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April 25, 2013

Tax cap is deceiving

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Cooperstown Crier

---- — As if figuring out one’s tax bill isn’t mind boggling enough. In its second year of implantation, the 2 percent limit on property tax increases makes things all that more complicated. One cannot just assume his or her individual taxes will not increase more than the cap threshold. 

It is not a simple calculation. In fact, the tax cap will affect each school district’s levy in various ways. The process uses a much more complex formula, eight steps, as a matter of fact.

The formula is used to figure out what is called a tax levy limit. For example, the formula allows for certain expenses to be exempt from the cap, therefore allowing the total tax levy increase to be greater than the “perceived” cap. There are also other factors such as assessments and equalization rates that will still impact tax rates.

A property tax report card is still required and will now include the district tax limit and a proposed tax levy before exemptions. The budget notice should now include the district tax levy limit, a proposed tax levy before exemptions and a budget statement.

School boards do have options. They can 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 plus one voter approval) or propose a budget requiring a total tax levy above the maximum allowable by law (requires 60 percent voter approval and a statement on the ballot indicating the required tax levy before exemptions exceeds the tax levy limit).

If the budget is not approved by the public, the district may resubmit the original or revised budget plan to voters on the third Tuesday in June or adopt a contingency budget that levies a tax no greater than that of the prior year. If the resubmitted/revised budget proposal is not approved, the board must adopt a budget that levies a tax no greater than that of the prior year and it 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. Expenditures are no longer subject to the overall contingent budget spending cap.

If a clerical or technical error is made and the levy exceeds the maximum allowed by law, the excess amount collected should be placed in reserve. Excess amount and any interest earned will be used to offset the tax levy in the following year.

We have reported that Cooperstown, Cherry Valley-Springfield and Milford Central schools are trying to stay below or at the cap for at least this year. We commend them for doing this when things look so bleak. However, we know there will be a time, probably sooner rather than later, that the districts will have to eventually exceed the cap. Schools just cannot keep going if things keep going the way they are as local school officials have said they are facing “financial insolvency.”