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Steep Slope [Part 3]: Village Taxes 2008-2009

April 29, 2008

real deal by a.w. leo wiegman

Last June in this column, we discussed some of the options available for curbing village property tax rates: Develop “Better Properties”; Cut Expenses; Raise Service Rates & Fees; and Reorganize Services.

Croton’s final fiscal 2008-2009 budget that emerged from the annual budget process is—as always—lower than the staff’s initial proposed budget.

How did the village board and staff get there? For many budget lines that do not involve personnel, the budget for next year is nearly flat over the current year. Let’s take a quick look at which of major tax levers were used and at inflation, capital projects, and resulting debt expenses.

The tax rate increase for 2008-2009 will be a modest 3.95%, down from the proposed budget that would have required a 5.9% increase. Given the underlying valuation for 2008-2009, the new total tax levy that yields a 3.95% increase must be circa $10,250,000 (the amount to be raised by local property taxes). The village’s total budget will be just over $16 million with the difference of c. $6 million raised by other means (parking lot, water and sewer rates, building and recreation fees, sales tax share, etc).

Compared to most other neighboring towns and villages this year, 3.95% is slightly better than the average. So, kudos to the board and staff!

The Property Value Lever: This year’s budget has no discernible assistance from the “Better Property” lever. The village did see an minuscule rise in property valuation (of +4/10th of 1%) for 2008-2009. The state’s valuation is based on transactions of prior fiscal year. So any continued softness in housing prices this year will affect tax calculations in 2009-2010 or beyond. In absolute dollars, the current underlying valuation is simply back to where it was from 2000 through 2003. However, the village tax levy is much larger now. So it will take a much bigger increase in property value in future years to avoid a tax rate increase, all other things being equal.

The Reorganize Services Lever: The “Reorganize Services” lever is not a major factor in lowering taxes this year either. While the village is working to establish a separate ambulance (EMS) corps, this is not yet having any positive fiscal impact [A4540]. Sharing services is of great interest to the county and neighboring towns and villages, e.g. see Andy Spano’s 2008 State of the County address and Assemblywoman Galef recent forum in Cortlandt on this topic. N.B. References such as [A4540] throughout this column refer the specific village budget code and accounts being discussed so you can look these up easily.

The Cut Expenses Lever: As the other two major levers above were non-factors this year, my guess is the final budget was reduced from the initial proposal with some “Cut Expenses” moves with a smidgeon of “Raise Fees and Non-Tax Revenue” tossed in.

Any combination of expense cuts and revenues hikes that netted a combined $200,000 reduction in the tax levy would have dropped the resulting tax rate increase from 5.91% to 3.95%. The final budget numbers behind the 3.95% increase have not yet been made public.

The village has only spent $250,000 (70%) of the 2007-08 earmark through February 2008 of the fiscal year that began June 1, 2007. So, the village reduced the earmark for legal work to a mere $337,000 this coming year, the biggest chunk of which is $200,000 for continuing the “Outside Legal Costs-1A Croton Point Avenue & Other” [A1420, Account # 4000]. Hence, in the law appropriations line we see a reduction of $43,000 from prior year’s $360,800 legal earmark of 2007-08.

Staff raises appear to be circa 4%, roughly in line with inflation and the comparable salaries in other municipalities. Keep in mind that the multi-year contracts with the Croton Police Association and Teamsters Local 456 lock in a large portion of the village’s commitment for salary expenses.

The Raise Non-Tax Revenue Lever: On the revenue side, the village projects about $166,000 more in non-property tax revenue for 2008-2009.

  1. The village anticipates it will collect $35,000 (3%) more dollars in 2008-09 from our share of the County Sales Tax and Cable Franchise Tax [A1120-1170, p R-2]. As we head into a recession, it seems more likely sales tax revenues will drop, but maybe the village has special insight here.
  2. The village anticipates collecting $25,000 (1%) more from the train station parking lot permits in 08-09 than was budgeted for 07-08 [A1720-1730, p.R-4].
  3. The village anticipates a $13,000 (9%) increase in Parks and Recreation program fees [A2001, P. R-5].
  4. The village anticipates a $28,000 (13%) increase in what the Town of Cortlandt pays Croton for fire protection services to the Mt. Airy homeowners [A2262, p.R-7].
  5. The village anticipates a $48,000 (240%!) increase in the rental of real property [A2410, p.R-9], which may be due to rising taxi stand rental income, but I am not sure..
  6. The village anticipates about $7,000 (12%) increase in public safety (e.g. street opening permits for ConEd, etc) and building permit fee incomes [A2550-2555, p.R-10].
  7. The village anticipates a $10,000 (5%) increase to $225,000 in “Fines and Forfeited Bail” due to actual amounts collected being higher than budgeted in recent years [A2610, p.R-11].
  8. The village anticipates minor increases in state aid and mortgage tax shares of $11,000 (8%) as well [A3001-3005, p.R-14].

Inflation: All in all, the upward pressure on the budget comes from a rise in cost of delivering the basic services we all want—without adding new services. The police department, a big ticket as 17% of total budget, is expanding by one officer. This addition is not strictly driven by inflation, but is seen as a way to help keep overtime costs from rising in the future. Together with the Croton Police Association contract raises, the police “personnel” budget increases by $260,000 (13%) for 2008-09 [A3120, account #1000].

The Fire Department budget is about one fifth the size of the police budget and will go up $68,000 (15%) in 2008-09, largely due to inflation in supplies and maintenance costs [A3410].

Medical insurance and general inflation are driving up many other costs. For example, the village’s electricity bill is anticipated to rise 21% to $170,000 from PASNY and Con-Ed. Next year’s power bill represents a 55% jump from what we actually spent on electricity just 2 years ago in fiscal 2006-2007!

Environmentalists in the audience, take note: the village’s cost for the renewable wind energy we buy is $8,750 and has not increased since inception. Wind power is “recession proof,” because it is not subject to fluctuations in coal, oil, natural gas or nuclear fuel prices.

Capital Projects: The total amount the village projects it will borrow for capital projects during 2008-09 is c. $3.8 million. Some capital expenses turned out to be much more than anticipated, e.g. corrosion control. The final budget may defer some projects for that reason. Some expenses we know are being contemplated are missing entirely, like acquiring property at 1A Croton Point Avenue.

  1. Parking Lot ($1.5 MM budgeted for 2008-09): The village is headed very fast toward floating the portion of the lot that floods on a 3 foot bed of gravel . In a no-bid contract earlier this year, the village authorized $265,000 (or more) be spent on the design work for the “3 foot fill” solution. In the next few months, $1.5 million dollars will need to be borrowed for this work. This sum is the village’s biggest single capital project on the books for 2008-2009.
  2. Corrosion Control (water system additives, $250,000 budgeted for 2008-09): After heated debate last fall, the village chose to add zinc orthophosphate (ZOP) to the drinking water and commissioned an engineering firm to design the system. The village board authorized the expense of c. $30,000 for the design work on the “ZOP additive system” to be installed at Croton’s well field pump house At the time, the likely first year implementation was projected at c. $30,000. Now that the preliminary design work is done, the real cost for construction and the first year implementation turns out to approach $250,000—an 8 fold increase over what we were told 8 months ago!
  3. Land Acquisition (Missing): While the 2008-2009 capital budget contains no allowance for acquiring land, we know that the village is in active multi-party negotiation to acquire several acres of prime light-industrial land at 1A Croton Point Avenue. In a striking omission this year, the capital budget no longer includes a future “land acquisition” line parked one or two years out, as it did for many prior years. Since the village has made 3 or 4 land purchases over the past 5 or 6 years, that line in the budget always kept the reality of financing such purchases on the horizon for trustees. So how would we pay for a land deal at 1A Croton Point Avenue?
  4. Municipal Garage and Office ($2.5MM in 2009-2010): While no money is set aside for acquiring the land upon which a new DPW facility would sit, the capital budget for 2009-2010 does anticipate borrowing $2.5 million for the construction of a new garage and office. If construction costs are $300 per square foot (very conservative), we could build a 8,333 square foot facility for $2.5MM. A few years ago, the village speculated that a 30,000 square foot space would be ideal for consolidating DPW and related work.
  5. Ambulance Headquarters ($1 MM in 2009-2010): The benefits of establishing a separate EMS corps are many and include improving recruitment of volunteers who want to work as medical response personnel (but not as fire fighters) and beginning to bill third party insurance for emergency medical services (which the combined Fire/EMS department we now have is barred from doing). By state law, a separate EMS Department must be housed in a facility distinct from that housing the Fire Department. So we have to renovate existing space or construct new space to house the ambulance and EMS office. The village anticipates doing so and has projected $1 million in the capital borrowing for “Ambulance Headquarters” for the year after next.

Future Debt: Just two potential capital expenses in 2009-2010 (DPW and EMS facilities) add up to $3.5 million. That is as much as the total of all capital expenses projected for 2008-2009. When we add all the other smaller capital projects of a typical year (e.g. required facility maintenance, vehicle repair and replacement, road and water system repair), the total projected capital borrowing for the year after next will be $6.2 million, almost double that of the coming year.

Let’s put $6+ million in new borrowing for the year after next in perspective. The village has not borrowed more than $3.9 million in any given year in the past decade (when it borrowed that much at 4.76% in fiscal 1998-1999). The village’s debt principle and interest payout for 2008-2009 is $1.8 million with the balance when paid across all funds at $16 million . Six million dollars in new borrowing on top of that would jack up the annual debt payout about 30% and affect property tax rates for as long as those new bonds are held.

The actual final published budget was not yet available when I compiled these notes. So the figures above are tentative and may change by the time this week the final budget is voted on.

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 April 29, 2008 4:50 PM, waffels said:

Leo……this is exactly what needs to be sent to the gazette and the Journal news as a guest editorial. ALL tax paying residents of this community need to see this information……thanks

On April 29, 2008 2:48 PM, weewill said:

Leo was one of the very best Trustees ever to serve in the village of Croton. Come back to us Leo!

We need his analytical analysis of this $16 million budget. Breaking it down the way he has in the above post allows us to not only to see where we are now but also to see where we might be headed.

It would be extremely helpful if either Abe Zambrano or Mayor Schmidt would respond point by point to this analysis. Correct it where they think it might be inaccurate and confirm what lies ahead of us. We’re not enemies in this battle; we’re all on the same side.

Taxpayers are stretched to the limit in this extremely shaky economic environment. Knowing enough detail to plan ahead is critically important if we’re to truly focus on controlling expenses. We may not be able to achieve all we’d like but we need a complete and realistic picture of what to expect so we can plan ahead.


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