Letter Regarding State Tax Freeze

January 8, 2010

Honorable David Paterson, Governor
State of New York
Executive Chamber, State Capitol
Albany, New York 12224

Dear Governor Paterson:

As you prepare to present your 2010-2011 Executive Budget, I strongly urge the exclusion of any proposal that would amend Section 544 of the real property tax law to cap the payment of taxes on state owned lands. There is no doubt that the State’s fiscal instability will continue to require some very difficult but necessary budgetary decisions, but in doing so it is critical that no one area of the state is impacted disproportionately. Any plan to freeze property tax payments would unfairly burden those communities throughout New York that are home to large tracts of state owned land.

The 2009-2010 Executive Budget included a similar provision that would have provided a relatively small amount of savings for the State while shifting enormous costs to our already overburdened property taxpayers in select host communities. This proposal was roundly rejected by Legislature and should not be revisited in future budget deliberations.

In 2007, the State paid approximately $173 million to counties, municipalities and school and special districts, many of which rely on these payments for a significant portion of their budgets. The state pays full local property taxes on about 3 million acres of Adirondack and Catskill parkland spread across approximately 100 towns, the impact of a freeze on state owed tax payments would be devastating for these areas. The land in question is not just restricted to these regions. There are, in fact, 23 counties where the total state payments to all taxing entities within the county exceeded $1 million, for example $33 million in Rockland, $20 million in Suffolk and $12 million in Orange.

The disproportionate loss of state revenue alone would be reason enough to abandon any plans to recycle this proposal. There are, however, several additional reasons why it would be poor public policy. A tax cap would disadvantage communities relying on state payments in three distinct ways. First, local governments and schools would no longer receive these additional revenues from the State even as the costs of services continue to rise. Second, since assessed values determine the equalized tax burden, the failure of state owned lands to carry their fair share forces additional costs on to other property owners in the assessing unit. Finally, the wealth factor formulas for state education aid and reimbursements would not take into account a school district’s inability to collect full taxes on state land when determining allocations based on the property wealth within the district. This would lead to an inequitable distribution of funds wholly inconsistent with the principles of Foundation Aid and the further distortion of the already unfair wealth modifier of our state education aid formula.

Additionally as we observed during last year’s debate over this issue, any such proposal would undermine local support for open space protection in these regions. These land acquisitions are crucial to maintaining the integrity of the New York City Watershed and keeping New York green. The continued protection of the sensitive ecosystems surrounding the City’s water supply is essential for compliance with the EPA Filtration Avoidance Determination.

I urge that your Executive Budget avoid these inequities and prevent any inordinate impact on our school districts and local governments by not proposing a cap the state's payment of taxes on state owned lands. As always, thank you for your consideration.

Sincerely,
Kevin A. Cahill
Member of Assembly

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