governing within the tax cap

HUDSON VALLEY

PATTERN FOR PROGRESS

Improving Hudson Valley Quality of Life Through Regional Solutions Since 1965

June 2012

GOVERNING WITHIN THE TAX CAP

A DISCUSSION BRIEF ON PUBLIC FINANCE

HUDSON VALLEY PATTERN FOR PROGRESS PROMOTING REGIONAL, BALANCED AND SUSTAINABLE SOLUTIONS THAT ENHANCE THE GROWTH AND VITALITY OF THE HUDSON VALLEY.

Bond Rating: Upgraded from Aa1 to Aaa Tax Cap: Tax levy was below the cap, with a 1.75 percent increase

Orange County Government

What the Bond-rating Agency Said:

When the county’s bond rating was upgraded in 2011,

Orange County was lauded for its strong reserve fund,

which provided “a satisfactory cushion to absorb

projected near-term operating losses.” The county was

also given a positive outlook based on its effort to

promote development at its 25 business parks, relatively

strong property values and the anticipated economic

expansion by the Port Authority at Stewart Airport.

However, the rating agency also warned that Orange

County might depend too much on sales tax and

declining state and federal aid. The agency also

cautioned that the county’s reserve levels could decline

more in the short term.

How the County Met the Cap:

To get under the tax cap, Orange County cut many

expenditures and spent more than half of its reserve

fund. The most noteworthy cut came at the county’s

nursing home, the Valley View Center for Nursing Care

and Rehabilitation. Orange County defunded the 360-

bed nursing home for half the year, saving $8 million.

It’s currently attempting to sell the home. The county

also cut 90 positions from its budget, most by attrition of

vacant positions. It also cut appropriations to contrac-

tors by 3 to 4 percent. Those contractors provide various

services ranging from mental health to economic devel-

opment. The county also cut its entire budget for travel.

Orange County expended more than half its reserve fund

to get under the 2-percent cap. The budget office said

county officials spent roughly $40 million in reserves,

leaving a balance of roughly $31.5 million. Since then,

county budget office said the reserve fund has already

grown to more than $50 million, backed by stronger-

than-expected sales tax performance, especially at

Woodbury Common Premium Outlets.

The Challenges Ahead:

Many of Orange County’s costs continue to rise annually

by double-digit percentages. For instance, health care

increased by 10.6 percent and liability insurance rose by

32 percent, according to the budget office. The county’s

share of mandated social-service programs increased by

4 percent.

The county budget office noted that it will be difficult to

meet the cap in years ahead, especially because cuts

from previous years have left Orange with little remain-

ing to trim. The sale of its nursing home is also tenuous,

with the County Legislature recently calling for a panel to

examine the issue. And as the bond rating agency

pointed out, the county cannot make a habit of spending

the majority of its reserves. Service delivery systems will

have to change to achieve the goals of the tax cap.

For the past year, our conversation about public finance in New York has been dominated by the 2 percent tax cap.

That’s why Hudson Valley Pattern for Progress decided to survey a select number of Hudson Valley communities to

determine how the cap affected them. How has the cap changed our local governments? What challenges lie ahead

and what lessons have been learned? Pattern asked these questions and more to local governments in Orange and

Rockland counties. Pattern chose to examine these counties because their county government finances appear to be

headed in opposite directions – Orange standing on solid financial ground, and Rockland slipping toward crisis.

The state’s 2 percent tax cap is a relatively complex formula that limits the property-tax levy increase to 2 percent or

the rate of inflation, whichever is less. However, there are a number of exemptions that make the cap more compli-

cated. Local governments and school districts get exemptions for any lawsuit settlements that exceed 5 percent of

their levy, and for pension contributions that exceed 2 percent of their covered payroll. Capital projects are exempted

for school districts, but not for municipalities. Both receive an incentive if they go below the cap. A carryover of up to

1.5 percent can be used in following years if their increase is less than 2 percent.

THE COUNTY

“Counties are consolidating, privatizing and eliminating

public services. This, combined with spending down

any remaining fund balance, has enabled most coun-

ties to stay under the state-imposed property tax cap.

The trend, however, is unsustainable over the next few

years.”

- Stephen J. Acquario, Executive Director, NYSAC

Tax Cap: A Reflection of Year One


General Observations: How the Localities Did

Many local governments in Orange County only got under

the 2-percent cap because they spent from their reserve

funds. For instance, the City of Port Jervis would have

seen a 7 percent increase and Tuxedo would have posted

a 3.25 percent tax increase if both didn’t spend reserve

money. The Town of Deerpark used $200,000 in reserves

to get under the cap, even though that money came from

a bond used to pull it out of deficits from previous years.

Dwindling reserves can hurt municipal bond ratings and

leave local governments without a “rainy day fund” for

emergencies. Spending money from reserve funds to

meet the tax cap is not a sustainable solution.

Most local governments said they feared that large

increases in health insurance, liability insurance, and

gasoline would challenge their ability to stay under the

2-percent cap.

The vast majority of municipalities passed a resolution

to override the cap, even if they had no intention of

exceeding 2 percent. Government officials said they

feared penalties from the state or criticism in an audit

if they miscalculated the tax-cap formula.

Many government officials are cracking down on over-

time to whittle costs. For instance, the Town of War-

wick is now scheduling fewer police officers on its less

busy shifts to eliminate overtime.

Several officials said they are using the tax cap to aid

union negotiations, telling their union workers that big

raises are unrealistic.

Capital Projects:

Because capital projects are not exempted in the tax-cap

formula, local government officials said they are left with a

difficult choice: override the cap to maintain critical infra-

structure, or eliminate some projects altogether. The

following are examples of this dilemma:

The Town of Newburgh is under a consent order from

the Federal Environmental Protection Agency to build

a new water filtration plant that will cost roughly

$21.8 million. Supervisor Wayne Booth said the

project could also force Newburgh over the tax cap.

The Village of Monroe could need to raise more money

to fix a cracked dam at Mill Pond, which will cost

roughly $1.2 million.

The Village of Montgomery wanted to bond $500,000

to fix some of its buildings, sidewalks and roads. But it

could not make

it under the

cap, so it re-

duced the

amount of work

to $200,000.

The Village of

Woodbury went

over the cap in

2012 because

it spent more than $1 million to get additional sewage

capacity from the county and to cover capital projects

to address inflow and infiltration in its system.

Tax Cap Driven Changes: The Dialogue is On

In year No. 1 of the tax cap, some municipalities have

already begun to change the structure and functions of

their governments. Some are sharing or eliminating

services, while others have begun substantive discussions

with their neighbors. The following are some examples

given by municipal leaders:

The Town of Chester consolidated its assessing with

Orange County, saving roughly $100,000.

The Village of Monroe said it saved money by paving

more roads with its in-house DPW crew, rather than

contracting the work.

The Village of Warwick is negotiating with labor unions

to pay a larger share of health costs.

The Town of Crawford cut back on police dispatching

and administrative workers.

The Village of South Blooming Grove chose to forgo

roadside leaf and Christmas tree pickup.

The Town of New Windsor eliminated its Dial-a-Bus

service, saving $350,000.

The Town of Wallkill eliminated full-time police

dispatchers and seasonal staff at its parks.

Village trustees in Goshen started paying 20 percent

toward their health insurance, in hopes of convincing

village employees to follow their lead next year.

The Town of Deerpark cut its senior citizen shuttle

from five days to three, privatized its building depart-

ment, and changed its police chief, assistant assessor

and building inspector from full time to part time.

“It’s a driver of change, without a doubt. Nobody can

stay for five years below that 2 percent without mak-

ing major, fundamental, structural changes in their

government.” - Steve Neuhaus, Supervisor,

Town of Chester

“This tax levy cap, when you have things like health in-

surance continuing to go up and pension costs continu-

ing to go up, is eventually going to force service reduc-

tions.” - Richard Herbek, Manager, City of Newburgh

Under the

38 /42 Municipalities

Tax Cap

90 %


Rockland County Government

What the Bond-rating Agency Said:

When the bond rating agency downgraded Rockland in

May 2012, it focused on the county’s operating budget

gap of roughly $40 million. It noted that Rockland’s plan

to close the budget gap, including an increase to sales

and mortgage taxes, had not received support from its

state representatives. The county also failed to get con-

cessions from labor unions. Analysts also criticized the

county for failing to sell or make “financial improvements”

to its county-owned nursing home.

The agency’s report noted the county may experience dif-

ficulty when trying to access short-term credit from the

capital markets, and any borrowed money would likely

come at higher interest rates. Rockland has already

asked the state to issue $80 million in deficit reduction

bonds.

Analysts said Rockland could improve its rating by imple-

menting realistic revenue enhancements, reducing expen-

ditures, and acting decisively to

close the operating gap at its nursing

home.

Why it Exceeded the Cap:

According to Rockland County

officials, the county exceeded the

cap for many reasons connected to

revenue and expenditures. On the

revenue side, Rockland missed its

sales-tax projection in 2011 by roughly $3 million,

creating a deficit that had to be closed the following year.

The county-owned Summit Park Hospital and Nursing

Care Center requires significant taxpayer subsidies to op-

erate. The county finance office said taxpayers would pay

as much as $15 million this year to keep the center open.

To meet the state’s 2-percent cap, they said Rockland

would have needed to lay off roughly 540 workers. This

year it eliminated 50 jobs, and county leaders are cur-

rently examining the reduction of another 150 positions.

Rockland County did relieve the taxpayers of two costs–

its methadone clinic and a portion of its mental-health

services were privatized this year.

The Challenges Ahead:

Rockland County’s finance office said it’s projecting a

deficit of roughly $90 million by the end of 2012. To close

that gap, the county finance office said Rockland will care-

fully analyze the future of its nursing home and hospital.

The county is also examining the idea of outsourcing all

its highway work to towns and villages, contracting with

local governments to maintain county highways with their

own crews. Rockland will also explore whether a local hos-

pital can take over its inpatient mental health beds. The

county also noted that significant layoffs will be the only

way it reaches the state’s 2-percent cap.

Other Emerging Strategies:

There is concern about the county’s response to its fiscal

crisis with the creation of an “energy tax.” Pattern has

written before about the practice of shifting taxes rather

than directly accepting responsibility and adapting service

delivery. Further, Rockland County objected to this very

practice when the Metropolitan Transportation Authority

shifted the true cost of its service by creating fees and

taxes for unrelated services. Should the county find it

necessary to raise taxes, Pattern believes it should be in

the form of the property tax to create greater transpar-

ency that it is the county raising the funds. This will lead

to a clearer debate about whether this

was the best way to achieve fiscal

stability. We also strongly urge consid-

eration be given to the Deficit Reduc-

tion Plan proposed by Assemblyman

Kenneth Zembrowski. We believe the

size of the projected gap, the downgrad-

ing of the bonds and the stagnant econ-

omy supports the creation of the Deficit

Reduction Task Force for a defined period of time. As New

York City learned from its fiscal crisis in the 1970s, aus-

terity measures do not last forever and if the economy

rebounds they can be revisited.

Bond Rating: Downgraded from A3 to Baa3 (lowest ranking for any county in New York State)

Tax Cap: Tax levy was above the cap, with a 31 percent increase

“The public knows about the cap, and

government has been under attack

for the past several years about over-

spending. With the political climate

being what it was, it was best to work

within the cap and make the hard

choices.” – Carl Wright, Mayor, Village

of Sloatsburg

The dilemma of PILOT agreements:

Several local governments have complained that the tax-

cap punishes them for attracting businesses through pay-

ment in lieu of taxes agreements (PILOT). The cap does not

allow municipalities to include the increases in property

value that resulted from PILOTs in their growth factor, and it

forces them to subtract PILOT payments from their tax-levy

limit. As a result, governments and school districts in grow-

ing regions have faced levy-increase limits below 2 percent,

and some are now rejecting PILOTs because of their affect

on the cap. New York must address this problem during a

period when the tax cap and jobs are priorities.


General Observations: How the Localities Did It

Several local governments in Rockland County used re-

serve funds to get under the 2 percent tax cap. Spending

this money to meet the tax cap is not a sustainable solu-

tion, and alternatives should be considered.

Most local governments responded that double-digit

increases in health care threatened to put them over the

tax cap in years ahead.

Some municipalities said they were exploring

user fees as a way to offset taxes. User fees are com-

monly applied for trash pickup, but the Village of Kaser

was also researching whether a user fee could be applied

to public safety.

Local officials are concerned that Rockland County’s

budget problems could trickle down to local governments,

making it harder for them to meet the tax cap. Town and

village officials feared that Rockland might take away the

portion of sales tax that is shared with municipalities, and

charge the towns for election services.

The Town of Ramapo recently saw its bond rating

downgraded for operating deficits and taking on debt for

“non-essential enterprises,” further proving the need for

long-term fiscal planning at every level of government.

Tax Certioraris Hurt :

Rockland County has been hit several times in recent

years with large tax challenges that forced local govern-

ments and school districts to pay back millions of dollars.

These multi-million dollar settlements also have forced

municipalities over the cap, or currently threaten to push

some to the brink. The following are some examples:

The Palisades Center mall recently filed a court action

that seeks to reduce its $253 million assessment by two-

thirds for the years 2008 and 2009. If the mall owners

are successful, the Town of Clarkstown, school district

and county could have to pay back millions. They could

have to break the cap to make those payments.

The Town of Orangetown will also be facing tax in-

creases due to a tax certiorari. Pfizer, the pharmaceutical

manufacturer, won a $2.4 million settlement that will

have to be paid back by the town.

Ignoring the Cap:

A few local governments in Rockland have decided to

ignore the cap in favor of giving raises to their employees

or keeping services. Here are some examples:

Montebello Mayor Jeffrey Oppenheim admits that the

village had no interest in the cap when it was passed. Af-

ter zero tax increases for a few years, Montebello chose

to raise taxes higher than the cap to fund a number high-

way and infrastructure projects.

West Haverstraw gave raises to its 17 full-time em-

ployees instead of going under the tax cap. Mayor John

Ramundo said the

village could have

gone under the

cap without the

raises but he

“didn’t think it was

fair” to freeze his

workers’ salaries.

Several mayors

and supervisors

expected to exceed

the tax cap in coming years. They indicated it was politi-

cally important to meet the cap in the first year, but it will

likely become more important to keep critical services in

the years that follow, even if that means going over a 2

percent increase on the property tax levy.

Tax Cap Driven Changes:

The tax cap has forced several local governments in Rock-

land County to think differently about the services they

offer, and whether it’s more efficient to partner with

neighboring municipalities. The increased dialogue is one

of the important outcomes of the cap. The following are

some examples of changes driven by the cap:

The Town of Orangetown has decided not to fill posi-

tions in its court, tax receiver’s office and building depart-

ment. It also has contemplated the closure of its munici-

pal golf course and is exploring whether to consolidate its

tax receiver, assessor or finance departments.

The mayor of West Haverstraw wants to convince tax

payers that privatizing garbage pickup will save money.

The village’s current user fee is $290 per household, but

privatization would bring it down to $210, the mayor said.

West Haverstraw has also been talking with the Village of

Haverstraw about shared road paving.

The Village of Hillburn asked its employees to contrib-

ute to their health insurance this year for the first time.

The villages of Hillburn, Sloatsburg and Suffern have

talked about combining fire companies and sharing DPW

services, officials said.

The Village of Haverstraw said its open to consolidat-

ing courts, shared highway services and combined con-

tracting to pave sidewalks.

Suffern applied for a grant to examine sharing its wa-

ter with Hillburn, which currently buys water from a private

company.

“It’s going to become more difficult to stay within 2 percent

as time goes on. There will be a time when (local govern-

ments) won’t be able to use surplus or take advantage of

early retirement programs. They’re not going to have the

luxury of downsizing anymore.” - Alexander Gromack,

Supervisor, Town of Clarkstown

Under the

17 /24 Municipalities

Tax Cap

71%


Tax Cap forces staff and program cuts in School Districts:

School districts across the Hudson Valley had been cutting

staff and programs because of the Great Recession, but

the state’s tax cap gave those cuts new urgency.

If school districts wanted to exceed the cap, they needed

approval from more than 60 percent of the voters in their

district. If the school budget failed twice, the district would

have to operate with a zero-percent increase, forcing huge

cuts.

That scenario was seen as too risky for many. According to

the New York State School Boards Association, 623 dis-

tricts statewide, or 92.8 percent, proposed budgets that

were below the new tax cap. Of those, 99.2 percent

passed.

Of the 48 districts that proposed budgets above the cap,

only 60.4 percent passed, suggesting that voters thought

of the tax cap as an important benchmark.

To get under the tax cap, school districts in Orange and

Rockland counties had to eliminate several hundred posi-

tions, including administrators, teachers, teaching assis-

tants and staff. They also had to make cuts to popular but

optional programs. The most common cuts include:

Changing full-day kindergarten to half-day. Because its

budget failed, East Ramapo is one of a growing num-

ber of school districts that must consider eliminating

kindergarten altogether.

Foreign language classes at the elementary and sec-

ondary levels.

Summer school course offerings.

The elimination of sports, especially modified and

freshman athletic teams.

Honors classes, including Advance Placement

courses, as well as music programs.

School districts are facing many of the same pressures as

local governments, including rising health, pension, liability

and other costs. Meanwhile, many districts are seeing a

reduction in state aid because their student enrollment is

declining.

To offset the loss of aid and meet the tax cap, 99 percent

of school districts statewide chose to spend money from

their reserve funds, according to NYSSBA. However, that is

a dangerous trend. A study by the Cornell University Center

for Rural Schools found that high-needs rural schools will

deplete all their fund balance in the aggregate by 2014.

There are also signs that the stresses of the tax cap and

recession have forced some thoughtful changes. For in-

stance, six school districts in Orange County are now shar-

ing a bus to bring children with special needs to out-of-

county facilities. Each district used to run its own bus. The

annual savings from that alone are estimated to be

$300,000.

Pattern’s Position

The tax cap dialogue will hopefully open a wide variety of

discussion about K-12 education, its cost and its out-

comes. Pattern sees great opportunity for innovation and

redefining how education services are delivered. There is

a great opportunity before us if education leaders and the

community can realize it and craft smart, efficient changes

for the future.

“It’s being spent somewhat desper-

ately and there is no mechanism to

refill the fund balance.”

John Sipple, Director of the Center

for Rural Schools “There are new ways of looking at things by require-

ment of the tax cap, that absent this compelling

reason would not take place. The challenge is to have

that change be a thoughtful change.” - Terry Olivo,

Chief Operating Officer, Orange-Ulster BOCES

“With the tax cap, the question will eventually become when does a school district get to a point and place where

it cannot provide, according to the constitution, “a free and appropriate public education?” - Bryan Burrell,

Rockland County School Boards Association

Orange County:

Every school budget passed in 2012. Only

two school districts, Tuxedo and Kiryas

Joel, exceeded 2 percent and required 60

percent approval from their district voters.

Rockland County:

Every school district proposed a budget that was less

than the 2 percent levy limit. However, the East

Ramapo district budget, which proposed a budget be-

low the cap, failed and will be subject to a second vote

on June 19.


Municipal Bond Rating:

Importance of Reserve Funds:

Reserve funds are critically important to all local govern-

ments and school districts, regardless of current fiscal is-

sues. Reserve funds provide a cushion for fiscally demand-

ing times, reduce the dependence on bor-

rowing, and are part of the formula for bond

ratings. Reserve funds must be accompanied

by a plan that clearly states their purpose,

when it is appropriate to use them, a plan for

replenishing them, and they must be trans-

parent to the public.

According to the New York State Office of the State Comp-

troller, “Towns, villages and counties are permitted by law

to retain a reasonable amount of any remaining estimated

unappropriated, unreserved fund balance for each fund,

consistent with prudent budgeting practices, necessary to

ensure the orderly operation of their government. School

districts, however, are limited to retaining 4 percent of the

current school budget in unreserved, unappropriated fund

balance.” Additionally, reserve funds must also be in-

vested and all interest must “follow the princi-

pal,” which includes separate accounting re-

cords for each reserve fund.

Reserve funds have traditionally been used by

governments to cover important and unforeseen

costs, such as emergency infrastructure repairs,

cleanup efforts following natural disasters, and

tax certiorari settlements. However, the past several years

have seen governments and school districts spend reserve

funds to keep taxes low during the Great Recession, and

to get under the tax cap. If that pattern continues, the

money might not be there when other emergencies arise.

Cities throughout the Hudson Valley

and across New York are experienc-

ing great fiscal difficulties. The chart

on this page shows that bond rating

agencies have recently altered the

ratings of seven Hudson Valley cit-

ies to include a downgrade or a

worsened outlook for the future.

In New York State, the discussion

about struggling cities used to cen-

ter around Buffalo, Syracuse and

Rochester. But as we have feared,

they are not the only cities that

need attention. The municipal fiscal

crisis has hit the Hudson Valley.

Pattern proposes four action steps

to understand the fiscal strain on

our cities and help them improve:

1. The State of New York needs to recognize this is a statewide problem. There should be a statewide commission to

look at the fiscal plight of cities, which tend to be inherently different as they include a multitude of issues that

range from crime to insufficient housing, and substantial unemployment to higher levels of poverty.

2. We recognize that the state does not have a lot of money to throw at the problem as it tries to stabilize its own fiscal

issues. Yet more must be done. The original intent of the Empire Zone Program was to help the most economically

distressed parts of New York. A new, very limited, targeted program must be created to help

cities.

3. Through programs offered at the Department of State, counties, towns and villages should be

encouraged to share services and even consolidate functions with cities.

4. Each city should be required to do four-year financial plans and potentially multi-year

budgeting.

CITIES OF THE

HUDSON VALLEY

CURRENT

RATING MOST RECENT ACTION-

Newburgh Ba1 Downgrade (2010)

Middletown A1 Upgrade (2011)

Port Jervis A1 Steady

Beacon Aa3 Upgrade (2011)

Poughkeepsie A2 Downgrade / Negative Outlook (2011)

Kingston A1 Steady / Positive Outlook Removed (2010)

Yonkers Baa1 Downgrade / Negative Outlook (2011)

White Plains Aa1 Steady / Negative Outlook (2012)

New Rochelle Aa3 Downgrade / Negative Outlook (2011)

Mount Vernon A1 Downgrade / Negative Outlook (2011)

Peekskill Aa2 Steady

Rye Aaa Steady

Source: Moody’s Investors Service


LONG-TERM FINANCIAL PLANNING AND RESERVES

Hudson Valley Pattern for Progress is the policy, planning and advocacy organization

that creates regional, balanced and sustainable solutions to quality-of-life issues

by bringing together business, nonprofit, academic and government leaders

to collaborate on regional approaches to affordable/workforce housing, municipal sharing

and local government efficiency, land use policy, transportation and other infrastructure issues

that most impact the growth and vitality of the regional economy.

Become a member of Pattern and be part of the solution!

3 Washington Center, Newburgh, NY 12550 (845) 565-4900 www.Pattern-for-Progress.org

HUDSON VALLEY PATTERN FOR PROGRESS

What is Long-Term Financial Planning:

Long-Term Financial Planning (LTFP) is a proactive ap-

proach to budgeting, and it establishes goals and direction

for a municipality or school. At the most fundamental level,

LTFP primarily deals with operating budgets and projec-

tions for the next two to four years. LTFP, specifically multi-

year budgeting, assesses costs and savings over time.

It is crucial that elected officials practice LTFP with full in-

volvement from department staff and residents, creating a

sense of ownership. There are many external factors and

variables to consider during the process of LTFP that are

out of the control of government officials, such as natural

disasters, property values, gas prices and population and

employment changes.

Why Plan:

Understanding long term implications of budgeting and the

impact of decisions made today is critically important to

the fiscal health of local governments. Budget decisions

based upon short-term goals lead to potentially disastrous

implications that can impact long-term strategies. For ex-

ample, all local officials face union and labor contracts.

Avoiding these issues or prolonging the difficult decisions

drastically increases the potential for fiscal crisis. Con-

versely, local officials who project budget outcomes, pro-

vide background and demonstrate actual financial data as

a proactive approach, will benefit. Additionally, presenting

the financial impacts and the likelihood of fiscal stress bol-

sters the argument for additional state aid to local govern-

ments and potential mandate relief.

In the past, many local governments used property taxes

as the stabilizing force to eliminate fiscal shortfalls. The

establishment of the New York State Property Tax Cap

curbed the practice of balancing budgets by raising local

taxes. However, LTFP allows local governments to create a

strategy for future years and at least creates a fact-based

rationale for overriding the tax cap when it’s necessary.

The Office of the State Comptroller (OSC) provides both

online training and hands on training for municipalities and

school districts regarding LTFP. The OSC website,

www.osc.state.ny.us/localgov/myfp/index.htm, offers a

tutorial and computer-generated spreadsheets that assist

local governments and school districts with long term

financial planning.

Benefits:

Despite volatile fiscal conditions that make it difficult to

project costs and revenues, there are definite benefits to

LTFP. Budget projections help government officials predict

budget shortfalls and adapt to them. It also reduces the

potential for large, unforeseen tax increases or budget

cuts.

Impacts of the Tax Cap:

The tax cap forced local governments and school districts

to initiate very difficult conversations about potential

budget cuts, layoffs, reductions in services and whether or

not to override the tax cap. LTFP can help a municipality of

any size plan and adjust for the budget years ahead. Still,

relatively few local governments use LTFP as a tool to pre-

dict their expenditures and adjust their budgets.

Of the 32 local governments in Orange County surveyed by

Pattern, only nine used a long-term plan. And of the 14

surveyed in Rockland County, only two planned for multiple

years.

CITY OF NEWBURGH

Newburgh has been using LTFP to forecast budget short-

falls and make revisions. City Manager Richard Herbek

used LTFP to project budget deficits over the next three

years of $1.2 million, $1.7 million and $2.2 million. Her-

bek reported to the state that increasing health care

costs are largely driving the deficits. In response to the

deficits, Newburgh has already renegotiated some union

contracts and anticipates new hires to contribute to their

benefits in future years.

TOWN OF DEERPARK

Deerpark began LTFP after a deficit forced the town to

borrow $600,000 for operations. Supervisor Karl

Brabenec began forecasting expenses four years out to

determine where the budget was quickly growing. Health

care was a trouble spot. The town changed to a less

expensive plan, for both employees and retirees. The

town also changed some of the highest paid positions,

such as police chief and bookkeeper to part time, thus

reducing expenses.

http://www.osc.state.ny.us/localgov/myfp/index.htm

governing within the tax cap

Documents

county budget office

county officials

county legislature

percent tax

aaa tax cap

countys bond rating

orange countys costs

tax levy