A recent report from the State Comptroller found that Cortland County and nine other municipalities in New York have reached more than 90% of their Constitutional Tax Limit (CTL), or the maximum amount of real property tax a local government can raise in a single year.
The report also found the number of municipalities at 80% or more of their limit has more than doubled since 2012, jumping from seven to 20 in that time. While this represents a small percentage of local governments, many of them – including Cortland – have been close to the limit year after year.
Running close to the CTL can be a sign of fiscal stress for many local governments, which could compound even further if that limit is ever exceeded. If that happens, the Comptroller is required by law to withhold state economic aid in the amount of how much it goes over.
“These 20 local governments are in a challenging financial position and have no room for error,” said DiNapoli. “The municipalities in danger of exceeding their Constitutional Tax Limit must be vigilant about their short- and long-term budgeting. It is critical they take steps to improve their position.”
In New York, there are two primary factors that limit how much a municipality can raise in property taxes.
The Property Tax Cap limits year-over-year growth in levy and can be overridden. The lesser known CTL limits the total amount of real property taxes a local government can raise in a single year and cannot be overridden.
More findings from State Comptroller Thomas DiNapoli:
Cities are more likely than counties or villages to be close to their CTL. Statewide, of the 60 cities for which 2018 data was available, 10 were found to have exhausted at least 80 percent of their CTL, or nearly 17 percent.
Eight of the 527 villages reporting (1.5 percent), and two counties out of 57 reporting (3.5 percent) were also found to have exhausted at least 80 percent of their available limit.
The cities of Jamestown (100 percent), Yonkers (92.7 percent), Lackawanna (90.9 percent), Ogdensburg (89.6 percent), Fulton (89.2 percent), Binghamton (89.1 percent), Gloversville (87.9 percent), Little Falls (83.8 percent), Niagara Falls (82.4 percent) and Elmira (80.6 percent) have all exhausted more than 80 percent of their CTL.
Notably, as of 2018, Jamestown had levied 100 percent of its CTL for two consecutive years. It has been over 90 percent since 2011. State legislative actions provided additional aid in recent years that gave Jamestown budgetary relief, and the city did not exceed its CTL.
The villages of Herkimer (99.4 percent), Hempstead (96.3 percent), Monticello (96.0 percent), Ilion (96.0 percent), Ellenville (92.1 percent), Spring Valley (91.4 percent), Potsdam (86.6 percent) and Liberty (83.1 percent) are also among those that have exhausted more than 80 percent of their CTL.
The village of Hempstead on Long Island levied 77.8 percent of its CTL in 2015, but jumped to 94.4 percent in 2017 and 96.3 percent in 2018. The village of Spring Valley in Rockland County levied 76.1 percent of its CTL in 2015, but had exhausted 91.4 percent in 2018. Cortland County and Allegany County exhausted 94.4 and 85.9 percent of their respective CTLs in 2018.
Preliminary results suggest that the number of municipalities exceeding 80 percent of their CTL will remain at 20 again in 2019.
Because the CTL is a percentage of the five-year-average real property value, economic forces that affect real property values, such as a rapid increase in real estate prices or an economic downturn, can affect the limit.
Even when real property values are stable, increases in levy, without property value increases of a similar magnitude, can cause a locality to approach its CTL.
Find out how your government money is spent at Open Book New York. Track municipal spending, the state’s 160,000 contracts, billions in state payments and public authority data.
Visit the Reading Room for contract FOIL requests, bid protest decisions and commonly requested data.