Orangetown Ponders Tax Cap Compliance

Jobs, staffing, composting top Tuesday Agenda


The Orangetown Town Board was pleased with itself three weeks ago when it announced that it would keep its property tax increase to only 1.9 percent next year, meaning the town would just barely skirt New York State’s mandate to keep tax hikes to 2 percent or less or risk heavy fines.

Tuesday evening, however, that same Town Board learned that its tax hike next year may indeed exceed the two percent cap.

Worse was the advice from town budget and legal officials that the board must adopt a final 2014 budget by next Tuesday, the state deadline, and if they are going to exceed the two percent cap, they must also pass a separate resolution that same evening declaring their acknowledgement of their intent to exceed the cap.

Failure to pass such a resolution, followed by an increase of greater than 2 percent, would lead to a fine against Orangetown of several hundred thousand dollars, Finance Director Jeff Bencik told the startled and dismayed five-member council.

If the final budget comes in at the projected $67.7 million, it would be just $15,000 below the tax hike limitation, Bencik said. If the budget figures hold up, the town would be safe from any allegation of violating the state limit, he explained. He quickly added, however, that if the theoretical $15,000 safety gap disappears for any reason, the town could be in serious financial jeopardy.

Critical Issues

There are at least two critical issues that remain to be resolved before the Town Board can adopt an official budget for next year, Bencik warned the council.

Since the town must vote on the final budget next week it must resolve those issues first, Bencik explained, either earlier that evening or during executive session conferences during the next several days.

The first is the size of the total budget itself. So far, the council has been working solely with Supervisor Andrew Stewart’s “preliminary” budget, which stands at $67,741,046. That document was prepared by Stewart and Bencik, based on their reductions from the budget requests submitted by all department heads over the past two months. Had they not trimmed each department’s request, the total town-wide budget would have gone up an estimated 15 percent, the two officials estimated at the time.

The other remaining open issue, according to Bencik, is the resolution of several major tax certiorari lawsuits against the town by aggrieved property owners who are seeking reductions on their assessed valuations, and thus their property taxes. He estimated for budgetary purposes that the town would win most of those legal actions, and that its tax revenues next year would thus remain stable and not take a drastic plunge.

Should any of the property owners win their suits, however, it will mean a significant drop in tax revenues for the township, and Bencik predicted that the $15,000 safety margin below the tax cap would suddenly vanish amidst a potential loss of several hundred thousand dollars, if not more.

Unfortunately, the finance director noted, the decisions on those tax lawsuits will not come for at least a month or two, meaning there is no way of predicting their outcome at this point, and no way to insert a more accurate figure in the estimated budget for next year.

If the town wins, the budget is “safe”, Bencik said, but if the town loses, or even splits a number of decisions, the resultant tax revenue drop will suddenly plunge Orangetown into deficit financing, and put it far in excess of the 2 percent tax increase limitation.

Proposed Solution

Bencik and Stewart said they had a remedy for the Town Board that would avoid running afoul of the state tax limitation, but the four members of the council quickly disagreed with that assessment, and said they would come up with their own solution by next week.

According to Stewart, the board’s only Democrat and also the town’s chief financial officer, the solution was to pass a resolution next Tuesday asserting that the town would knowingly exceed the 2 percent tax cap, and then adopt the budget with the theoretical $15,000 safety net. If the town loses enough tax suits to plunge it over that state limitation, it would be protected from being fined by having first adopted the resolution declaring it intended to exceed the limitation. A vote to adopt such a budget must be approved by a “super majority” vote of 4-1 or more, rather than just a simple majority of 3-2.

By declaring its intent to exceed the limit now, if in fact the town does adopt a final budget with a tax hike of more than two percent, it would be protected from any fine, Stewart and Bencik theorized.

Town attorney John Edwards was somewhat skeptical of the maneuver, noting that the override resolution would not become legally effective until a certified copy of the resolution was sent to Albany, received by the Secretary of state’s office, and posted in a state ledger. That could take five to ten days to accomplish, he theorized, while the state’s tax cap law requires that the resolution adopted by the Town Board Tuesday must be in full effect before it can exempt the town from being in violation. Since it must be in effect Oct. 22, the day it would be voted on, Edwards called it a feat that would be physically impossible to accomplish.

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