Recently, we looked at the overall property tax picture for Croton and, in particular, the school tax portion. Now, let’s look at the village taxes—about a third of our local tax bill. And at some possible strategies for keeping property taxes in check:
Under state law, the village expenses must equal revenue each year. Village revenue comes from property taxes, parking lot permits (gold in the chart), and other sources (county sales tax, etc).
A larger portion of village revenue comes from non-tax sources (yellow and gold in the chart above) than for the school district, chiefly due to the village’s income from the Croton Harmon commuter parking lot and the village’s water sales. Other sources include our share of the county sales tax, and fees for village programs and services.
Income from the Westchester County sales tax goes up and down with the general economy, so we can do little to influence that revenue stream. Croton’s annual share has lately been between $840,000 and $960,000. We do control our parking and water rates, which bring in over $1.5 million each.
The good news is the village’s non-tax revenues have kept pace with the budget increases since 1998. The bad news is, while expenses will keep going up, our existing non-tax revenues may not be able to keep up any longer.
Even with non-tax revenues increasing, the village tax rate—like the school rate—has climbed even steeply in recent years. Can we reduce the steepness of this tax slope? What do we do on the expense side? On the revenue side?
Option #1: Develop “Better Properties”
Let’s call this the “better properties” option: getting more tax dollars from existing lots. A handsome, multifunctional two or three story building pays more property taxes than a one story building of the same footprint.
Hundreds of Croton’s residents have improved their homes in recent years. Commercial or mixed use lots have lagged far behind home improvements on a similar scale. This “home-shop improvement gap” creates a tax catch-22 for homeowners.
Unless commercial or mixed use properties undergo similar upgrades, the homeowners’ renovations will lead to rising property values and resulting tax assessments, which in turn will only further guarantee that residential properties, as a group, will pay an even greater share of the overall village tax pie than commercial properties.
Redevelopment of existing non-residential lots to higher and better uses may hold the best long term way to spread out future tax increases beyond today’s heavy reliance on resident homeowners paying the lion’s share of village, school and county taxes.
Croton does have a large number of under-developed commercially zoned properties. Commercial and residential property pay the same tax rate. But commercial lots often require fewer services (e.g. less impact on schools than new homes) and in many cases could have greater valuation per acre than residential lots.
Are there ways to help underdeveloped commercial or office properties become more valuable? The more value a property could have, the more likely an owner will reinvest or redevelop. More investment means more taxable improvements that generate more tax dollars from the same acre of land.
We can also try to expand the number of properties that pay taxes. But the village is largely built out, so this “more properties” option holds less promise of relief than it would for a municipality with lots of open, undeveloped land. Of course, more development would increase the need for new public services, with all those attendant costs, from new sewer and water, to police, fire protection, and education.
Option #2: Cut Expenses
We can always try to stem the rising tide of expenses. However, only a very small slice of the budget contains “cuttable” expenses. Most of the budget contains spending that the village can not alter by itself, such as long term labor contracts, required pension contributions, borrowing costs, and state and federal mandates.
Note that mandates for health insurance and pension contributions (yellow in the chart), had the largest percentage increase among village expenses in the past 5 years. Nonetheless, small savings in other categories could add up are possible without cutting services or inflicting undue sacrifices, such as continuing to implement energy savings measures.
Option #3: Raise Rates
We can also try to expand revenue from non-tax sources. The single biggest non-tax revenue source is the village’s commuter lot at the Croton-Harmon train station at $1.98 million in 2006-7. June 2007 witnessed the 2nd hike in parking rates in 3 years for commuters at the station.
Revenue has either fallen or barely increased after the last two rate hikes as the chart shows and a prior column discussed. Can we keep raising parking rates, especially without also improving the commuter’s experience at the lot?
In 2005, 2006, and 2007 the village has raised the rate per gallon of metered water, 5%, 8%, and 7.3% respectively. Village income from water sales has risen modestly, contributing $1.62 million in 2006-7 to the village coffers.
Historically, water use was varies depending on how dry the year is. But that may no longer be true. Our water consumption was relatively flat at 350 million gallons from 1998-2003, but is climbing now and seems likely to surpass 400 million gallons this year and this is happening even with recent relatively wet years.
So we have to assume folks are just using more water. But high water consumption may push the Village to construct a costly new well sooner than expected, a prospect best avoided, if we care about keeping tax rates low.
Since June 2006, an increase in the water rate produces an automatic increase in the new additional sewer rate. Clearly the village has a captive audience among its water and sewer users. Can the village raise water and sewer rates every year, as we have in the past 3 years?
The village has been aggressive in raising other fees for services, but these revenues are dwarfed by the parking and water contributions. In sum, futures hikes in commuter parking and water rates are options for increasing revenue, but each comes with risks. So where else can we look for residential property tax relief?
Option #4: Reorganize Services
Another place we can look is reorganizing existing services to either reduce cost or raise non-tax revenue. Anyone in business knows you have to invest a dollar to make a dollar and ten. So the question is what can we invest in that would bring a revenue return or cut future expenses?
Spin off Ambulance Corps: One new potential idea is to create a separate volunteer ambulance corp. in Croton. Croton’s Fire Department leadership is investigating this innovation already. Spinning off emergency medical services from the volunteer Fire Department would allow the village to collect from insurance companies for the transportation costs of bringing those who have health insurance to area hospitals. This potential source of reimbursement has a big start up cost, but could bring in more than it costs in short order.
Unify Assessment Rolls: Another possible option is moving the Village assessment roll to the Town of Cortlandt’s larger office. The Village would lose some control and discretion. The move would have a significant up front cost of converting all village assessment to the town roll. The Village’s own cost for conducting its own assessments is not very large. So there is not big immediate savings. The strategic questions is, would we benefit in the long run from eliminating the dueling assessments between village and town?
We have a many potential options to help avoid property taxes from climbing as steeply as in the past 3 years. No one answer will solve the whole equation. We just need to be creative. And we need to get started today!
Postscript on Property Valuation:
We face a stiff challenge in our total valuation of property within the village. According to the assessment history, overall property value in Croton is relatively stagnant, having risen only 4% in the past decade.
The new Discovery Cove condominiums account for valuation increase seen in 2003 and 2004. Depreciation of phone, power utility and other “special franchise” properties and successful tax grievance by one large property owner have lowered our property valuation since 2004.
For a given amount to be raised by tax levy ($9.8 million for Croton in 2007-8), a lower total total property valuation means a higher tax rate per $1000 of assessed value, and vice versa. So if we raise our total Village property valuation, our tax rate should increase less than if the valuation were flat or declines. (See Table 1.)
|Impact of Rise in Total Valuation on Tax Rate||Assessed Property Valuation in Croton||Total Village Tax Levy||Tax rate (Tax Levy ÷ Assessed Value) x 1000|
|Current approximate (Actual $43.9MM)||$40,000,000||$10,000,000||$250|
|Hypothetical improvement in property value of 20%||$50,000,000||$10,000,000||$200|
Despite rising real estate prices, the assessed values of properties lag far behind their actual market value, because we don’t reassess properties every year (nor does any other community).
To quote the state’s Office of Real Property Services, “In New York State each municipality is authorized to assess at market value or some fraction of market value. A level of assessment (LOA) of 50 percent means that assessments are at half of market value; an LOA of 100 percent means a community is assessing at 100 percent of market value. Regardless of the LOA chosen by a municipality, all of the assessments in the municipality are required by law to be at a uniform percentage of market value.”
The state assigns a residential assessment ratio (RAR) reflecting that level of assessment for all assessed residential values in Croton. For example, let’s asssume Croton’s RAR is 3.0% (it varies somewhat from year to year). If the village’s assessed value card for my home states assesses the value of my property at $20,000, I divide that value by the RAR and discover this method yields a current market value for my home of $600,000. Maybe that is about right. Maybe it’s too high, or to low.
For more information, the NYS Office of Real Property Services is a good place to start.
Editor’s Note: The author is a former Village of Croton-on-Hudson Trustee who served three terms from 2001 to 2007.