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November 26, 2014
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Why are property taxes so darned high? Part III of this series, continued

Ken Hilton

This article is the continuation of “Why are property taxes so darned high?,” a multi-part series examining Sullivan County’s local property tax burden. Most recently, I wrote about two reasons for our high taxes: (1) a huge growth in the size and costs of local governments and (2) the rural nature of the county with its sparse population footing the bill for local services, especially road maintenance, which is very costly. Here are a number of other reasons for our high property taxes.

Reason #3: Lack of commercial tax base

Sullivan County has very little manufacturing or commerce. With few factories or large commercial establishments to tax, the property tax burden falls on the homeowners. When asked last year why it’s so difficult to attract business to our county, Alan Scott, CEO of the Sullivan County Industrial Development Agency, cited three reasons: an inadequate business infrastructure, lack of a trained labor force and “our awfully high taxes.” So we’re stuck in a dilemma: the lack of business in our county makes our property taxes high, and our high property taxes discourage businesses from locating here.

Reason #4: Tax exemptions

New York State’s Constitution guarantees tax exemptions for religious, educational and charitable organizations, but allows the legislature to define such organizations. Over the years, local governments, with state approval, have greatly expanded the number and value of property tax exemptions. In 1970, 23% of property value statewide was tax-exempt. Today that figure is 30%. In Sullivan County about 20% of property is exempt, though some of our towns, notably Fallsburg at 40%, have higher rates. Many local governments have extended exemptions or partial exemptions to volunteer firefighters, farmers, senior citizens, veterans and others. Perhaps such groups deserve tax relief, but it’s good to note that as exemptions are granted to some, the tax burden is shifted to the remaining taxpayers.

Reason #5: Unfunded mandates by the state and federal governments

Over the past 60 years, hundreds of state and federal laws have been passed that mandate enforcement by local governments, in part or wholly at their expense. Many of these laws are well meaning with noble purposes. Among the better-known mandates are the Americans with Disabilities Act of 1990, Medicaid and the No Child Left Behind Act of 2001. But there are literally hundreds of other, lesser known mandates. One of the most costly for New Yorkers is the requirement that state and county governments pay over one-half of Medicaid costs. And in just the last few years, our state has mandated that public schools provide students with calculators, allow employees to take time off each year to donate blood and to be screened for cancer, require the employment of data managers, create concussion-management teams, assign staff to investigate all harassment and bullying accusations and fulfill dozens of other costly tasks. Independent studies have shown that unfunded mandates cost local governments billions of dollars each year. These state and federal mandates push up local taxes, and at the same time begin to limit the abilities of local governments to pay for traditional services—such things as road maintenance, law enforcement, library books and public education.

Three other New York State (NYS) mandates—all of them are labor laws—deserve mention because of their powerful effects upon the costs of local government. The first is the Triborough Amendment of the Taylor Law. The Taylor Law governs the labor relationship with public employee unions. The Triborough Amendment states that when a labor contract expires, the terms of the previous contract continue. Critics argue that this gives public labor unions unfair leverage in labor negotiations. Critics also condemn the inclusion of “salary steps” in many public employee contracts that require salary increases even though a contract has expired and no new one is in place. New York is the only state that has anything like this rule.

The second of these NYS mandates requires that local governments pay at the “prevailing union rate” for most capital construction projects. Clearly, this is a great benefit to employees of contractors who win bids for pubic construction projects. However, it comes at the expense of taxpayers, for it greatly increases the costs of all public construction.

The third is called Wick’s Law. It requires the hiring of four separate contractors for major public construction projects, adding 20% to 30% to their costs.

Reason #6: Many small governments

New York State contains almost 10,000 separate local government entities. And in Sullivan County, one of the state’s least populated counties, we have 15 towns, 21 villages, eight school districts, eight library systems, and numerous fire, water, sewer and other districts, plus the county government itself. Because of our numerous small local government units, Sullivan County lacks what economists refer to as “economies of scale,” making local government services more costly than in most other counties nationwide. This factor, plus those described above, helps to explain why our local property tax burden is so high—higher in fact, than in 99% of the other counties across America.

[Editor’s note: In two future articles, Ken Hilton will look at the real-life consequences of high taxes on our Sullivan County neighbors, and he will examine Gov. Cuomo’s proposal to reduce the number of local government bodies in the state through consolidating their services and municipal governments themselves to create more regional bodies.]