February 8, 2012

Hilton CSD Superintendent of Schools Letter to Community

Hilton Dear Community Member,

In June 2011 the Governor and the Legislature passed historic legislation enacting a property tax cap to apply to all local governments that levy property taxes, including school districts. The new law, known popularly as the 2% tax cap, places limits on how much a local government’s tax levy [the amount of taxes to be collected] can increase each year. The primary component of the cap is an annual limit of the lessor of the rate of inflation or 2%.  While the political rhetoric from Albany gives the impression that the tax cap is a simple calculation, provisions in the law include several additional components to the calculation that cause the actual cap amount to vary for each school district, town, county and village annually. 

The other major elements that enter into the calculation are as follows: - New Construction – Changes in the total assessed values attributable to new construction are determined by the State for each municipality and is added to the basic two percent cap; - Large Increases in Retirement System Costs – School District employees belong to one of the State retirement systems, the Employees Retirement System and the Teachers Retirement System. The rates charged to local school districts for providing these pension benefits are determined annually by the governing bodies of the retirement systems. The costs associated with annual increases in the rates of greater than two percentage points are added to the allowable increase in the property tax levy under the cap law; - Changes in Capital Tax Levy – When the voters approve a capital project or the purchase of buses, they are authorizing the Board to issue bonds to finance the cost of the project or bus purchase. In subsequent years, the amount that is collected in property taxes reflects the annual repayment of principal and interest on the bonds, known as debt service, offset by the annual NYS Building and Transportation Aid that is paid to the District as the State’s share of these costs. This difference is known as the capital tax levy.

This amount can change from year to year as districts pay off old debt, voters approve new projects, and the reimbursement percentage paid by the State changes.

When the capital tax levy increases in a budget, the increase is added to the basic two percent property tax cap. When it decreases, that decrease is deducted from the basic two percent property tax cap.

By the end of February the District must report to the State its calculated property tax levy cap.  As of the end of January, the District has calculated that the three adjustments described above will produce a total property tax cap in Hilton of approximately four percent. The District is continuing to refine its calculations as more clear guidance on the interpretation of this new law is released by the State. It should also be noted that the percentage increase in the property tax levy is not the same as the percentage increase in the property tax rates. Due to annual increases in assessments, the change in tax rates is typically one to three percentage points less than the change in the property tax levy. More detailed information as to the final property tax cap for Hilton and the associated projections of property tax rates will be included in the Budget Update and Budget Insight this spring.

Sincerely,

David Dimbleby, Superintendent of Schools

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