Monday, August 24, 2009

Fire Tax Revenue from Pendell Commons

Note to flamers: This post is not intended to be an argument for or against the Pendell Commons proposal. My purpose is only to provide a simple fire tax analysis. I have not taken a position for or against Pendell Commons.

Pendell Commons is a proposed $10 million housing project to be built in the Fairview Fire District (FFD). Many residents have raised objections to this proposal based on a variety of issues, especially those related to the already-overburdened and over-taxed FFD. It has been argued that Pendell Commons would increase the pressure to add staffing to FFD. Less attention seems to have been paid (no pun intended) to the additional revenue such a project would bring to Fairview.

Revenue Analysis

Here's a simple back-of-the-envelope revenue analysis: The fire tax rate in Fairview is approximately $5 per thousand dollars of market value, and has been so for many years. The Pendell Commons project can be assumed to increase the market value of the Pendell Road parcel by about $10 million. Multiplying these two numbers together shows that if Pendell Commons were built — and it stays entirely on the tax rolls — approximately $50,000 in fire taxes would be added to FFD coffers each year.

It has been reported that Kearney Realty & Development, the company proposing Pendell Commons, would donate $50,000 to FFD “to help defray costs”. Assuming this is a one-time donation in addition to fire taxes, we can conclude that FFD would see $100,000 increased revenue the first year, and $50,000 each year after that.

Additional Firefighter?

The budgetary cost of a full-time professional firefighter in Fairview is approximately $120,000 per year. Thus, if Pendell Commons is built and stays entirely on the tax rolls, it could pay for most of one additional full-time professional firefighter the first year, and could pay for nearly half of a full-time professional firefighter in succeeding years. This would be in addition to the current 18 full-time professional firefighters in Fairview.

Monday, August 3, 2009

Fairview's New Tax-Exempt Myth

The Fairview Fire District has the highest fire tax rate in Dutchess County, and possibly the highest in New York State. (See Document #11 at my Fairview Fire Tax website.) The question is, “Why?”

Hint: It's not only because of Fairview's tax-exempt properties, and it's not even mainly because of Fairview's tax-exempt properties. How can that be? Read on.

Fairview's Old Tax-Exempt Myth

Fairview's old tax-exempt myth, widely believed until about a year ago, was that Fairview's fire taxes are so high because up to 80 percent of Fairview is tax exempt. That myth was busted by Document #1 at my Fairview Fire Tax website. That report shows that only 42 percent of Fairview's market value was tax exempt in 2008. For 2009, the figure is 47 percent, still less than half.

Fairview's New Tax-Exempt Myth

Since the old myth was busted, it now seems to have been replaced by a new myth: Fairview's fire taxes are so high because nearly half of Fairview is tax exempt. In other words, the reasoning is the same, but “up to 80 percent” is replaced by “nearly half”. This myth is stated as fact in a widely-circulated July 29, 2009, letter by New York State Assemblyman Joel Miller to Dutchess County Executive William Steinhaus. In a widely-circulated response to Miller's letter, Mark Bendel, Vice President of Fairview's Firefighter Union, appears to disagree with most of what Miller wrote. However, regarding Miller's assertion about the reason for Fairview's high taxes, Bendel writes, “You are absolutely right.” Thus, at least two public officials with divergent views believe the new myth. I suspect that many more officials believe likewise.

What's Wrong with Fairview's New Myth?

The best that can be said for the new myth is that it isn't all wrong. For a start, it is factually correct that nearly half the market value of Fairview is tax exempt. (No, it's not half the land that's tax exempt, as Miller claims. A quick glance at the map of Fairview on the Firefighter Union's website shows that only a quarter to a third of the land area (the yellow areas) is tax exempt. Anyway, it's the market value, not the land area, that matters for calculating fire tax rate.)

Secondly, it is true that with nearly half of Fairview's market value tax exempt, Fairview's fire tax rate is significantly higher than it would otherwise be. But Fairview's tax exempt properties are not the sole reason why Fairview's taxes are so high, and it is not clear that they are the most important reason. Document #12 at my Fairview Fire Tax website shows that even if all Fairview's tax exempt properties paid their “fair share” of fire tax, Fairview’s fire tax would still be the second highest in Dutchess County.

“Second highest fire tax rate in Dutchess County” does not sound to me like “problem solved”. It sounds more like “major problem”. Indeed, when Fairview's fire tax rate is adjusted in Document #12 for the assumption that all tax exempt properties pay their “fair share” of fire tax, the adjusted Fairview fire tax rate is still two and a half times greater than the weighted average fire tax rate for Dutchess County.

Here's another way of looking at it: Fairview's fire tax rate is 4.5 times higher than the average Dutchess County fire tax rate. Of that 4.5 times, only 1.8 times is accounted for by tax exempt properties. The other 2.5 times (these are multiplicative factors, not additive terms) must be attributed to other factors. So most of Fairview's high fire tax rate must be attributed to factors other than the existence of tax-exempt properties.

Why Is Fairview's Fire Tax So High?

So we're back to the original question: What factors other than tax exempt properties might account for Fairview's high fire tax? I don't really know for sure, but here's my guess: Fairview is a very small fire district. It has only one fire house. Nevertheless, Fairview still requires an accountant, a lawyer, a full-time secretary, a fire chief, and probably many fire-fighting resources I don't know about. Fairview cannot achieve the economies of scale that larger districts can. Knowledgeable readers are encouraged to post additional and more detailed factors.