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The Steep Slope, Part 2: Croton's Options for Controlling Taxes

July 2, 2007

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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).

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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.

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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.

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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.

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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.

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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.)

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.

Leo Wiegman

Editor’s Note: The author is a former Village of Croton-on-Hudson Trustee who served three terms from 2001 to 2007.

On December 15, 2007 11:22 AM, Tom Moore said:

Leo: Thanks for all the great facts. But Croton has to stop doing the same things over and over again.

“Biodegradable bags have trimmed leaf-removal costs significantly in places like Rockville Centre and Litchfield, a town of 8,600 in northwestern Connecticut, because gathering bags takes less time than shoveling up leaves. Landscapers also collect leaves and haul them away.” Times article dated Dec 2

I know When Bob was Mayor he tried to get Croton to switch to baggin leaves but the public complained. Let’s re visit it. How about holding our village elections in Nov., so someone else can pay the cost of machines and poll workers. It will be a cost savings. How about getting the other towns that share the croton river to pick up the cost of the Croton police officers riding the boat on the river. They all have very nice houses along the river and complain about the lack of enforcement. It was nice that they help to buy the boat, but the real cost is the Croton police riding the boat all summer long.

Thanks for all that you do Leo:

Tom Moore Sr.

On December 13, 2007 9:33 AM, weewill said:

As luck would have it, Phil Reisman has a “must read” piece in today’s Journal News on the proposed raises for County Legislators. Check it out for a good clear view of where your county tax dollars are being used/abused!

On December 12, 2007 8:46 PM, weewill said:

And for every person reading these posts, please, please put your money where your mouths are and send a clear and concise email to our county legislator, Bill Burton at wxb1@westgov.com and beg him NOT to vote for salary increases for any county legislator.

And go on to suggest to him that there are some of us who feel we should be downsizing county government given the small amount of bang for the buck we get. I’d bet if you asked your neighbors how many of the county services they even know exist much less ever use you might be surprised. Most of us do not make use of the services at all and if anything, think the number of legislators should be reduced requiring fewer and less dollars.

A raise would be a direct affront to most of us during the present high-priced and ever escalating tax area in Westchester. Latest reports label us as the highest taxed community in the country! We cannot conceive of an increase for county legislators. Present a budget that brings us in line with other communities and we may be willing to consider it. Public service is just that … public service. Fair and reasonable compensation is ok. The consideration before the board presently is outrageously out of line.

We ask that you at least give us a fair shot at paying our oil and gas bills. We all need to tighten our belts and that includes government who should be setting an example for us.

On December 8, 2007 1:02 PM, Stu said:

Thank you notorc for remembering this important analysis done by Leo Wiegman. Although we can probably never reduce taxes, his suggestions regarding the available options for keeping them in check are very valid, especially his first option regarding Croton’s under-developed commmercial properties. From what I am reading in the Gazzette, the economic development committee has been working on identifying ways to kick-start some meaningful improvements in the Harmon Gateway area. Utilizing the Gateway concepts as a base (which I recently read, I hope they can develop some implementation plans that both the Village and the property owners will support. Such improvements take time but, if achieved, Croton would be moving in the right direction.

On December 8, 2007 10:24 AM, notorc said:

I was in a big debate yesterday about the so-called sub prime bailout. The talk of people getting “suckered” or being “foolish” had me irate. At least someone that signs up for an ARM has the chance to read the fine print and review worst case scenarios.

I’m probably a fairly typical resident of Croton that pays $1,000+ a month in school/village/town/county taxes. I believe the big ones (School/village) were up “only” 7% last year but prior to that they peaked out near 10% for a couple of years in a row.

I remembered Leo’s great articles regarding these taxes and just reviewed them again.

Forget about the subprime issue, that’s a personal issue facing individuals. Instead, how are we as a community expected to sustain 7-10% increases year after year after year? How many folks know of neighbors that migrated to places like the Carolinas in order to be able to afford retirement? It’s a damn shame when you’re own local school, village and town governments kick you out of your home.

Now I know this isn’t a simple issue but every village resident should have a copy of the charts Leo put together in his articles. They should be posted on the village website, on the front door of the municipal building and in every kitchen in Croton.

If you do pay $1,000 a month, picture this. Every day you come home from work, put $50 on the kitchen table for your taxes. Yep, $250/wk is what you need.

Think about it. Similar to the subprime folks, we could sell our homes and move to a cheaper place but sadly, that won’t be in Croton. We can’t simply re-finance either, it just doesn’t work that way.

What we need is a “freeze” on rising rates…just like this bail out offers!

Where do we apply?

On July 2, 2007 2:20 PM, weewill said:

This article is perhaps one of the most significant and useful articles ever to be published in any newspaper, blog or village newsletter. Leo is one smart guy who has an indepth handle on village fiscal matters. His analysis and suggestions for help in controlling taxes are extraordinarily clear, creative and well presented.

It will take a while to grasp and digest all the facts he presents but it’s well worth the effort. As one who welcomes the visual presentations of graphics, I was particularly interested in graph #2 showing tax increases from 1998 - 2008. It’s interesting to note they continue to rise under the present administration despite many statements to the contrary by both the Mayor and his supporters. We of course appreciate efforts of past and present boards to keep a lid on taxes. However, those efforts have largely been unsuccessful and a new strategy must be considered. . Leo is to be especially commended for his personal efforts to search for ways to improve life in the village. That was his MO when he sat on the board and remains so today.

His knowledge is comprehensive and his ideas innovative and daring. We need his expertise and commitment if we’re to move forward and I urge you to read his report with an open mind. I thank him for his dedication and for making difficult facts easy to understand.

Georgianna



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