Start Thinking About Your 2014 Tax Bill

It’s Time to Start Thinking About Your 2014 Tax Bill

It’s not too early to start thinking about the 2014 budget and what your taxes will be next year.

Time is running out for Supervisor Grace to let his fellow Board members — and taxpayers — know how he plans to fairly and equitably raise roughly $1.4 million for his 2014 budget.

• The fairness issue is whether some taxpayers are being unfairly overtaxed in order to cover expenses that should be paid for by all taxpayers.
• The $1.4 million represents the special fees that only taxpayers in the three largest special districts, Water, Refuse and Hallocks Mill Sewer, pay into the general fund, aka, the fund that all taxpayers pay into and which supports basic town functions and services such as police, parks, finance and tax collection. The $1.4 million fee is supposed to reimburse the general fund for the administrative services that town departments provide the three special districts.

(A note about special districts. Special districts are created to provide a specific benefit to a specific group of taxpayers. Each special district —the town has over 20 special districts — has its own budget and only the property owners within the district pay taxes into the district. For example, only residential properties are in the Refuse district; about 80% of the town’s taxpayers are in the Water district; and 25% are in the Hallocks Mill Sewer district. So, depending on whether a property is residential or commercial, whether it has town water, and which sewer district it’s in, a taxpayer may be paying taxes into one, two or three of the major special districts. Or none.)

The problem is: no one in town hall, including the finance department, the supervisor or the councilmen, has any idea exactly what administrative services are being provided, to what special district, and at what cost. Like Goldilocks, no one knows if the $1.4 million fee — that only some taxpayers are paying — is too big, too small, or just right.

And Supervisor Grace has been conspicuously silent on the status of the special district cost study that was supposed to figure out exactly what those services are and the cost to provide them. The study was supposed to be completed by July 1.

Historically, town officials have used a flat percentage of each district’s budget to calculate the special district fee. A flat percentage formula was easy and convenient; it was one simple calculation.

But is a flat percentage formula fair or equitable? Does a flat percentage of each district’s budget bear any relationship to the actual cost of the services being provided? Or, should town officials be using a different formula, one that’s based on actual services and actual costs?

Take the Refuse district. The district provides two basic services: it oversees the collection of kitchen garbage and recycling by an outside contractor, and town employees provide bulk trash services.  To service the $2.5 million outside garbage contract, the finance department cuts a single check to the carter once a month. The district uses few, if any, other additional administrative services paid for by the general fund. But — the district is being charged a flat 6% special district fee based of its total $4.6 million budget.  In effect, Refuse district taxpayers are being charged a $150,000 service fee to cut 12 checks a year.

The obvious guesswork associated with how to raise $1.4 million in revenue became painfully clear last year when Supervisor Grace, looking for ways to reduce the town tax rate, paid by all taxpayers, proposed raising the special district fee, paid by only some taxpayers, to 7% from 5%. He argued — without offering a shred of evidence — that the 2% increase was justified because the special districts should pay for police services.

Although the councilmen rejected the supervisor’s 2% tax shifting plan, they did agree to a compromise that made political, if not finance sense: rather than increase the town tax rate, they agreed to a 1% increase in the special district fee – but only for one year – and “found” the additional revenue needed to balance the budget by raiding the fund balance, aka the town’s rainy day fund.

And, in order to avoid a repeat of the same argument when it came time to vote on the 2014 budget, the Board directed the supervisor to do a study to determine exactly what administrative services each district actually used and at what cost. The July 1 deadline was chosen so that the Town Board would have ample time to agree on a formula, based on real costs, not guesswork, for calculating the special district fee before the supervisor began work on his 2014 budget.

Sadly, the July 1 deadline has come and gone and without any indication that the supervisor has even begun the study. When asked at a recent Board meeting if he had begun the study, he declined to answer.

What will happen if the special district cost study never gets done?

For Supervisor Grace:

• He’ll be free to plug in any special district fee number he wants in his 2014 budget.
• Without a study, he won’t have to justify how he arrived at his arbitrary fee number.
• He could try again to increase the fee to 7%. Or, suggest an even higher fee in order to make the town tax rate “look good” prior to Election Day.

For the four councilmen: 

• They won’t be able to challenge the supervisor’s 2014 special district fee number because they won’t have any documentation as to what the actual costs are.
• They will have abdicated their fiscal responsibilities to the supervisor.

For the taxpayers in Refuse, Water and Hallocks Mill Sewer districts:

• They’ll never know if they’re being overtaxed in order to subsidize other taxpayers.
• Their special district fees will continue to be based on guesswork without any relationship to actual costs.
• They’ll never know if the special district taxes they’re paying are fair and equitable.

When the Town Board voted for the 1% increase in the special district fee last year, some taxpayers ended up paying more while other paid less. Which group were you in?  Did you win or lose in the game of musical tax shifting? 

Will you be a winner or loser in the 2014 budget?  The answer to that question may very well depend on whether the supervisor ever completes the special district cost study — the study the Town Board directed him to do.

For more information about special districts and the town budget, visit yorktownbettergovernment.org.