since the tax cap was enacted, we run under the understanding that even though it has a sunset clause, the cap is here to stay for the foreseeable future,” Fessler told LIBN. “We are working to try to address inequities in the cap. Focusing on tweaks to make the tax cap more fair and equitable in terms of how it affects school districts statewide and are good for both school districts and taxpayers alike.”

Despite spending 25 years as a teacher before entering politics, Assemblywoman Christine Pellegrino, D-Babylon, isn’t averse to having controls on school spending, though she shied away from endorsing a permanent cap.

“With the tax cap set to expire in two years, we need to ensure solutions that both fully and adequately fund our schools, ensure that Long Island gets its fair share of funding and keeps property taxes down,” Pellegrino said via email. “Long Island families are already overburdened by property taxes which is why I will support legislation that would extend the tax cap while also require adequate funding for our schools from Albany.”

Mark LaVigne, deputy director of the New York State Association of Counties, said the state needs to take more fiscal responsibility for the programs that they require counties to fund and deliver at the local level. Though counties are restricted by the tax cap, LaVigne said they are responsible for $7.5 billion a year through property tax revenues towards the state’s Medicaid program.

“We’d support making the tax cap permanent if the state reduces the cost burden on counties and local governments,” LaVigne said. “It’s disingenuous for the state to pass tax cap legislation when they are in so much control over property tax levies across the municipalities.”

Vecchio says it imperative that the tax cap is made permanent to ensure there’s a hold on school and municipal spending.

“Little by little, they’re bleeding us dry,” she said.