EXCLUSION OF SMALLER MUNICIPALITIES FROM HEALTH INSURANCE TRUSTS THAT ARE EXPERIENCED-RATED
Under current law, municipalities with fewer than 50 employees must have a community-rated health plan. By extension, a multiple employer trust of several municipalities attempting to jointly purchase health insurance must also be community-rated if any of its constituent employers has less than 50 employees.
Unlike an experience-rated plan where premiums are based upon specific claims experience, community-rated plans’ premiums are determined by the collective claims experience of all insureds in a particular community pool, without regard to age, sex, health status or occupation. It has been reported that in the first year of being subject to community-rating, almost 30% of the insured experienced premium increases ranging from 20% to 60%.
Amend the Insurance Law so that smaller municipalities may join multiple employer trusts that are experience-rated, thereby allowing them to share in the health insurance costs savings associated with these trusts.
PUBLIC SECTOR PENSION COSTS
In recent years, the pension cost crisis has revealed the underlying imbalance between the high cost of New York's public pension benefit structure and the limited fiscal capacity of local governments and their taxpayers. The state and its local governments operate under what is known as a defined benefit plan where employees are guaranteed a certain level of benefits financed primarily by state and local employer contributions to the retirement system. Over the years, these benefits have become increasingly more difficult to sustain.
Over the years, as pension benefit outlays have increased and pension fund assets have declined, pension costs have become increasingly more difficult to sustain. When combined with other mounting fiscal pressures on local governments, these increases in pension costs have led, and will continue to lead, to further increases in property taxes and cutbacks in essential municipal services. Additionally, while the less expensive Tier 6 will bring about long-term savings, something needs to be done to equitably provide relief in the near-term.
Our state leaders should be commended for establishing a new retirement tier with more affordable retirement benefits for new hires in both the Employees' Retirement System and the Police and Fire Retirement System. This new tier contains many of the elements the Conference of Mayors had been calling for, including: 1) requiring an employee contribution for the duration of their employment; 2) increasing the minimum retirement age at which an individual can begin to draw down even a partial pension benefit; and 3) revising the way the final average salary is (FAS) is determined by considering more than three years and taking into account only base pay. This much-needed and long overdue pension reform is clearly a significant step toward helping local governments address their rising personnel costs. Unfortunately, it will do little to assist municipalities in the short-term and, as a result, we must continue to support finding ways to ease the immediate impact of rapidly rising pension contribution rates. To accomplish this, the state must undertake a thorough analysis of the benefits, funding methodology and oversight structures of our public pension system.
While the Taylor Law is a comprehensive labor relations statute that provides many important privileges for public sector employees -- including the right to organize and to negotiate the terms and conditions of their employment -- it has the effect of increasing employer costs by placing key decisions concerning the salary and benefits of local public safety employees outside the control of local officials and local taxpayers. In the event an impasse is reached in negotiations between a municipality and a police or firefighter union, the final step in the impasse resolution procedure is the use of compulsory (or binding) arbitration. A three person panel of state-approved arbitrators convenes to consider the issues which have led to the impasse and the positions taken by both parties.
The hearing produces verbal testimony and documents to support each party. The panel then meets to decide how each outstanding issue will be resolved and issues a written report containing its award. An arbitration panel has significant power and can issue an award which requires an increase in taxes. However, an arbitration panel is not responsible for its award and is not accountable to taxpayers. Over the years that the compulsory arbitration law has been in existence, many unions have sought to rush to arbitration and avoid substantive negotiations.
As one might expect, an unelected panel of non-residents of a community are not going to be sensitive to the financial capacity of local taxpayers when it issues compulsory arbitration awards. As a result, the binding arbitration system in New York leads to contracts that are more expensive for taxpayers than they would otherwise be without such a system. The impacts of binding arbitration on police and firefighter salaries and benefits are described in this Empire Center for New York State Policy report.
While this statute imposes an unfunded mandate upon municipalities and, ideally, should be repealed, an acceptable first-step would be to amend the statute in those areas that municipal officials have identified as most problematic for taxpayers:
Definition of ability to pay. The statute has no definition of its phrase "ability to pay." It should be amended to require that an arbitration panel accord substantial weight to "ability to pay" when making an award and the term should be defined as the ability of a public employer to pay all economic costs imposed on it by an arbitration award without requiring any new or increased level of taxation, or a reduction in municipal services, for each year or years addressed by the award.
It should be noted that Chapter 67 of the Laws of 2013 amended the statute to say that for those municipalities deemed "fiscally eligible," the arbitration panel is compelled to "first and foremost," give 70% of its weight and consideration to the local government's "ability to pay." The panel must also "recognize and take into account" the constraints imposed by the 2% property tax cap. A municipality is considered fiscally eligible if it meets one of the following two criteria:
A 5-year average full value tax rate in the top 25% statewide (i.e., above $6.57 per $1,000)
A 5-year average General Fund fund balance as a % of General Fund expenditures that is less than 5%.
Final offer arbitration. Under the current arbitration process, each party submits their most recent bargaining demands to the arbitration panel and offers evidence in support of the demands presented. The arbitration panel has the authority to make an award as it deems appropriate and is not required to accept either party's position on a particular matter at impasse. Some states use a different process and require that an arbitration panel pick the final offer of either party. Some practitioners who are familiar with both types of compulsory arbitration contend that the "final offer" requirement forces a convergence of bargaining demands, as opposed to what is currently used in New York. The compulsory arbitration law should be amended to require that the arbitration panel select the final offer of one of the parties.
The prevailing wage law is a prime example of a mandate that arbitrarily and without merit drives up the cost of managing a municipal government, particularly as it relates to undertaking public works projects or providing services for municipally owned buildings. Labor Law § 220 mandates that for all contracts for public works projects the contractor must pay workers "prevailing wages" and supplements -- that is, wages and benefits equivalent to those paid to laborers and workers performing the same types of work on private projects. Also, Labor Law § 230 imposes the prevailing wage mandate on contracts to provide services to municipally and privately owned buildings, provided the contract is more than $1,500.
Although the payment of prevailing wages is an obligation of the contractor, this cost is passed through to the governmental entity since it must pay the contractor for performing the work. It must also be noted that the methodology by which "prevailing wage" is defined and determined in New York essentially guarantees that the prevailing rate will be the union rate, which is often significantly disproportionate to what non-union labor would cost.
The dollar exemption found in Labor Law § 230 was enacted in 1971 and has not changed. During the last four decades, however, consumer prices have quadrupled. A first and relatively easy step to reforming this mandate would be to amend the statute to exempt building service contracts of less than $20,000 from prevailing wage laws. Similarly, Labor Law § 220 -- which currently contains no threshold -- should be amended to exempt public works contracts of less than $35,000 from prevailing wage obligations. Lastly, the method used by the State to calculate "prevailing wages" for public works projects should be changed to use the State's Unemployment Insurance Prevailing Wage tables. The Unemployment Insurance Prevailing Wage tables are updated semi-annually via the Occupational Employment Statistics survey of employers and reflects local economies' actual prevailing wages, which will provide a better determination of regional prevailing wages for projets.
THE TRIBOROUGH AMENDMENT
The 1982 Triborough Amendment to the Taylor Law prohibits a public employer from altering any provision of an expired labor agreement until a new agreement is reached. This amendment, which was originally approved with the strong support of unions, has the effect of requiring automatic pay increases where a salary step schedule or longevity schedule exists, even though the labor agreement has expired. Consequently, a public employer's salary costs continue to rise even when labor negotiations have reached an impasse.
The Triborough Amendment also undermines the collective bargaining process by discouraging unions from offering concessions or givebacks since, as long as no agreement is reached, the terms of the current contract remain in effect. Not only is New York the only state in the nation known to have such a requirement, but in the private sector, where collective bargaining has existed for more than 60 years under the National Labor Relations Act, no similar obligation is imposed upon employers who are parties to a labor contract.
The dramatic impact that the Triborough Amendment has on collective bargaining translates into a negotiations process that discourages compromise, putting New York's taxpayers at an extreme disadvantage.
The Triborough Amendment should be repealed so that public employers and employees can be encouraged to work together to achieve labor contracts that are both fair and affordable.
LEGISLATIVE CHANGES TO THE TAYLOR LAW THAT UNDERMINE THE COLLECTIVE NEGOTIATION PROCESS
The Taylor Law provides public employees in New York with a right to: (1) join an employee organization; (2) collectively negotiate with public employers over their terms and conditions of employment; and (3) invoke procedures to resolve an impasse in negotiations. This law has been in existence for nearly 40 years and was originally modeled after a federal law which allows private sector workers to unionize. In addition to New York, numerous states have adopted similar bargaining statutes which permit public employees to unionize.
With limited exceptions, one of the common characteristics of any bargaining statute is that both an employer and an employee organization representing workers must comply with the same standards with respect to their conduct as it relates to (1) interactions between themselves and (2) their conduct regarding employees who have chosen to unionize or not to unionize. For instance, under the Taylor Law, both a public employer and an employee organization have the affirmative obligation to negotiate bargaining subjects in good faith, and both are prohibited from interfering with, restraining or coercing public employees in the exercise of their Taylor Law rights. Additionally, an employee, an employee organization or a public employer can seek to require compliance with such obligations through the filing of an improper practice charge with the Public Employment Relations Board (PERB).
In recent years, the State Legislature has attempted to circumvent the negotiation process by passing legislation that would provide employee unions with certain benefits they were unable to successfully obtain at the bargaining table. Examples of such bills include: extending the length of time an employee could be absent on leave due to an occupational injury from an already generous 12 months to 18 months; prohibiting the termination of an employee represented by a union unless the disciplinary hearing were to be conducted by an independent hearing officer; mandated paid leave for cancer screening and voting; and several bills increasing pension benefits, something which should only occur if organizations representing those public employers effected were to consent.
Mandated benefit enhancements via legislative intervention into the collective negotiation process over the past decade, have added several hundred million dollars of expense onto local governments and their property taxpayers, with no commensurate benefit in return.
The State Constitution should be amended to prohibit any one-sided changes to the Taylor Law that would undermine the collective negotiation process or jeopardize the balance between the negotiating power of public employers and that of public employees.
EXTENSION OF THE MANDATORY RETIREMENT AGE FOR POLICE AND FIREFIGHTERS
In 2008, a law was enacted that increased the mandatory retirement age from 62 to 65 for police and firefighters who have elected a 20-year retirement plan. An overwhelming number of such individuals have elected a 20 - year retirement plan. Federal law enforcement personnel are subject to a mandatory retirement after 20 years of service or age 57, whichever occurs first.
The financial impact on municipalities is that, for an individual who delays his or her retirement, the municipality will be contributing a greater amount to the Retirement System because of the higher pay of such an individual as compared to a newly hired person. In addition, the senior individual will likely be at the top step of a longevity schedule. A newly hired person would not receive a longevity payment for several years.
The law should be repealed.
ALLOWING RETIREMENT PLAN CHANGES ONCE A DISABILITY OCCURS
The provisions of General Municipal Law § 207-a and § 207-c require that in the event a workplace injury to a paid firefighter or police officer prevents the performance of work, a municipal disability payment that is equal to the full amount of regular salary or wages must be continued until the individual reaches the mandatory retirement age established by the retirement plan in which he or she is a member. Many firefighters and police officers are enrolled in special retirement plans which require a retirement at age 62, if disabled. In order to extend their disability payments (which are more generous than their retirement benefit), firefighters and police officers out on § 207-a or § 207-c are - prior to the age of 62 - switching to a different retirement plan with a mandatory retirement age of 70.
Where this occurs, a disabled firefighter or police officer continues to receive municipal disability payments equal to the full amount of regular salary or wages for an additional eight years, and the municipality does not receive a credit from the Retirement System for the municipality's years of contributions to the previous and more expensive retirement plan.
The appropriate statutes should be amended to prohibit these individuals from changing retirement plans once an on-the-job disability has been incurred.
LIMITATIONS ON ADMISSION TO PROMOTIONAL EXAMS
Under existing law, when an exam for a position is offered, should the position represent a promotion, the only individuals eligible to take the exam are those currently employed in the same department. Should an appointing authority seek to have other individuals take the exam, reasons must be presented in writing to the appropriate civil service agency in order to obtain its consent to expand the pool of test takers.
This arbitrary prohibition prevents local governments from obtaining the most qualified, efficient and productive person for a position.
In the interest of seeking to obtain the best qualified job applicants, the statute should be amended to provide that those employed in other departments or by other municipalities, and who are otherwise qualified to take an exam, be allowed to do so.
PAID LEAVE FOR CANCER SCREENINGS
Section 159-b of the Civil Service Law provide that any public employee or public officer has a right to take paid leave, of up to four hours per year for cancer screening. As a result, those covered by these laws have paid leave over and above whatever paid leave may have been granted to them by their employer. The reality is that any employee with accrued sick leave could potentially use such leave to undergo screenings for these types of cancer. Consequently, these laws are unnecessary. Furthermore, this coverage extends to part-time employees. While this class of employees is generally not provided with paid leave, any part-time employee seeking a cancer screening would be able to schedule such outside of normal working hours.
Ths law is both costly and unnecessary and should be repealed. The State Legislature should recognize that both state and local government employees are permitted to take vacation, sick and personal time for these and other related purposes. Also, NYCOM is aware of no circumstance where a local government employee in New York was denied the opportunity to use his/her accumulated leave for the purpose of cancer screening appointments.
EXCLUSION OF MUNICIPALITIES FROM DISABILITY RETIREMENT PROCEEDINGS
Municipalities are not allowed to participate in the process to consider the merits of a disability retirement application filed by, or on behalf of, a member of the New York State Police and Fire Retirement System. This prohibition denies the opportunity for disability benefit administrators to obtain additional information relevant to the merits of an application. In the past, disability pensions have been improperly granted due to the fact that disability benefit administrators were not presented with all of the facts.
The cost of disability pensions for the members of the NYS Police and Fire Retirement System are paid totally by taxpayers.
Permit municipal employers to be participants in any disability retirement proceeding conducted by the New York State Police and Fire Retirement System.
INABILITY TO ESTABLISH STORMWATER UTILITY DISTRICTS
Municipalities that fall within the scope of the Municipal Stormwater Sewer System (MS4) program are required to comply with a series of stormwater management system mandates. Under the MS4 program, impacted municipalities are required, by the federal government, to implement best practices with respect to their oversight of stormwater in municipal systems. According to the NYS Department of Environmental Conservation who administers the program, there are six minimum control measures that constitute best practices that all MS4 municipalities must implement. These requirements include public education, out reach and involvement, illicit discharge detection, construction run-off control, and pollution prevention.
The cost of complying with the MS4 program varies from community to community, depending on a myriad of factors. However, this program places a significant and costly mandate on the local governments who are obligated to meet the MS4 program requirements. Historically, some funding for MS4 compliance has been included included the state's Environmental Protection Fund (EPF). Unfortunately, the need far exceeds the state assistance that has been made available to help impacted communities implement this program.
The state should pass enabling legislation which would allow municipalities the option to create "stormwater utility districts." These districts have been used successfully by municipalities in other states to address the administration of the MS4 program. A stormwater utility would operate as a department of municipal government, similar to municipal water and sewer utilities. These utilities are funded by user fees. The fees are imposed upon benefited properties, rather than being levied as a general tax. This approach is perceived as more equitable by property owners and provides for a more reliable revenue stream. The user fee is set annually based on program needs.
Currently, the functions needed to implement the MS4 program are dispersed throughout many different municipal departments. A stormwater utility would consolidate these functions, making administration more efficient and providing a focal point to ensure MS4 compliance. It would also provide a mechanism to better account for program costs. This system may also be applied to a county or regional-level authority. In doing so, the efficiencies of scale and intermunicipal drainage/basin issues may be more readily addressed.
It is unclear whether municipalities currently have the authority to create stormwater utility districts under current law. A definite statutory framework would eliminate any uncertainly and acknowledge the need for alternative financing opportunities for cities and villages that are subject to this mandate.
PROHIBITION AGAINST REASONABLE RETURN ON SEWER RENTS
Currently, General Municipal Law § 94 authorizes a municipality to earn a "fair return" from the operation of a water utility service. This means a local government may use the "profits" or surplus resulting from the operation of the water utility system for any municipal purpose. However, this same authority does not exist for municipal sewer utility systems. General Municipal Law § 453 limits the use of sewer fund revenues to expenses directly related to the sewer system including operation, maintenance, repair, construction and indebtedness
By not allowing a municipality to earn a "fair return" from the operation of a sewer utility system, the state restricts a local government's ability to use their resources in the most cost-effective manner, which only exacerbates the reliance on the local property tax.
Amend General Municipal Law § 453 to permit a municipality to earn a "fair return" from the operation of a sewer utility system, as is currently allowed with water utility systems. Amending the law will allow local governments to excess sewer funds for any municipal purpose, potentially easing the financial burden currently facing local governments by allowing for the more economical delivery of municipal services.
LIMITATION ON CHARGERS FOR FOIL REQUESTS
Under Public Officers Law Article 6, New York's Freedom of Information Law (FOIL) imposes substantial requirements upon municipalities to provide access to and copies of local government records.1 Although some requests are relatively easy to comply with, many are extensive, costing local governments hundreds of hours of staff time to search for and copy the records sought. Additionally, many municipalities are subjected to frivolous FOIL demands that divert local government employees from performing vital government functions in order to process these non-meritorious requests.
As the law currently stands, municipalities are permitted to charge 25¢ per page for copies of letter and legal size records. The law does not allow a local government to account for the actual cost involved in expending municipal resources to locate, copy, and in many instances, redact confidential information from requested documents. The hours spent searching for and copying records for voluminous requests can impose significant costs on municipalities and often leads to the stagnation of government, as other duties typically performed by local officials must be put on hold in order to timely comply with such requests.
The Public Officers Law should be amended to permit municipalities to charge 50¢ per page copied. Additionally,
Indeed, other states have implemented progressive policies that more accurately reflect the costs imposed upon local governments in complying with FOIL requests. For example, Michigan provides that a local government may charge for duplication, mailing, and labor costs when the failure to charge a fee would result in an unreasonably high cost to the public body.2
Amending New York's Freedom of Information Law to reflect policies like those mentioned above would drastically ease the burden imposed upon municipalities and their taxpayers, discourage individuals from making frivolous requests, and enhance local government efficiency.
1. See Public Officers Law § 87.
2. See Mich. Comp. Laws Ann. § 15.234.
INABILITY TO IMPOSE FEES FOR POLICE SERVICES
Municipalities in New York are granted relatively broad authority to impose fees for the services they provide. However, this authority is limited when it comes to public safety services. The State Comptroller has opined that “…the providing of police protection is a basic governmental function which all inhabitants of the government are entitled to receive equally without having to pay any additional charges therefore.” (see Opinions of the State Comptroller 81-366). As a result, when a special event is held within the geographic area served by a municipal police department and the event requires extraordinary police services, the municipality is precluded from imposing a fee upon the sponsoring individual or organization, regardless of whether an admission fee is charged. Similarly, no authority exists for municipalities to charge auto insurance companies for the costs incurred by police and fire departments to complete theft investigations and compile vehicular accident reports.
Without such authorization, municipal taxpayers must fully support the cost of providing police officers, frequently called back to work at overtime rates, to cover special events for which an admission fee is charged. Additionally, police and fire departments provide valuable services and generate reports from which automotive insurance companies benefit. The costs associated with conducting such investigations and compiling such reports is borne by the municipal police department, and in turn, local taxpayers.
State legislation should be enacted to allow a local legislative body to set a fee for providing police services deemed necessary or required at places of public amusement or exhibition, particularly when the event sponsor charges an admission fee. Municipalities should also have the ability to bill automotive insurance companies for the cost of public safety services associated with completing theft investigations and compiling vehicular accident reports.
LACK OF REIMBURSEMENT FOR EMERGENCY MEDICAL SERVICES
Pursuant to State Finance Law §54-e, municipalities may be reimbursed by the state for the cost of firefighting on state property. However, reimbursement to a municipality is prohibited when it provides emergency medical services on state property.
Municipal governments, particularly those in which state offices or state colleges/universities are located, regularly expend resources providing emergency medical services on state property.
The State Finance Law should be amended to include emergency medical services as a reimbursable service when provided on State property.
DISPARITY IN CHARGES FOR VITAL RECORDS
Many cities and villages in New York State employ a Vital Records Registrar who issues birth and death certificates. Historically, the statutory amount which may be charged by local offices for vital statistics documents was equal to the $10 charge imposed by the state for similar records. In 2003, the state's fee was raised to $30 without a corresponding change for municipalities. Since then, the State Legislature has enacted similar increases for certain counties including Monroe, Onondaga, Chemung and Tompkins, and the City of Oswego. However, the remaining local governments are prohibited from charging more than $10 for these documents.
Allowing municipalities to increase the fee to $30 could generate significant non-property tax revenue, thereby reducing the reliance on the local property tax. It has been estimated that cities could receive an additional $100,000 to $600,000 annually (depending upon the number of documents issued) if they were permitted to charge the $30 fee. It should also be noted that this cost is likely to be borne by individuals that live outside the municipality or even the state.
Enact legislation that allows all municipalities to charge up to the same amount as the NYS Department of Health for the issuance of vital records. Local governments have limited revenue sources, many of which are currently experiencing declines as a result of their economic sensitivity. Consequently, it is more important than ever that the state find no-cost ways to enhance local governments’ ability to generate additional resources.
STATE SHARE OF LOCALLY ADMINISTERED FEES
There are several examples of locally administered taxes and fees of which the state receives a share including the mortgage recording tax, the handicapped parking fee and the marriage license fee. At a time when local governments are doing all that they can to reduce the local property tax burden, it is essential that they have full access to all possible local revenue streams.
Despite the face that local governments are responsible for the administrative and collection of these fees, and the associated costs that go along with that, they are compelled to share a portion of the fee/fine revenues with the state.
ENFORCEMENT OF UNPAID BUILDING CODE FINES
Criminal enforcement can be one of the most cost-effective tools that local governments have to address building code and property maintenance violations. However, cities and villages are currently not permitted to levy unpaid building code and property maintenance fines on municipal property tax bills. Consequently, the criminal fines imposed by local courts do not serve as a deterrent to the illegal activity, because the individual, limited liability company or corporation that owns the property, often cannot be found to collect the fine. The methods for collecting default judgments and unpaid court fines can be very cumbersome when dealing with absentee landlords and limited liability entities.
Local governments do have the ability to include certain delinquent charges (e.g., unpaid water and sewer rents) on the local property tax bill, which increases the likelihood that those charges will be paid. Moreover, there are provisions in state law that allow local governments to recover expenses a municipality incurs when it abates a nuisance condition and incurs an expense in the process (see Public Health Law, Article 13). In addition, municipalities may, pursuant to their municipal home rule authority, enact a local law providing for abatement expenses to be placed as a lien upon the property (1985 N.Y. Op. Atty. Gen. (Inf.) 85-13, p.78, Opns St Comp, 1982 No. 82-216, Opns St Comp, 1982 No. 82-130).
However, there is no authority or established procedure that would easily allow unpaid criminal court fines relating to delinquent property owners to be levied on the property’s tax bill. This inability to collect criminal court fines as a levy upon a property’s tax bill frequently makes the criminal enforcement an ineffective method for dealing with delinquent property owners.
Enforcing building code, property maintenance, and public nuisance violations can be a difficult and costly process for New York’s local governments. While criminal enforcement is designed to be a relatively cost-effective method for enforcing compliance with New York’s state and local laws, the inability of municipalities to levy unpaid criminal fines on the tax bills of properties that are the subject of such criminal action, requires local government officials to undertake more expensive and time-consuming methods of enforcing unhealthy and often unsafe property conditions.
In addition to the enforcement cost to municipalities, the inability to hold property-owners accountable often has serious consequences for the surrounding property owners, lowering property values and inhibiting sound growth and development, leading to the proliferation of more nuisance conditions.
Permit municipalities to convert unpaid building code, property maintenance and nuisance criminal fines (after adjudication) to liens on real property and to include them on municipal tax bills. This will give municipalities a more viable and effective method of collecting these outstanding fines.
INABILITY TO IMPOSE FEES FOR POLICE AND FIREFIGHTER INVESTIGATIONS
Currently, written reports generated by a police or firefighter investigation of an automobile accident are available to insurance companies at little or no charge. The Freedom of Information Law sets a maximum charge of $0.25 per page for a document that is released to a member of the public and alternatively provides that, if a requested document can be electronically provided, it must be. These insurance companies rely heavily on police and fire departments for investigative work, reporting, interviewing witnesses, etc. They also have enormous assets and generally are extremely profitable, a direct result of quick responses by police and fire departments. While municipal residents generally provide financial support for the operation of these departments through the payment of taxes, non-residents do not, yet they represent a significant percentage of drivers involved in at-fault accidents.
Local governments cannot recover the cost of personnel responding to a motor vehicle accident and for the use of specialized equipment in recovery operations.
Municipalities should be authorized to charge the insurance company of a non-resident at-fault driver for the costs associated with the services, personnel, supplies, and equipment when personnel from a police department, fire department, or both, respond to the scene of a motor vehicle accident.
INABILITY TO IMPOSE FEES FOR VOLUNTEER EMERGENCY RESCUE AND AMBULANCE SERVICES
The authorities having control over a volunteer fire department may establish an emergency rescue squad within the department and further authorize the squad to provide both emergency and general ambulance services. However, the statute creating this authorization, General Municipal Law § 209-b, prohibits any fees or charges for rendering such services. Municipal emergency medical and general ambulance services provided under other sections of law (e.g., General Municipal Law § 122-b, which governs those municipalities with paid fire departments) are not subject to such a restriction.
Municipalities that are not permitted to charge a fee for emergency rescue and ambulance services must rely on the property tax to fund such services, rather than the individuals who use such services.
This section of law should be amended to permit municipalities to establish a schedule of fees for emergency medical and transport services rendered by members of a volunteer fire department or fire company. In most cases, the fees would be covered by the individual’s medical insurance provider.
LOCAL TAXATION FOR SERVICES NOT PROVIDED TO SUB-UNITS OF LOCAL GOVERNMENT
Towns encompass all territory within New York State except for cities and Indian reservations. As a result, every individual (except for those living in a city or on an Indian reservation) lives in a town. A village is a municipal corporation within a town, and its residents are residents and taxpayers of both the town and the village is which the town is located. Of the 932 towns in New York State, 421 of them contain at least one village.
As a general rule, town services are to be financed by taxes levied on the whole town, including village residents within the town, unless state statute requires or permits an expenditure to be paid from taxes levied only on the unincorporated area outside of the village. Consequently, village taxpayers must pay for all town services -- regardless of whether they receive or benefit from such services -- unless a statute requires or permits otherwise.
A classic example of this mandate, and one that garners significant attention, concerns village taxpayer liability as it relates to the town highway budget. Highway Law § 141 prescribes that a town's highway budget consist of four items:
Item #1 – repair and improvement of town highways;
Item #2 – repair and construction of bridges having a span of five feet or more;
Item #3 – purchase, repair and custody of road machinery; and
Item #4 – removal of obstructions caused by snow and other miscellaneous purposes.
Pursuant to Highway Law § 277, property owners in a village are exempt from the levy and collection of town taxes for Item #1. However, all town residents, including the residents of a village, are responsible for the expenses associated with Item #2. With respect to Items #3 and #4, the town board has the option to finance those expenses as part-town charges. Not surprisingly, town boards frequently impose these charges town-wide even when the town does not provide snow removal or highway services within the villages. Additionally, if village taxpayers are exempt from paying for the repair and improvement of town highways, it only seems logical that they should also be exempt from paying for the purchase and maintenance of road machinery and the cost of snow removal on those same town highways.
This issue has been further highlighted by the increased attention on village dissolution. Studies of villages considering dissolution have projected, in many cases, an increase in the town residents’ tax burden, due in large part to the fact that village residents would no longer have to pay town taxes for services which they do not receive, thereby eliminating this “subsidy” funded by village taxpayers.
While this is predominantly a village issue, city residents are also subjected to this inequity when, through county taxes, they pay for county sheriff and highway services that are not provided inside city boundaries.
New York's property taxpayers are already subject to one of the highest local tax burdens in the nation. Requiring village and city residents to pay for services they do not receive results in a duplication of taxes and unfairly adds to that burden.
Support legislation prohibiting town and county governments from taxing property owners within sub-units of local government for services not provided to such property owners.
INABILITY TO PLACE A LIEN AGAINST FIRE INSURANCE PROCEEDS ON CERTAIN PROPERTIES
Municipalities are prohibited from placing a lien for unpaid real estate taxes against the proceeds of a fire insurance policy on properties containing a one or two family structure.
The burden for the non-payment of the taxes on these properties shifts to other property owners, as municipalities are forced to look for revenue elsewhere.
Permit a municipality to place a lien for unpaid real estate taxes against the proceeds of a fire insurance policy on any real property located within a municipality. This solution would permit the municipality to be treated in the same manner as any other lienor that has made a claim to the insurance proceeds, and ease the burden imposed upon property owners.
TAXATION OF MUNICIPAL PROPERTY USED FOR PUBLIC PURPOSES
Pursuant to the Real Property Tax Law § 406, municipally-owned property that is used for municipal purposes but is located outside municipal boundaries, is generally subject to property taxation by any taxing entity in which the property is located. While there are a few exceptions to this provision based upon how the property is used, these exceptions require the approval of the municipality in which the property is located.
Based upon the most recent local government data from the New York State Comptroller's Office, cities and villages pay approximately $19 million annually in property taxes on municipally-owned property.
Legislation should be enacted that would grant exempt status to all municipally-owned real property used for public purposes, without regard to whether the property is located within the boundaries of the municipality owning the property.
ABSENCE OF PILOTS ON STATE-OWNED LAND AND COMMUNITY RESIDENCES
Pursuant to Real Property Tax Law § 404, property owned by the State of New York, or any of its departments or agencies, is generally wholly exempt from taxation. Current law includes an inconsistent and inequitable patchwork of provisions that, for certain state property, requires a PILOT payment. Due to the ad hoc nature in which policies and programs concerning state-owned land have been developed, similar properties may generate significantly different payments, or in some cases, no payments at all. In addition, community residences for the developmentally disabled are a responsibility of the whole State. However, these facilities are not always evenly distributed among municipalities, and as a result, certain municipalities bear a disproportionate burden of these tax-exempt properties.
In 2016, there were 21,506 property tax exemptions granted on state-owned property, totaling $75.9 billion in exempt full value. Municipalities with large concentrations of tax-exempt property must continue to provide essential municipal services despite their compromised tax base. Exempting property from taxes does not diminish the need for those lost tax revenues; it simply shifts the burden of generating those revenues to the remaining taxpayers in the community.
Enact legislation establishing a uniform requirement for the State to make PILOT payments on state-owned land and buildings in an amount equal to a fixed percentage of the lost tax revenues. Also require PILOT payments from the State on tax-exempt community residences for the developmentally disabled.
RESTRICTION ON ASSESSMENTS FOR CONDOMINIUMS AND COOPERATIVES
Section 581 of the Real Property Tax Law and Section 339-y of the Real Property Law create a de facto exemption for most properties held in condominium or cooperative form of ownership. These laws, in essence, mandate that condominiums and cooperatives are to be valued for purposes of the real property tax by using a capitalization of income or cost approach. A comparable sales approach, which is used for most residential properties and is based upon the sales prices of individual units, may not be used.
This mandated and arbitrary assessment restriction places an artificial cap on the assessment of condominium and cooperative properties, forcing assessors and appraisers to ignore market resale information which is usually the best indicator of property values. This law, in effect, results in a ceiling on assessments that is based not on a type of property, but on a classification of ownership. Consequently, you may have a single-family home and a condominium that are physically identical and sell for the same price, but the property tax liability associated with each will differ significantly, sometimes by as much as 50%. See New York State Office of Real Property Services' Opinion of Counsel, Volume 11, No 124 (2008), which states: "[ORPS] has data showing that residential condominium units in some municipalities incur one-half the taxes incurred by comparably priced homes under conventional ownership."
Not only are condominium developments increasing in number, more and more communities are reporting that single-family homes on large parcels of land are being classified as, and therefore assessed as, condominiums. A 2008 report issued by ORPS notes that, "Although condos traditionally have been developed in multi-family buildings or in clustered, town house-style developments, nothing in state law prevents single-family homes from being grouped as a condo development. All that's required is some commonly owned land or other assets." As the number of people who take advantage of this loophole increases, the greater the tax burden that is shifted to the remaining taxpayers who are not in receipt of this preferential treatment.
Real Property Law § 339-y and Real Property Tax Law § 581 should be amended, so that market value -- rather than income-producing value -- becomes the valuation method for property held in condominium or cooperative form of ownership.
EXCLUSION OF CELLULAR SERVICES FROM THE UTILITY GROSS RECEIPTS TAX
Cities and villages are authorized to impose a gross receipts tax (GRT) on the sale of utility services. Authorized by General City Law § 20-b and Village Law § 5-530, the tax is equal to 1% of the gross income of utilities operating within their boundaries. (The cities of Rochester, Buffalo and Yonkers are authorized to impose this tax at rate not to exceed 3%.)
Cities first received the authority to impose the tax in 1937 when the State imposed its own gross receipts tax pursuant to § 186-a of the Tax Law. In fact, it is this section of the Tax Law that provides the framework for the local gross receipts tax as both General City Law § 20-b and Village Law § 5-530 state that "...any city (village) is hereby authorized and empowered to adopt and amend local laws imposing in any such city (village), a tax such as was imposed by section 186-a of the Tax Law in effect on January first, nineteen hundred and fifty nine, except that the rate shall not exceed one per centum of gross income or of gross operating income....”
Section 186-a defines utility as "any person ... subject to the supervision of the state department of public service . . . who sells gas, electricity, steam, water or refrigeration delivered through mains, pipes or wires ...." When the law governing the imposition of this tax was first enacted, wireless technology was not considered. Consequently, even though cellular companies -- for all intents and purposes -- are considered utilities, cities and villages are currently prohibited from imposing the utility gross receipts tax on cellular service providers since they do not fall within the legal definition. In recognition of the new wireless technology and to promote equity in the tax treatment of various types of telecommunications providers, both the State and New York City made amendments to the Tax Law and the Administrative Code of the City of New York, respectively, to include cellular services as taxable for purposes of the State's tax on telecommunication services and the City's gross receipts tax.
Approximately 360 villages and 61 cities currently impose the utility gross receipts tax. According to the NYS Division of the Budget, extending the utility gross receipts tax to mobile telecommunications would generate an additional $12.5 million annually in non-property tax revenue for cities and villages outside of New York City.
Local governments are continually trying to control expenses while expanding their limited non-property tax revenue options. The utility gross receipts tax is one of these options, but many municipalities have, and will likely continue to experience declines as more and more consumers move from land line to wireless phone service. Given that cellular companies are, for all practical purposes, considered utilities, and to ensure that all telecommunications providers are treated equally, General City Law and Village Law should be amended to include mobile telecommunications services within the scope of the local gross receipts tax.
INABILITY TO RECOUP COSTS FOR MUNICIPAL SERVICES PROVIDED TO TAX-EXEMPT PROPERTIES
All real property in New York is subject to taxation unless the law grants it exempt status. Real property tax exemptions are permitted on the basis of many different criteria, including the use to which the property is put, the owner’s ability to pay taxes, the desire of the State and local governments to encourage certain economic or social activities, and other such rationale. Many tax-exempt properties require the same, and in some cases, more municipal services than non-exempt properties require, yet they are not obligated to pay for such services due to their tax-exempt status. While municipalities currently have the ability to impose user fees and benefit assessments to cover some of these expenses, they are prohibited from doing so for the most costly services, including police and fire protection (see Opinions of the Office of the State Comptroller 81-366 & 90-39).
Municipalities regularly expend resources providing services for properties which are tax-exempt. While real property tax exemptions do play an important role in New York State's property tax system, it is important to note that exempting property from taxes does not diminish the need for revenues; it simply shifts the burden of generating those revenues to the remaining taxpayers in the community. In 2016, Gannett newspapers completed an eight-part series on tax exemptions in New York State that helped to portray the magnitude of the issue. According to their research, approximately $866 billion in property is exempt from municipal and school taxes; the number of wholly tax-exempt parcels in New York grew from 179,420 in 1999 to 219,602 in 2016, a 22% increase; and the value of those properties more than doubled from $276 billion to $567 billion over the same time period.Prohibiting local governments from being able to recoup a portion of the costs they incur to provide services to tax-exempt properties only exacerbates the burden on local taxpayers.
The proliferation of real property tax exemptions -- which often times occurs in a haphazard manner via special laws and expansive judicial interpretation -- has resulted in a dilution of local tax bases. As cities and villages statewide continue to try to contend with the increasing expenses associated with the delivery of municipal services, they must be given greater latitude to recover a portion of these costs from those properties that are benefitted. The state should enact legislation that would permit municipalities, at local option, to impose a service charge on certain tax-exempt properties to offset some of the costs of providing such properties with municipal services.
HOLD LIMITED LIABILITY PROPERTY OWNERS ACCOUNTABLE FOR THEIR NEGLECTED PROPERTIES
A substantial number of properties in New York are owned by corporations or limited liability companies. Unfortunately, it is not uncommon for those corporations and limited liability companies to abandon properties once the property has become unprofitable. Once abandoned, these properties blight the community, often becoming a safety hazard. Cities and villages are then left to shoulder the cost of remediating the properties and, in many instances, demolishing unsafe buildings. Although local governments may place the costs they incur in remediating a property as a lien on the property, the municipality's abatement/demolition costs frequently exceed the property's resulting value, leaving the local government and its taxpayers paying for the costs of the property.
The cost of demolishing a single family home can range from $20,000 to $40,000 per home. Demolitions of multiple dwellings and commercial properties frequently exceeding $50,000 and can stretch into the hundreds of thousands of dollars. With tens of thousands of buildings needing to be demolished across the State of New York, the cost to New York's local governments and their taxpayers is in the tens of millions.
State law should be amended to allow local governments to petition a supreme court judge for an order allowing the local government to attempt to recover the costs it incurs in remediating or demolishing an unsafe building from the owner of the corporation or limited liability company. Specifically, local governments should be allowed to pierce the protective veil of a corporation or limited liability company if the value of property which is the subject of a proceeding pursuant to General Municipal Law § 78-b(1) is less than the cost of abating the nuisance condition or code violation or demolishing the unsafe structure and (a) the assets of the corporation or limited liability company are insufficient to cover the cost of abatement or demolition and (b) the corporation or limited liability company (i) made a profit on the property at any time during the five years prior to the abatement or demolition or (ii) used financial losses on the property to write-off capital gains or income from other properties that the corporation or limited liability company owns during the five years prior to the abatement or demolition. Legislation has been introduced which would effectuate these changes (A. 6673 (McDonald)).
Enacted in 1885, the Scaffold Law holds contractors, employers and property owners absolutely liable for gravity-related injuries, even if the worker was grossly negligent. Municipalities are large property owners, and as such, are faced with widespread liability for accidents that occur on worksites beyond their supervision.
As a result of this heightened liability, municipalities often face significantly higher insurance premiums, particularly when municipalities are self-insured. Furthermore, a judgment or settlement based on the Scaffold Law often exceeds the municipality's insurance coverage, imposing further costs on local governments. Studies have shown that general liability insurance premiums have skyrocketed due to increased litigation resulting from the Scaffold Law. In fact, New York – the only state with this law on the books – has insurance premiums that are 300% to 1200% higher than any other state in the country. Many insurance carriers have been forced to leave the market, citing the high costs associated with the absolute liability standard set forth in the Scaffold Law. As a result, municipalities involved in construction projects are faced with significantly high construction costs.
In light of the damaging effect of the Scaffold Law on local governments and their taxpayers, NYCOM supports A. 3209/S.543, sponsored by Assemblyman Morelle and Senator Gallivan, which we believe offers common sense reform to the Scaffold Law. This bill would amend the Civil Practice Law and Rules to establish a comparative negligence standard for personal injury, property damage or wrongful death actions arising under the Scaffold Law when the employee has committed a criminal act, used drugs or alcohol, failed to use safety devices, or failed to comply with employer instructions or safe work practices when a cause of action accrued. This legislation would create a more equitable standard, holding an employees who directly contribute to their injury liable for his or her apportionment of fault.
PUBLICATION REQUIREMENTS FOR OFFICIAL NOTICES
New York State law is replete with provisions mandating that local governments publish an official notice in a local newspaper.1 These onerous requirements necessitate the expenditure of municipal moneys whenever a local government proposes to enact a local law, puts out a request for bids or holds a public hearing, among other municipal actions.
A conservative estimate reveals that local governments across the state are spending millions of dollars every year publishing legal notices. The cost of the publication requirement is compounded by the fact that many of New York's local governments are only serviced by a weekly newspaper. Weekly newspapers present serious challenges to local governments acting efficiently when they need to quickly enter into a purchase or public works contract, as the deadline for submissions to weekly newspapers can result in a two-week lag before the notice is actually published, thereby delaying the opening of bids. The foregoing demonstrates that the impacts of this mandate are more than financial, as delays in posting caused by the presence of a weekly newspaper, to a limited geographic area, do nothing to ensure that a local government will obtain the best services for the most favorable rate available.
Requiring local governments to pay to advertise official notices in a local newspaper is incredibly antiquated, particularly in the age of the Internet. State law should be amended to allow local governments to satisfy official notice requirements by posting the notices on the municipality's website continuously for a period of days, thereby allowing local government officials to notify interested parties of important information in a more timely, efficient and cost effective manner.
1. See General Municipal Law § 103 (2); Public Officers Law § 104.
LACK OF REIMBURSEMENT OF MUNICIPAL LEGAL COSTS
A plaintiff can sue any municipality so long as the statutory notice requirements are complied with. Oftentimes plaintiffs rush to comply with the notice requirements and, in so doing, commence litigation against the wrong municipality. Despite this wrongful commencement, municipalities are still obligated to expend money and resources defending the lawsuit
In addition to municipalities expending significant time and money defending these wrongful lawsuits, these suits clog up the courts, increasing judicial delay and the overall costs of the legal system.
Require individuals or businesses who sue the wrong municipality to reimburse the municipality for all legal costs incurred. This would encourage plaintiffs to thoroughly research the proper parties and may ultimately reduce the number of municipalities that are wrongfully sued.
LOCAL GOVERNMENT LIABILITY
Local governments are favored targets of lawsuits because they are perceived as having deep pockets and, in many instances, they may be the only viable defendant, even if they are only minimally related to the incident giving rise to the cause of action. Compounding this problem is a myriad of New York State laws that (1) amplify the financial exposure local governments face from such lawsuits and (2) increase the incentive to commence frivolous lawsuits against municipalities.
One major source of cost to local governments and property taxpayers is the jury trial system for civil actions against municipalities. Numerous studies have shown that juries render larger damage awards than judges. The United States Bureau of Justice Statistics found that jury awards were larger than awards handed down by a judge.1 In addition to excessive damage awards, jury trials are more expensive for local governments to litigate. Studies indicate that litigation costs, for both the municipal defendants and the state which administers the judicial system, are greater in jury trials than bench trials because jury trials are longer and more involved. For example, jury selection accounts for nine to seventeen percent of total trial time.2 Moreover, the prospect of large jury awards serves as an incentive to sue local governments, even if the perceived likelihood of success on the merits of the case is small
Excessive Damage Awards
Additionally, the compensation which local governments must pay frequently exceeds defendants' actual damages, pain, and suffering. Juries also "appear to be more receptive to ‘redistribute the wealth' arguments than judges."3 Finally, in many instances local governments are sued because they may be the only potential source of money, even if the local government is only nominally related to the case or partially responsible for the damages.
New York's laws regarding local government liability result in higher insurance premiums for local governments. In addition, local governments incur substantial costs defending meritless lawsuits. While it is difficult to quantify the costs to local governments of New York's plaintiff friendly laws, the failure to reform New York's tort laws is costing municipalities across New York State millions of dollars. For example, New York City alone estimates that the failure to reform New York's collateral source law will cost it nearly $164 million in pending cases. And cities from Albany to Buffalo, as well as hundreds of villages and towns across the State, are forced to pay out hundreds of thousands, even millions of dollars, each year - all because the Legislature has not yet fixed this obvious mistake. This means not only higher taxes, but also fewer services, firefighters or police officers for our communities.
Court of Claims Jurisdiction
Unlike cases brought against New York's cities and villages, cases brought against the State of New York are adjudicated by the State's Court of Claims, which does not adjudicate cases via a jury. Consequently, the State of New York is subject to neither excessive jury awards nor the expense of litigating jury trials. New York's local governments should be afforded this same cost-saving opportunity. Requiring cases against local governments to be adjudicated by the Court of Claims would lower the costs local government and local property taxpayers incur in defending jury trials.
Cap Non-Economic Damage Awards
As previously mentioned, juries are susceptible to "redistribute the wealth" arguments. They often view local governments as having limitless resources and thus force them to pay large monetary awards. Consequently, New York's existing tort system should be amended to compensate plaintiffs more accurately for the actual damages they incur. Specifically, state law should be amended to reduce the municipal costs for tort liability by imposing a medical expense threshold and a $250,000 cap on non-economic damages in actions against public entities. Thirty-eight states cap both economic and non-economic loss damages against local governments.
1."The Decline In Jury Trials: What Would Wal-Mart Do?," South Texas Law Review, Winter 2005, Justice Scott Brister, citing Bureau of Justice Statistics, U.S. Dep't of Justice, NCJ Bull. 202803, Civil Trial Cases and Verdicts in Large Counties, 2001 3 tbl.2 (2004), http://www.ojp.usdoj.gov/bjs/pub/pdf/ctcvlc01.pdf; see also Eric Helland and Alexander Tabarrok, "Runaway Judges? Selection Effects And The Jury," Journal of Law, Economics and Organization, October, 2000.
2."The Decline In Jury Trials: What Would Wal-Mart Do?," South Texas Law Review, Winter 2005, Justice Scott Brister, citing Dale Anne Sipes et al., Nat'l Ctr. for State Courts, On Trial: The Length of Civil and Criminal Trials 14, 40 (1988).
3.Eric Helland and Alexander Tabarrok, "Runaway Judges? Selection Effects And The Jury," Journal of Law, Economics and Organization, October, 2000.
INTEREST RATES ON JUDGMENTS AGAINST MUNICIPALITIES
Various sections of New York State law govern the interest rate on judgments paid by both public and private entities. Pursuant to the Civil Practice Law and Rules § 5004, the interest rate on judgments is set at 9%. Pursuant to General Municipal Law § 3-a, the interest rate on judgments paid by a local government “shall not exceed 9%.” Despite this language in General Municipal Law, more often than not, the 9% rate is applied. This rate is applied in three circumstances: (1) interest on a claim until a verdict or a court's decision, (2) interest on a verdict or court's decision until it is reduced to judgment, and (3) interest on the judgment until the judgment is paid. While the requirement to pay interest on judgments is fair and reasonable, the current rate of 9% is much higher than the interest rate that a judgment creditor would earn by investing the money. This excessively high interest rate is borne to the taxpayers of New York State.
For example, assume that a plaintiff receives a $1,000,000 court award five years after suffering an injury. Pursuant to CPLR § 5004, the plaintiff would be entitled to the $1,000,000 plus interest on that award calculated at an interest rate of 9%, which works out to $411,582. If the interest rate was established at a rate that is more equitable and reflective of the current market rates, for example 6.5%, the plaintiff would receive the $1,000,000 award plus $286,466. Arguably, $286,466 is a fair return for the plaintiff on the $1,000,000 award, and at the same time would save the taxpayers $125,115. While this is a simplified example, it is useful in demonstrating how amending New York’s laws on the interest rate on judgments could save taxpayers money while at the same time treating plaintiff’s fairly.
Although it is difficult to quantify the actual cost associated with the current 9% interest rate, it has been estimated that using market rates would generate significant annual savings for local governments.
Enact legislation that would reduce the rate of interest on judgments against municipalities from 9% to a variable market rate with a 9% cap.
LIMITATIONS ON MUNICIPAL DEPOSIT OPTIONS
Under current state law, originally enacted in 1909, the only banking institutions that are permitted to accept deposits from local governments are commercial banks and trust companies. In fact, New York is one of only a handful of states that does not allow other banking institutions, such as credit unions, to accept municipal deposits. Consequently, the cash management needs of local governments in New York State, which are estimated to be $6 to $8 billion, all must be handled by commercial banks, effectively giving them a monopoly over the deposit of public funds.
Limiting the number of depository options precludes municipalities from taking advantage of the best available interest rates, thereby decreasing their ability to earn greater returns on their investments without increasing their investment risk. According to data collected for the NYS Credit Union League, credit union deposits could save municipal property taxpayers $18 million to $24 million annually. The more local governments can increase money on interest earnings, the more they can decrease their reliance on property taxpayers. Not only can credit unions, at times, offer a better rate of return, they are 100% locally-owned, not-for-profit institutions, which means the money they take in remains within the local community. In addition, municipalities in rural and economically diverse areas will likely be better served by credit unions and other financial institutions, since commercial banks are not always in a location that is convenient to the municipality that is depositing funds. This issue has been exacerbated by the bank mergers that have taken place recently, not only adding to the inconvenience but also leaving municipalities with fewer and fewer local depository options.
Enact legislation that would allow savings banks, savings and loan associations and credit unions to accept deposits from municipalities. During these difficult economic times, municipal officials need to have as much flexibility as possible to assist them in their efforts to balance their tight budgets while keeping property taxes down. Expanding depository options for municipalities will not only help them in this effort, but will help local economies as well.
EXCLUSION OF SCHOOL PROPERTY TAXES FROM TAX INCREMENT FINANCING (TIF) FUNDING
Tax Increment Financing, often referred to as TIF, is a gap financing1 tool that taps the incremental increase in tax revenues resulting when a formerly vacant or underutilized property is redeveloped. The increased property tax revenues that would normally go into a municipality’s general fund are instead used to pay off the debt obligations2 that are issued to help finance the real estate development project. However, New York’s TIF law currently only permits the municipal portion of local real property taxes to be used to finance debt service for such projects. School districts’ real property tax revenues, which comprise approximately 61% of all property taxes levied in the State, are excluded from the TIF program.
What follows is an example of how TIF should work in New York. First, for a redevelopment project to qualify for TIF in New York, an area must be designated as a Municipal Redevelopment Project Area.3 Take, for example, a particular property within the Municipal Redevelopment Project Area that has a value of $250,000 and generates $6,250 in annual real property taxes.4 A plan to redevelop that property would increase its value to $1,250,000, and would generate an additional $25,000 in annual real property taxes.5 However, the developer is unable to secure sufficient funds to fully finance the redevelopment project and needs $375,000 to cover the remaining costs. After reviewing the plan, the local government approves the property as a TIF project, thereby authorizing the taxes generated from the incremental increase in the property’s value to be used to pay off $375,000 in tax increment bonds that will be issued by the municipality to help finance the redevelopment. The municipality continues to receive the original $6,250 in annual real property taxes. However, for 15 years after the issuance of the tax increment bonds, the additional $25,000 that the municipality collects in real property taxes resulting from the increase in the property’s value is used to pay off the bonds that were issued to help finance the redevelopment project in the first place. After the tax increment bonds are paid off, the municipality then receives the $25,000 incremental increase in property taxes in addition to the original $6,250. Please note that this example is extremely simplified and does not take into account many variables that come into play in TIF projects. It nonetheless illustrates how TIF projects can work.
Critics often question,“Why should local governments forego these tax revenues?” The answer to that question is simple: but for the TIF, which is used to close a gap in the development’s financing, there will not be any additional tax revenues because the development will not be undertaken. In addition, it must be noted that during the period that the incremental increase in the tax is used to pay off the TIF bonds, the development will be generating other economic benefits for the community.
TIF bonds are needed as a source of financing in New York because many older properties in municipalities are environmentally contaminated, have antiquated structures and/or require demolition, thereby rendering the cost of redevelopment higher than it would be on a piece of vacant property that has no environmental contamination or existing structures to deal with. Consequently, amending New York’s TIF program is long overdue. It is time that New York’s economic and community redevelopment programs be put on an equal footing with the rest of the country so that our struggling communities can be revitalized into the thriving local economies they were only a few decades ago. And at a time when there are very few sources of revenue to finance economic and community redevelopment activities, it is imperative that the State amend the TIF law to allow communities to help themselves revive their local economies.
As the law currently stands, only the municipal portion of the real property tax is allowed to be used to fund TIF bonds; school district real property tax revenues are excluded. This severely hinders the functionality and utility of the TIF bonds by significantly reducing the amount of debt that can be leveraged for public infrastructure improvements. In fact, since its enactment in 1984, New York’s TIF program has never been used because of the deficiencies in the law. As a result, local government efforts to spur economic development have been severely hampered.
New York’s Municipal Redevelopment Law must be amended to permit school districts to allow incremental increases in the school portion of local property taxes to be used to fund TIF development programs. This would result in greater utilization of this financing mechanism, stimulating local economies and encouraging private investment in local infrastructure.
TIF legislation championed by Assemblyman Schimminger and supported by NYCOM has been pending in the New York State Legislature for several years. Assemblyman Schimminger’s bill (A.2378-A) is currently sponsored in the Senate by Senator Stachowski (S.1716-A) and is a very comprehensive bill, which, while not requiring school districts to participate in the tax increment financing program, gives schools the option of doing so. Individual boards of education would have the opportunity to analyze proposed redevelopment projects, weighing the costs and benefits and the short- and long-run implications for the school districts property tax revenues, before determining whether to allocate the school portion of the real property taxes to pay for the TIF bonds. In addition, this legislation would authorize the use of several alternative revenue sources to pay for the debt service on the TIF bonds, including sales tax receipts, municipal assistance agreements, and benefit assessments.
NYCOM also supports TIF legislation sponsored by Assemblyman Hoyt (A. 9142) and Senator Valesky (S. 6337). While less comprehensive than the Schimminger/Stachowski bill, this legislation does makes the essential improvement to New York’s TIF law of allowing the school portion of property taxes to be used to finance redevelopment bonds.
1. "Gap financing" is financing that completes the total funding needed to undertake a development project when all other available funding sources have been tapped to their limit.
2. In New York, TIF debt is specifically authorized in the form of "tax increment bonds or tax increment bond anticipation notes." See General Municipal Law § 970-p.
3. See General Municipal Law Article 18-C.
4. In this example, the real property tax rate is $25 per $1,000 in assessed valuation.
5. Assuming that the real property tax rate of $25 per $1,000 remained constant.
BUILDING CODE ENFORCEMENT
When the state first enacted the Uniform Fire Prevention and Building Code (the Uniform Code) in the early 1980s, it mandated that local governments enforce and administer the Uniform Code. When the Uniform Code was first enacted, the state also enacted Insurance Law § 9108 and State Finance Law § 54-g, which imposed a fee on commercial fire insurance policies written in New York. The fire insurance fee was originally created for the purpose of helping local governments offset their costs associated with enforcing and administering the Uniform Code. Since 1991, however, these monies have been diverted into the state's general fund instead of being distributed to municipalities. In the past eight years alone, over $98 million in commercial fire insurance fees have been collected but diverted from funding local code enforcement activities.
Needless to say, the state's diversion of these monies has turned the enforcement and administration requirement found in Executive Law § 381(2) into an unfunded mandate, which has forced local governments to fund code enforcement and administration activities through the local property tax. This issue has become even more acute in recent years because the Department of State promulgated regulations that impose additional enforcement requirements on local governments.
The state's building code enforcement mandates require New York's local governments to spend tens of millions of dollars every year to enforce and administer the Uniform Code. The state's diversion of the fire insurance fee from code enforcement and administration activities costs local governments more than $14 million annually.
Legislation has been introduced that would provide a permanent funding stream to support local enforcement of the Uniform Code and serve as a measure of relief for local property taxpayers. The proposed law would reimburse local governments for a part of the costs they incur to enforce and administer the Uniform Code.
TAKING TITLE TO ABANDONED PROPERTIES
As if the economic challenges facing New York's communities weren't already great enough, the "Great Recession" has further strained local economies that were already under tremendous pressure. The decline in jobs and population, particularly in upstate New York, over the past four decades has left many communities with depressed housing markets. This has resulted in a high rate of rental, vacant, and abandoned properties that depress surrounding property values, require a disproportionate focus of municipal resources, and generally inhibit sound economic and community growth. The responsibility of dealing with the negative effects of vacant and abandoned properties falls primarily to the local governments in which those properties are located. Unfortunately, State law does not adequately allow municipalities to promptly deal with abandoned property.
Vacant properties - that is those properties without an occupant but where the property owner is active in the property's maintenance and upkeep, or is at least capable of being located by municipal officials -- have significant negative consequences on their surrounding communities. Abandoned properties are those where the responsible party, who should be held accountable for property maintenance violations and unpaid property bills and taxes, cannot be located. Abandoned properties present much more serious problems for local government officials.
It is difficult enough for local government officials to deal with vacant and neglected properties. When a property is also abandoned, local government officials must first make sure that the property does not present an immediate threat to the public's health, safety, and welfare. If a property does present an imminent danger to the public, then the municipality may take steps to eliminate the danger, often at a cost to local taxpayers. Once it is determined that there is no danger present, or such danger has been eliminated, then local governments must focus on returning the property to the hands of a responsible property owner. However, the first challenge of getting abandoned property into the hands of responsible property owners is to acquire clear title to the property.
The Real Property Actions and Proceedings Law allows municipalities to take title to residential dwellings that are abandoned in their jurisdiction. However, municipalities are not permitted to take title to all abandoned real property, including commercial real property that has been abandoned. As a result, thousands of abandoned properties in New York continue to blight the communities in which they are located.
With municipalities unable to take title to abandoned commercial properties, the property remains vacant, thereby contributing to blight in the surrounding communities. This decreases property values (which in turn affects property tax revenues), puts a strain on local government resources, and generally inhibits the community and economic health of the area. While there are no hard figures about the cost that abandoned properties place upon New York's communities, many studies have been conducted across the country that illustrate the serious consequences of not addressing abandoned properties:
Amend the Real Property Actions and Proceedings Law to permit municipalities to take title to all abandoned real property, including commercial property. This would allow municipalities to quickly and effectively address the negative effects abandoned properties have on the surrounding community. In addition, amend the procedure for completeing the abandonment process to streamline the notice requirement while at the same time protecting property owners' rights. Finally, amend the Real Property Tax Law to shorten the redemption period for tax deliquent abandoned property to one year so that the abandoned property do not sit for long periods of time blighting the surrounding community while falling into further disrepair. Legislation has been introduced that amend the RPAPL (A.7355 (McDonald)) and the RPTL (A. 2490 (McDonald)/S. 175 (MArchione)) effectuate these changes.
1. William Spelman, "Abandoned Buildings: Magnets for Crime?" Journal of Criminal Justice 21.5 (1993): 481, cited in Vacant Properties: The True Costs to Communities, National Vacant Properties Campaign, August 2005 (http://www.vacantproperties.org/latestreports/True%20Costs_Aug05.pdf).
2. "New Tool Ready to Combat Arson: Vacant and Abandoned Buildings Targeted," American Re, 16 June 2003 , cited in Vacant Properties: The True Costs to Communities, supra.
3. Jodi Wilgoren, "Urban Renewal Without the Renewal," The New York Times, 7 July 2002, cited in Vacant Properties: The True Costs to Communities, supra.
5. Pennsylvania Horticultural Society, "Vacant Land Management in Philadelphia Neighborhoods: Cost Benefit Analysis," Philadelphia, 1999: 17, cited in Vacant Properties: The True Costs to Communities, supra.
6. Temple University Center for Public Policy and Eastern Pennsylvania Organizing Project, "Blight Free Philadelphia: A Public-Private Strategy to Create and Enhance Neighborhood Value," Philadelphia, 2001, cited in Vacant Properties: The True Costs to Communities, supra.
LOCAL RECORDS MANAGEMENT
Local municipalities are required by state law to retain and manage an immeasurable number of various documents, which requires a significant expenditure of time and money by the municipalities. In 1989, the Local Government Management Improvement Fund was created to assist the municipalities in complying with the mandate and to improve local government records management. The money is collected by County Clerks on every deed and mortgage filed in their offices by local citizens, which is then distributed back to local governments through a competitive grants program.
In March 2008, a portion of the money collected by county clerks was swept into the state's general fund. Using these funds for state general fund relief means that local governments will have to expend more of their resources to cover the cost of this mandate.
The state should not be permitted to balance its own budget deficits by using money directly collected by and for local governments.
REQUIRING MUNICIPALITIES TO USE PREFERRED SOURCE VENDORS
The state-mandated procedure for entering into purchase and public works contracts is burdensome. Adding to this archaic and costly process is the requirement that local governments purchase certain commodities and services from Preferred Source Vendors. This price preference is in effect a requirement for local taxpayers to pay for a state created subsidy.
New York's Preferred Source law costs local governments as much as 15% on their purchase of goods and services.
The price-preference should be eliminated, thereby lowering the property tax burden created by this program by as much as 15%.
COMPETITIVE BIDDING REFORM
Pursuant to General Municipal Law § 103, local governments are required to follow complex and cumbersome procedures to purchase goods exceeding $20,000 and contract for public works exceeding $35,000. In November 2009, the monetary threshold for public works contracts was raised from $20,000 to $35,000, and in April 2010, the threshold for purchase contracts was raised from $10,000 to $20,000. While these increases are a step in the right direction, further reform is still needed. Given the rising costs of construction, essentially every project pursued by a local governmentis subject to competitive bidding, as tall but the most minor of procurements exceed the current statutory parameters.
The current competitive bidding thresholds decrease local government efficiency, as compliance with the statute imposes mandatory processes that draw out the procurement of uncomplicated transactions for weeks at a time. Moreover, General Municipal Law § 103 prevents local governments from negotiating bidders for a better price or contract terms. These limits ensure that the bidding process is fraught with complications and heavy expenses for local governments and their taxpayers, when procurement should be a relatively streamlined procedure.
New York’s bidding thresholds should be raised from $20,000 for purchase contracts and $35,000 for public works contracts, to $25,000 and $50,000 respectively. Increasing the thresholds to more accurately reflect the cost of projects that the statute was originally intended to cover will enable local governments to operate more efficiently and with greater flexibility.
THE WICKS LAW
The Wicks Law was put into place to promote competition and protect workers' rights. Named for Senator Arthur Wicks who sponsored a bill to expand the law in 1946, the Wicks Law requires that, under General Municipal Law § 101, state and local government construction projects (including school district construction projects) costing more than $3 million in New York City, $1.5 million in Nassau, Suffolk and Westchester counties, and $500,000 in the rest of the state are subject to separate plumbing, heating/ventilation/air conditioning, and electrical contracts. The requirement has proven to be one of the most onerous mandates facing local governments.
The fundamental problem with the Wicks Law is that the responsibility for coordinating the various subcontractors and the overall construction process lies with the public entity bidding the project, which typically has little expertise in this area. These coordination problems often result in costly delays. Most private developers and nearly all the other states in the nation employ a single contract method, where the authority to coordinate the project is vested in a general contractor, who has a financial interest in ensuring that the project is completed in a cost efficient and timely manner.
The Wicks Law also raises indipect costs for the municipality. Lawsuits are often brought against local governments for losses that developers incur as a result of the project delays. The courts have upheld the government's liability in several of these cases, even when the delays are the fault of another contractor. Additionally, there are increased administrative expenses associated with preparing, bidding and awarding separate contracts, as well as the added costs resulting from contractors who automatically increase initial bids for projects subject to Wicks, to compensate for the anticipated delays and other problems common among Wicks Law projects.
For decades local governments and school districts called for reform or repeal of the Wicks Law. The State Legislature finally amended the statute in 2008 by increasing tthe former $50,000 threshold to the current $3 million in New York City, $1.5 million in Nassau, Suffolk and Westchester counties, and $500,000 in the rest of the state. Additionally, projects for which the public entity requires the contractor to enter into a project labor agreement (PLA) are exempt from the Wicks requirements. A PLA agreement is defined as "a pre-hire collective bargaining agreement between a contractor and a trade labor organization establishing the labor organization as the collective bargaining representative for all persons working on the project," and provides that only contractors and subcontractors who sign a pre-negotiated agreement with the labor organization can perform project work.
Other reforms included requirements governing the presentation of bids, an authorization for the prequalification of bidders, and prompt payment provisions that require contractors to pay subcontractors within seven days of receiving payment. With respect to projects for which a PLA is entered into, each contractor and subcontractor must participate in apprentice training programs that have been approved by the Department of Labor for at least three years, have graduated at least one apprentice in the last three years, have at least one apprentice currently enrolled in its program, and have made significant efforts to attract and retain minority apprentices.
Although the changes to the Wicks Law were long overdue, the reforms that were ultimately enacted were met with mixed reviews. While the threshold increases have assisted the state's smaller communities, the rising cost of construction projects, have resulted in many municipal projects still being subject to the multiple bidding requirements under the Wicks Law. Furthermore, several of the labor-related provisions that were included in the 2008 reforms have been criticized as disadvantaging to non-union labor, and as a result, have posed some significant problems for upstate municipalities and small businesses.
The Wicks Law has the effect of increasing state and local construction costs, delaying projects, and in some cases preventing projects from moing forward completely. Previous studies estimate that the Wicks Law adds anywhere from 8% to 30% to project expenses. Repeal of the Wicks Law would significantly reduce municipal debt service costs and save local governments billions of dollars in capital costs.
Enact legislation to repeal the Wicks Law. Eliminating this onerous mandate will help stimulate our languishing local economies by allowing municipalities to utilize a more cost-effective approach to executing public projects, thereby removing a major impediment to communities investing in much-needed infrastructure and other capital improvements. Additionally, the elimination of this requirement would produce savings for New York State as well.
Alternatively, the Legislature should authorize the use of Design Build. The design-build model is a project delivery system used as an alternative to the traditional design-bid-build model. Under the latter approach, design and construction are split -- separate entities, separate contracts, separate work. The design-build system is an integrated approach that provides the municipality with design and construction services under one contract. By relying on a single point of responsibility, the design-build model minimizes risks for the project owner, reduces the delivery schedule by consolidating the design phase and construction phase with a single source of contact, and cuts costs by streamlining the construction process. The model can also be used to facilitate public-private partnerships in order to share the cost of building and infrastructure projects with the private sector.
Several state agencies, including the Department of Environmental Conservation, the Department of Transportation, the Thruway Authority, the Office of Parks, Recreation and Historic Preservation, SUNY and the Bridge Authority are currently authorized to use and benefit from design-build. Currently, no authority exists for municipalities to use this model.
REQUIREMENT FOR OFFICE OF POLICE CHIEF
Pursuant to the provisions of Civil Service Law § 58 (1-c), a city or village with a police department serving a population of 150,000 or less and having more than four full-time police officers, must maintain the office of chief of police. While NYCOM recognizes the important role that police chiefs play in ensuring the protection of their residents in many communities, this mandate undermines the judgment of elected local officials as to how a municipal police department should be structured. Furthermore, it fails to recognize that municipalities adopt a variety of different approaches to police management depending upon the size and needs of the community, as well as the availability of municipal resources to fund such needs.
This mandate deprives local officials of administrative flexibility in the organization of their police departments, something which is available to them with respect to all other municipal departments. The annual cost of maintaining the office of police chief can range, with benefits, from $80,000 to $180,000.
In recent years, the State Legislature has passed legislation that would have exacerbated the current mandate imposed by this section of law by requiring that the police chief be full-time and by extending the requirements to police departments with a certain number of part-time officers. Thankfully, these bills have been vetoed by the Governor. At a time when local governments are facing some of their greatest fiscal challenges, the state needs to do all that it can to enhance flexibility at the local level and allow local leaders to make the most of their limited resources. As a result, this statute should be repealed so that elected municipal officials can determine how best to structure and supervise their police departments.
MUNICIPAL DISABILITY PAYMENTS UNDER GENERAL MUNICIPAL LAW § 207-A AND § 207-C
Paid municipal firefighters and police officers are potentially eligible for generous municipal disability benefits if an injury or illness is incurred in the performance of duty under General Municipal Law § 207-a or § 207-c, respectively, and the injured individual is unable to report for work. In these instances, such individual is entitled to all necessary medical treatment and receipt of a municipal disability benefit equal to the full amount of regular salary or wages. These payments are required to be made until the individual recovers, is granted a disability retirement or reaches the mandatory retirement age.
For each individual with a § 207-a or § 207-c injury, not only does the municipality have to pay the disability benefit, but the local government also has to cover the workload of the injured individual by hiring a replacement or by paying overtime to an existing employee. This double payment for one actual worker puts a significant strain on fire and police department budgets in cities and villages throughout the state. A recent survey conducted by the NYS Conference of Mayors revealed approximately $15 million in expense to local taxpayers for § 207-a, and since § 207-c disability benefit recipients are more prevalent, § 207-c costs are even higher.
These sections of the General Municipal Law should be amended to replace the "performance of duty" standard with a more appropriate "heightened risk" standard for the granting of these benefits. Under a "heightened risk" standard, an injury incurred while performing a work duty which did not involve a hazardous activity would not be eligible for the municipal disability benefit available under § 207-a and § 207-c. A police officer or firefighter who is injured while involved with a nonhazardous work duty instead would likely be eligible for less costly workers' compensation benefits.