Tax Cap Year 2:
A Retrospective
Deborah H. Cunningham
Director of Education and Research
New York Association of School Business Officials
Michele Levings
Director, State Aid and Financial Planning Service
Questar III BOCES
Mark Sansouci
Assistant Superintendent for Business
Penfield Central School District
October 26, 2013
Agenda
 Introduction
 Vote Result after 2 years
 How it Works
 PILOT Considerations
 Exemptions
 Long Term Consequence of the Cap – Planning
Considerations
 Impact of STAR Cap
 Conclusion
2
Property Tax Cap
Chapter 97 of the Laws of 2011
• June 2011 – Chapter 97 passed and signed by Governor
Cuomo, Began with the 2012-13 school year budget
• In effect through at least 2016-17. It remains in effect
only so long as regulation and control of residential
rents and evictions (i.e., rent control) laws are in
place.
(The current rent control system began in 1943)
Its Here to Stay!
It’s Complex…..
Incorrectly referred to as “2% cap”
New terminology
New voter thresholds
New consequences for contingent
budgets
 New considerations for planning
 New confusion




4
The Tax Cap is Complex...
5
The Tax Cap is Complex…
6
Property Tax Cap
Chapter 97 of the Laws of 2011
• Not really a “cap”
• Sets a higher threshold for voter approval of
budgets IF proposed tax levy increase exceeds the
“tax levy limit”
 60% or more vs. simple majority (more than 50%)
• “Tax levy limit” calculated by each district and
varies by district
• “Tax levy limit” is also NOT technically a limit— its a
threshold for what level of voter support is needed
7
Tax Levy Limit
Prior year tax levy
x
Tax base growth factor, if any
+
Payments in lieu of taxes receivable during prior year
–
Taxes levied for exemptions during prior year (not ERS & TRS)
=
Adjusted Prior Year Tax Levy
x
Allowable levy growth factor (lesser of 2% or CPI)
–
Payments in lieu of taxes receivable in the coming year
+
Available carryover, if any
=
“Tax Levy Limit”
8
Total Levy to support proposed budget
Tax Levy Limit
+
Coming school year exemptions
=
Maximum Allowable Tax Levy
(requiring simple majority)
9
The 2% Myth…
Year 1 – 2012-13
 574 districts calculate a Maximum
Allowable levy GREATER than 2%
 12 districts calculate a Maximum
Allowable levy LESS than the 11-12 tax
levy
 5 of those districts proposed a tax levy
DECREASE for 12-13
 8 of the 12 proposed to override
10
The 2% Myth…
Maximum Allowable Levy
Year 1
2012-13
11
Year 2
2013-14
#
Districts
%
of Total
#
Districts
%
of Total
Over 6%
60
8.9%
134
20.0%
4% to 6%
74
11.0%
259
38.7%
2% to 4%
445
66.3%
259
38.7%
0% to 2%
80
11.9%
14
2.1%
Below 0%
12
1.8%
3
0.4%
Total
671
100%
669
100%
What Was Proposed in the
First Year?
 92% of districts proposed budgets with tax levies at or below
their maximum allowable levy (cap)





476 proposed budgets with levies below their cap
144 proposed budgets with levies at the cap
48 districts asked the voters to override the cap
22 districts proposed budgets with no tax increase
10 districts proposed budgets with a tax levy decrease
 The average tax levy % change is + 2.27%
 The average budget % change is +1.47%
 Total taxes levied increased 2.24% statewide
12
First Year Extremes….
 Highest proposed tax levy change:
Pocantico Hills = 12.52%
(Maximum Allowable = 2.51%)
 Lowest proposed tax levy change:
Oswego = - 52.25%
(Maximum Allowable = -34.82%)
 Highest maximum allowable levy % change
Barker = 31.84%
(Proposed = 2.90%)
 Lowest maximum allowable levy % change
Oswego = -34.82
(Proposed = -52.25%)
13
What Was Proposed in the
Second Year?
 96% of districts proposed budgets with tax levies at or
below their maximum allowable levy (cap)
 549 proposed budgets with levies below their cap
 92 proposed budgets with levies at the cap
 28 districts asked the voters to override the cap
 16 districts proposed budgets with no tax increase
 14 districts proposed budgets with a tax levy decrease
 The average tax levy % change is + 2.83%
 The average budget % change is + 2.88%
 Total taxes levied increased 3.05% statewide
14
Second Year Extremes….
 Highest proposed tax levy change:
Newcomb CSD = 24.78%
(Maximum Allowable = 6.94%)
 Lowest proposed tax levy change:
Mexico = -40.48%
(Maximum Allowable = -40.48%)
 Highest maximum allowable levy % change
Barker = 92.66%
(Proposed = 3.50%)
 Lowest maximum allowable levy % change
Mexico = -40.48
(Proposed = -40.48%)
15
The 2% Myth…
Proposed Levies
Year 1
2012-13
16
Year 2
2013-14
#
Districts
%
of Total
#
Districts
%
of Total
Over 6%
11
1.6%
16
2.4%
4% to 6%
33
4.9%
83
12.4%
2% to 4%
403
60.1%
437
65.3%
0% to 2%
214
31.9%
119
17.8%
Below 0%
10
1.5%
14
2.1%
Total
671
100%
669
100%
Year 1 Results
Pass
654
96.5%
Fail
24
3.5%
2nd Highest Rate Ever!
17
Year 1 Results
98% of budgets which
were within the levy
limit passed
18
Year 1 Results
49 districts sought an override,
30 were successful
61%
But
Of the 24 districts that were defeated
19 were seeking an override
19
Year 2 Results
Pass
644
95.3%
20
Fail
32
4.7%
Year 2 Results
28 districts sought an override,
7 were successful
25%
And
Of the 32 districts that were defeated
21 were seeking an override
21
Vote Result Takeaways
 While not technically a cap, overrides
are extremely difficult
 Taxpayer tolerance for increases
 Real consequences of contingent budget
22
Calculation Challenges
23
Sample Tax Levy Limit Calculation
Prior year tax levy
Tax base growth factor
Prior year exemptions (capital levy, court orders)
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 200,000
Adjusted Prior Year Levy
4,950,000
Prior year PILOT
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
24
x 1.02
5,049,000
- 100,000
= 4,949,000
+
0
= 4,949,000
Tax Base Growth Factor
25

Quantity Change Factor = The percentage by which the full value of
the taxable real property in the school district increases due to
physical or quantity change, compared with the prior year tax roll
(growth in full value due to new construction, additions and
improvements to real property, etc.).

Tax Base Growth Factor = 1 + Quantity Change Factor; only calculated
if quantity change factor is a positive number.

Source: New York State Tax and Finance Department (ORPS)

Factor made available by February 15th
Sample Tax Levy Limit Calculation
Prior year tax levy
Tax base growth factor
Prior year exemptions (capital levy, court orders)
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 200,000
Adjusted Prior Year Levy
4,950,000
Prior year PILOT
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
26
x 1.02
5,049,000
- 100,000
= 4,949,000
+
0
= 4,949,000
PILOTS
Prior Year PILOTS
 Not all districts will have PILOT payments
 Payments in lieu of taxes (PILOT) owed to the district in
the prior school year
 For 2013-14 school year, 2012-13 PILOT Payments
PILOTS for the Coming Year
 Payments in lieu of taxes (PILOT) to be paid to the district
in the upcoming school year
 For 2013-14 school year, 2013-14 Estimated PILOT Payments
27
Maximum Allowable Levy Example
(Substantial DECREASE to PILOTS)
Prior year tax levy
Tax base growth factor (district specific)
Prior year PILOT
Prior year exclusions (capital levy, court orders)
Adjusted Prior Year Levy
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
Coming School Year Exclusions
Maximum Allowable Levy
5,000,000
x 1.01
5,050,000
+500,000
5,550,000
- 225,000
5,325,000
x 1.02
5,431,500
- 100,000
5,331,500
+
0
5,331,500
+ 225,000
5,556,500
+11.13%
Maximum Allowable Levy Example
(Substantial INCREASE to PILOTS)
Prior year tax levy
Tax base growth factor (district specific)
Prior year PILOT
Prior year exclusions (capital levy, court orders)
Adjusted Prior Year Levy
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
Coming School Year Exclusions
Maximum Allowable Levy
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 225,000
4,925,000
x 1.02
5,023,500
- 500,000
4,523,500
+
0
4,523,500
+ 225,000
4,748,500 -5.03%
Summary Impact of PILOTS
 PILOT growth is not included in
“Growth Factor”
 Permanent loss of growth factor
multiplier – PILOTs are excluded
30
PILOT Impact on Tax Cap
Assume $40,000,000 (1.2% of assessed value) is given a ten year sliding PILOT - what is impact with no Growth Factor
Annual PILOT Payment
76,000
152,000
684,000
0
Line #
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
31
Tax Factor
2013-14
Prior Year Levy
65,647,810
Tax Base Growth Factor
1.0000
Sub - Total
65,647,810
Prior Year PILOTs (actual)
3,640,587
Adjusted Prior Year Levy
69,288,397
Allowable Growth Factor (2% or CPI)
2%
Sub - Total
70,674,165
PILOTs for upcoming year
(3,716,587)
Tax Levy Limit (Reported to State)
66,957,577
% Change in Levy
1.995%
Total Levy plus PILOT Payments
70,674,165
Annual % increase in Levy & PILOTS
2.000%
2014-15
2021-22
2022-23
66,957,577
1.0000
66,957,577
3,716,587
76,933,813
1.0000
76,933,813
4,248,587
78,481,461
1.0000
78,481,461
4,324,587
70,674,165
81,182,400
82,806,048
2%
72,087,648
(3,792,587)
2%
82,806,048
(4,324,587)
2%
84,462,169
(3,640,587)
68,295,061
78,481,461
80,821,582
1.998%
2.012%
2.982%
72,087,648
82,806,048
84,462,169
2.000%
2.000%
2.000%
What happens when expiring PILOTS are not
included in Growth Factor ?
Assume $40,000,000 (1.2% of assessed value) is given a ten year sliding PILOT - what is impact with Growth Factor if allowed
Annual PILOT Payment
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Tax Factor
Prior Year Levy
Tax Base Growth Factor
Sub - Total
Prior Year PILOTs (actual)
Adjusted Prior Year Levy
Allowable Growth Factor (2% or CPI)
Sub - Total
PILOTs for upcoming year
Tax Levy Limit (Reported to State)
% Change in Levy
Total Levy plus PILOT Payments
Annual % increase in Levy & PILOTS
$ Increase Revenue from Tax Base Growth
% Increase Revenue from Tax Base Growth
32
76,000
152,000
684,000
-
2013-14
65,647,810
1.012
66,435,583
3,640,587
70,076,170
2.0%
71,477,694
(3,716,587)
67,761,107
3.2%
71,477,694
3.2%
2014-15
67,761,107
1.0
67,761,107
3,716,587
71,477,694
2.0%
72,907,248
(3,792,587)
69,114,662
2.0%
72,907,249
2.0%
2021-22
77,856,844
1.0
77,856,844
4,248,587
82,105,432
2.0%
83,747,540
(4,324,587)
79,422,961
2.0%
83,747,548
2.0%
2022-23
79,422,961
1.0
79,422,961
4,324,587
83,747,548
2.0%
85,422,508
(3,640,587)
81,781,921
3.0%
85,422,508
2.0%
803,529
1.1%
819,600
1.1%
941,463
1.1%
960,339
1.1%
Year
10
PILOT Impact
Current
Law
Expiration of PILOT
Tax Levy
$
Allow in
Growth Factor
80,821,582 $
81,781,921
Growth Factor
H / (L)
$
$ Increase Revenue from Tax Base Growth
% Increase Revenue from Tax Base Growth
960,339
960,339
1.1%
• Difference is Forever – not just a one year impact
• Starts at beginning of PILOT, adverse impact is permanent
• No growth allowance when PILOT exemption expires
33
Sample Tax Levy Limit Calculation
Prior year tax levy
Tax base growth factor
Prior year exemptions (capital levy, court orders)
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 200,000
Adjusted Prior Year Levy
4,950,000
Prior year PILOT
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
34
x 1.02
5,049,000
- 100,000
= 4,949,000
+
0
= 4,949,000
Prior Year Exemptions

Capital Tax Levy = Tax levy necessary to support capital local
expenditures

35
Capital Local Expenditures = The tax levy associated with budgeted expenditures
resulting from the construction, acquisition, reconstruction, rehabilitation or
improvement of school district capital facilities or capital equipment, including debt
service and lease expenditures, and transportation capital debt service.

Court Orders/Judgments = Tax levy necessary for expenditures
resulting from court orders or judgments arising out of tort actions for
any amount that exceeds 5% of total tax levied in prior school year.
(excludes tax certioraris)

Excludes prior year pension exemption
Maximum Allowable Levy Example:
Impact of Changing Exclusions
Prior year tax levy
Tax base growth factor (district specific)
Prior year PILOT
Prior year exclusions (capital levy, court orders)
Adjusted Prior Year Levy
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
Coming School Year Exclusions
Maximum Allowable Levy
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
0
5,150,000
x 1.02
5,253,000
- 100,000
5,153,000
+
0
5,153,000
+ 225,000
5,378,000
+7.56%
Maximum Allowable Levy Example:
Impact of Changing Exclusions
Prior year tax levy
Tax base growth factor (district specific)
Prior year PILOT
Prior year exclusions (capital levy, court orders)
Adjusted Prior Year Levy
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
Coming School Year Exclusions
Maximum Allowable Levy
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 225,000
4,925,000
x 1.02
5,023,500
- 100,000
4,923,500
+
0
4,923,500
+
0
4,923,500 -1.53%
Sample Tax Levy Limit Calculation
Prior year tax levy
Tax base growth factor
Prior year exemptions (capital levy, court orders)
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 200,000
Adjusted Prior Year Levy
4,950,000
Prior year PILOT
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
38
x 1.02
5,049,000
- 100,000
= 4,949,000
+
0
= 4,949,000
Allowable Growth Factor
 Allowable Levy Growth Factor = Lesser of: 1.02 OR
(1 + Inflation Factor); Minimum of 1.0.
 Inflation Factor = CPI change, carried out four
decimal places.
 2014-15 Budget= ???
 Source: US Department of Labor
39
Growth Factor Impact
At 2%
At 1.66%
5,100,000
x 1.015
5,176,500
+100,000
5,276,500
- 220,000
5,100,000
x 1.015
5,176,500
+100,000
5,276,500
-220,000
Adjusted Prior Year Levy
5,056,500
5,056,500
Allowable Growth Factor (lesser of CPI or 2%)
x 1.02
5,157,630
- 100,000
= 5,057,630
+ 74,000
x 1.0166
5,140,438
- 100,000
= 5,040,438
+ 74,000
Prior year tax levy
Tax base growth factor
Prior year PILOT
Prior year exemptions (capital levy, court orders)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
Coming School Year Exemptions
Maximum Allowable Levy
40
= 5,131,630
+ 125,000
5,256,630 3.07%
5,114,438
+125,000
5,239,438 2.73%
Sample Tax Levy Limit Calculation
Prior year tax levy
Tax base growth factor
Prior year exemptions (capital levy, court orders)
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 200,000
Adjusted Prior Year Levy
4,950,000
Prior year PILOT
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
41
x 1.02
5,049,000
- 100,000
= 4,949,000
+
0
= 4,949,000
Available Carryover

Available Carryover: Districts may use taxing authority from the prior school
year to increase the subsequent year’s tax levy limit if taxes were increased in
the prior school year by less than the amount allowed by the tax levy limit. If a
negative number, no carryover is available (use $0).
Calculation:
Calculated 2012-13 Tax Levy Limit – Actual 2012-13 Total Tax Levy
(No Greater Than 1.5% x Prior Year Tax Levy Limit)

42
Things to remember:
 Available carryover is NOT an exclusion from the tax levy limit
 It is a dollar amount not a percentage
 It must be included in the calculation for the 2013-14 tax levy limit
 Does it really matter? Reality check
 Roughly 106 schools have carryover
Carryover Example
Assume a district levies at an increase of 2.2% as opposed to their allowed 3.48%:
Tax Levy Limit: $4,949,000
District’s Calculated Maximum Allowable: $5,174,000
2012-13 Levy: $5,000,000 x 1.022 = $5,110,000
Now assume the district levies $4,850,000:
Calculation:
43
Comparing Year 1 to Year 2
with Carryover
Prior year tax levy
Tax base growth factor
x
Year 1
Year 2
$ 5,000,000
$ 4,850,000
1.01
x
5,050,000
Prior year PILOT
+
4,898,500
100,000
+
5,150,000
Prior year exclusions
-
Adjusted Prior Year Levy
Allowable Growth Factor
-
4,950,000
1.02
-
5,049,000
100,000
PILOTs for coming year
+
TAX LEVY LIMIT
Coming School Year Exclusions
x
-
44
225,000
$ 5,174,000
2012 ACTUALY AMOUNT LEVIED
$ 4,850,000
150,000
4,744,470
-
MAXIMUM ALLOWABLE LEVY
1.02
4,894,470
+
74,235
4,818,705
+
300,000
4,949,000
+
200,000
4,798,500
4,949,000
Available Carryover
100,000
4,998,500
200,000
x
1.01
3.48%
$ 5,118,705
5.54%
Sample Tax Levy Limit Calculation
Prior year tax levy
Tax base growth factor
Prior year exemptions (capital levy, court orders)
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 200,000
Adjusted Prior Year Levy
4,950,000
Prior year PILOT
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
45
x 1.02
5,049,000
- 100,000
= 4,949,000
+
0
= 4,949,000
Total Levy to support proposed budget
Tax Levy Limit
+
Coming school year exemptions
=
Maximum Allowable Tax Levy
(requiring simple majority)
46
Coming School Year Exclusions
• Capital Tax Levy = Tax levy necessary to support capital local expenditures
• Capital Local Expenditures = The tax levy associated with budgeted
expenditures resulting from the construction, acquisition, reconstruction,
rehabilitation or improvement of school district capital facilities or capital
equipment, including debt service and lease expenditures, and
transportation capital debt service.
• Court Orders/Judgments = Tax levy necessary for expenditures resulting
from court orders or judgments arising out of tort actions for any amount
that exceeds 5% of total tax levied in prior school year.
(excludes tax certioraris)
Coming School Year Exclusions
•
The pension cost exclusion applies only when ERS and/or TRS employer
contribution rates increase by more than 2 percentage points over the
prior year.
•
ERS Costs = Tax levy necessary for expenditures for coming school year for
employer contributions caused by growth in the system average actuarial
contribution rate, minus two percentage points.
•
TRS Costs = Tax levy necessary for expenditures for coming school year for
employer contributions caused by growth in the normal contribution rate,
minus two percentage points
•
For example, if an employer contribution rate for ERS and/or TRS increased
by 2.2 percentage points, only an amount equal to applicable salary
expenditures times .002 would be excluded from the tax levy cap. If an
employer contribution rate increased by 1.98 percentage points over the
prior year, no exclusion would be allowed from the cap on the tax levy for
pension cost increases.
Calculating Exclusions
PENSION EXCLUSION for 13-14
ERS Rate 2013-14: 20.9%
- 2012-13: 18.9%
2.0%
- 2.0%
ERS Exclusion =
0.0%
TRS Rate 2013-14: 16.25%
- 2012-13: 11.84%
4.41%
- 2.0%
TRS Exclusion =
2.41%
49
PENSION EXCLUSION for 14-15
ERS Rate
2014-15: 20.1%
- 2013-14: 20.9%
-0.8%
- 2.0%
ERS Exclusion =
0.0%
TRS Rate 2014-15:
??????%
- 2013-14: 16.25%
?????
Maximum Allowable Levy Example
Prior year tax levy
Tax base growth factor
Prior year exemptions (capital levy, court orders)
5,000,000
x 1.01
5,050,000
+100,000
5,150,000
- 200,000
Adjusted Prior Year Levy
4,950,000
Prior year PILOT
Allowable Growth Factor (lesser of CPI or 2%)
PILOTs for coming year
Available Carryover
TAX LEVY LIMIT
Coming School Year Exemptions
Maximum Allowable Levy
50
x 1.02
5,049,000
- 100,000
= 4,949,000
+
0
= 4,949,000
+ 225,000
5,174,000
+3.48%
Tax Levy, “Decisions”
 Seemingly insignificant decisions today may
result in significant adverse impacts
tomorrow
 Levies below the Maximum Allowable Levy:
 Result in the municipality self-funding
exclusion items such as pension costs
 Have long term ramifications that should
be reviewed carefully
51
Long Term Impact of Levying
below the Tax Cap
Impact of first year decision to be BELOW Tax Levy Limit
Levy Proposed
Tax Cap
Limit
Levy
52
Levy at
Limit
Proposed
Levy
Levy Annual
Difference
Accumulated
Revenue
Loss
12-13
3.00%
3.14%
1.63%
5,074,289
5,000,000
(74,289)
(74,289)
13-14
3.98%
5.39%
5.39%
5,347,793
5,269,500
(78,293)
(152,582)
14-15
2.00%
2.00%
2.00%
5,454,749
5,374,890
(79,859)
(232,441)
15-16
2.00%
2.00%
2.00%
5,563,844
5,482,388
(81,456)
(313,898)
16-17
2.00%
2.00%
2.00%
5,675,121
5,592,035
(83,085)
(396,983)
Long Term Impact of Levying
below the Tax Cap
Impact of a Second Year BELOW Tax Levy Limit
53
Proposed Levy Annual
Levy
Difference
Accumulated
Revenue
Loss
Tax Cap
Levy
Limit
Propose
d Levy
Levy at
Limit
12-13
3.00%
3.14%
1.63%
5,074,289
5,000,000
(74,289)
(74,289)
13-14
3.98%
5.39%
4.00%
5,347,793
5,200,000
(147,793)
(222,082)
14-15
2.00%
2.00%
2.00%
5,454,749
5,304,000
(150,749)
(372,831)
15-16
2.00%
2.00%
2.00%
5,563,844
5,410,080
(153,764)
(526,596)
16-17
2.00%
2.00%
2.00%
5,675,121
5,518,281
(156,839)
(683,435)
Multi-Year Fiscal Health
Projections
Central School District
Board of Education
January 10, 2012
Estimates Are Subject to Change
54
Multi-Year Fiscal Health
Projections
Expenses




Salary and Benefits (ERS/TRS, Health)
Debt Service
BOCES
Utilities, Supplies, Transfers, etc.
Revenues
 Levy (Tax Cap)
 State Aid
 Use of Reserves
55
Multi-Year Fiscal Health
Projections
Surplus (Deficit)
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
-$1,000,000
-$2,000,000
-$3,000,000
-$4,000,000
-$5,000,000
56
In Brief…
 NYS’s tax levy cap is NOT a “2% cap”
 The law applies to the school district levy, NOT the individual tax
bill of resident taxpayers
 The “tax levy limit” (actual allowable tax levy increase requiring
only a simple majority) will vary by district
 The formula allows for certain expenses to be exempt from the
cap, therefore allowing the total tax levy increase to be greater
than “perceived” limit
 BOEs can present a budget that has a tax levy above the “limit,”
but will need 60% voter approval
57
Tax Cap vs. Tax Bills
 Difference between tax levy and tax
rates
 Impact of equalization rates and
assessments
 Remember they have been bombarded
with 2%!!!
 For STAR, it REALLY IS A CAP!
58
For STAR– It is a 2% CAP!
 Increases in the value of the STAR
exemption are capped at 2%
 Cap applies to both basic and
enhanced STAR
 Cap is independent of the STAR
exemption amount
59
STAR Cap Impact
Year
60
Exemption
Exemption %
%
%
Tax Rate
Calculated
$ Value Inc.
Inc.
Inc.
Value
2% Cap
%
Exemption Inc
Value
.
Taxpayer
Bill
Bill %
Share of
(100K AV) Increase
Total Bill
2011-12
60,100
0%
24.48
2%
1,471
2%
1,471
2%
977
2%
39.9%
2012-13
62,200
4%
25.21
3%
1,568
7%
1,500
2%
1,021
5%
40.5%
2013-14
63,300
2%
25.97
3%
1,644
5%
1,530
2%
1,067
5%
41.1%
All budget deadlines/ requirements
remain in place
• Legal notices
• Property tax report card is still required and will now
include:
• district tax levy limit
• proposed tax levy before exemptions
• Public hearings and disclosure
• Budget notice will now include:
• district tax levy limit
• proposed tax levy before exemptions
• Budget statement
What options does the BOE have?
Option 1: Propose a budget requiring a total tax levy at or below the
calculated Maximum Allowable Tax Levy prescribed by law:
 Requires a simple majority (50% + 1 voter approval)
Option 2: Propose a budget requiring a total tax levy above the
Maximum Allowable Tax Levy prescribed by law:
 Requires a “super majority” (60% voter approval)
 Requires a statement on ballot indicating the required tax levy
before exemptions exceeds the Tax Levy Limit
Maximum Allowable Tax Levy = tax levy limit + exemptions
62
What happens if the budget
is not approved by the public?



63
If the proposed budget is not approved by the required margin:
 the district may resubmit the original budget or submit a revised
budget to the voters on the third Tuesday in June OR
 adopt a contingency budget that levies a tax no greater than that
of the prior year (0% increase in tax levy).
If the resubmitted/revised budget proposal is not approved by the
required margin:
 the Board of Education must adopt a budget that levies a tax no
greater than that of the prior year (0% increase tax levy) and the
budget would be subject to contingent budget requirements.
Districts will not be allowed to increase the tax levy to the extent
necessary to fund items of expenditure excluded from the tax cap
 No growth factor
 No capital, court order/judgments or pension exemptions
Are contingent budget laws
still in effect?
 Administrative cap is in effect
 Non-contingent expenses removed
 Expenditures are no longer subject to
overall contingent budget spending cap
(4% or 120% of CPI)
64
What happens if there is an error
in the calculation of the cap?
 If, due to clerical or technical errors, the actual
levy exceeds the maximum allowable tax levy:
 The excess amount collected is placed in reserve
 Excess amount and any interest earned will be
used to offset the tax levy in the following year
65
Questions????
66