Friday, October 30, 2009

Beekman Taxpayers Face 10 Percent Tax Rate Increase

Q: What tax rate increase can Beekman taxpayers expect to see in 2010?
Short Answer: Just read the title of this post.
Long Answer: Read this whole post.

The answer is complicated by the fact that the Town of Beekman has proposed to transfer its $319,800 ambulance contract to the Beekman Fire District. This cost-shifting makes the Town of Beekman tax rate increase smaller than it would otherwise be, and it makes the Beekman Fire District tax rate increase larger than it would otherwise be. From the taxpayer's viewpoint, what matters is the combined effect of the Town's rate increase and the Fire District's rate increase. That's because, as I've written so many times before, the tax rate is all that matters.

One cannot simply add the two rate increases, because they pertain to different tax levies. Instead, one must first sum the tax levies, then calculate a combined tax rate, and then compare these rates for 2009 and 2010. Two factors make it even more complicated to compute the overall Beekman tax rate increase:
  1. The tax base for the Town of Beekman is approximately 4 percent smaller than that for the Beekman Fire District, because of special exemptions (such as for veterans) that apply only to the Town tax. This means that about 4 percent of Beekman's assessed value pays only fire tax, no town tax.
  2. The Beekman Fire District's tentative 2010 budget has very recently been modified to reduce the fire tax levy by $107,000, as I learned today from Beekman Town Supervisor John Adams.
Beekman Tax Bills

Taking all the above into account, Beekman property taxpayers can expect to see the following on their 2010 property tax bills:
  1. Town of Beekman tax rate of $1.32 per thousand dollars of assessed valuation, representing a 0.7 percent decrease from 2009. This 0.7 percent decrease represents a correction of the blunder I reported yesterday, and which Adams has graciously confirmed.
  2. Beekman Fire District tax rate of $0.65 per thousand dollars of assessed valuation, representing a 42.0 percent increase from 2009. (Without the recent $107,000 tax levy reduction, the tax rate increase would have been 56.3 percent.)
  3. The combined effect of the above two taxes is an effective tax rate of $1.97 per thousand dollars of assessed valuation, representing a 10.2 percent increase from 2009. (Without the recent $107,000 fire tax levy reduction, the tax rate increase would have been 14.0 percent. None of the numbers in this item will appear explicitly on the tax bill.)
  4. Possible additional taxes for properties in Pawling Lake Estates and Dover Ridge (water/sewer). These additional taxes are separate from the Town and Fire District taxes, and are not considered in this analysis.
The key number from the taxpayer's viewpoint is the 10.2 percent effective tax rate increase, combining the Town of Beekman tax and the Beekman Fire District tax. (Item 3) This number gives the best measure of how much more heavily each taxpayer's wealth — as measured by the market value of his property — is being taxed by the Town of Beekman and the Beekman Fire District.

Response from Beekman Town Supervisor

I'm pleased that Adams has added a comment to my previous Beekman post, and that we now agree about the effective Beekman tax rate increase. I'm also glad that Adams has chosen to publicly state the effective tax rate increase for Beekman. As I've said many times before in this blog, from the taxpayer viewpoint the tax rate is all that matters. On the other hand, Adams couldn't resist adding:
Keep in mind that the valuation of the Town dropped by about 6% so the effective change in dollars paid will be about 4%.
Although these are true facts, taxpayers are advised to disregard them. The main purpose of such statements is to make tax increases sound not as bad as they really are. I've written about this extensively in The Dirty Little Secret of Property Taxes.

Disclaimer: All of the above numbers are based on proposed budgets, and are subject to final approval of these budgets by the Town of Beekman and the Beekman Fire District.

Acknowledgments: My thanks to Beekman Town Supervisor John Adams, Beekman Town Budget Officer William Brady, and Beekman Town Councilman Daniel French for graciously providing information essential to this analysis.

Thursday, October 29, 2009

Town of Beekman Blunder Overstates Tax Rate Increase

A blunder has caused Town of Beekman Supervisor John Adams to significantly overstate the proposed 2010 Town tax rate increase. A letter from Adams to Beekman Town Clerk Virginia Ward on October 19 includes figures indicating that the projected 2010 Town of Beekman property tax rate would increase 10.09 percent. Also, a Poughkeepsie Journal story on October 14 states that Adams is proposing a 10 percent tax rate increase. In reality, the projected 2010 Town of Beekman property tax rate would decrease 0.7 percent.

Town of Beekman Budget Officer William Brady has confirmed this blunder, which I discovered by examining Beekman's preliminary budget. The blunder was caused by mistakenly comparing the projected tax rate with the corresponding 2008 tax rate. The comparison should have been made with the 2009 tax rate, which is substantially higher. The net size of the tax rate error is 10.8 percent.

Effect on Property Taxpayers

Beekman property taxpayers will presumably be glad to know that their Town of Beekman taxes will decrease slightly, rather than increasing significantly. The bad news is that the Town of Beekman has held down its tax rate only by transferring a $319,000 ambulence-contract cost to the Beekman Fire District, thus raising the Beekman Fire District tax rate by a whopping 56 percent, from $0.46 per thousand dollars of assessed valuation to $0.72. Thus, the same taxpayers will be paying higher taxes out of another pocket. The dirty little secret of property taxes strikes again.

Saturday, October 24, 2009

Poughkeepsie Journal Fails Truth-in-Taxing Test

The Poughkeepsie Journal has failed, in its recent stories about property taxes, to properly inform the public about what's really going on. Most readers of the Journal stories on property taxes in the City of Poughkeepsie and the Town of East Fishkill likely think that projected 2010 property taxes are going down substantially. The truth is that they're projected to go up from 5 to 9 percent. Most readers of the Journal stories on property taxes in the Town of LaGrange, the Town of Poughkeepsie, and the Arlington School District likely think that projected 2010 property taxes are going up by single-digit percentages. The truth is that they're projected to go up by double-digit percentages. The only recent Poughkeepsie Journal story that gets it pretty-much right is the one on the Town of Red Hook, where property taxes are projected to increase 25 percent.

Poughkeepsie Journal Parrots Government PR

In every one of these stories, the Poughkeepsie Journal has done nothing more than to rephrase the press releases and statements of government officials, even when those statements are deliberately misleading. None of the Journal stories has given any hint that there might be a different interpretation of the property tax situation than the government spin. The only reason the Town of Red Hook story is not misleading is that the government officials themselves were candid enough to provide the tax rate and tax rate increase.

The Tax Rate is All That Matters

From the viewpoint of property taxpayers and other members of the public (who pay property taxes indirectly through their rent), the most important measure of property taxes is the tax rate, and changes in the tax rate. In today's declining real estate market, property tax assessments are trending downward by single-digit or in some cases even double-digit percentages. In other words, the wealth of property owners — as measured by the market value of their properties — has diminished by these percentages. Under these conditions, property tax rates will tend to rise, even if the tax levy does not. And if the tax levy does rise, the tax rate will tend to rise even more. This is exactly what's been happening.

The Big Story is Being Missed

An increase in the tax rate is Really Bad News, because it means that our wealth is being taxed at a higher rate. Furthermore, it's likely that local governments will find it difficult to lower this rate to “normal” levels in the future, when the real estate market improves. In other words, the current dramatic increases in local property tax rates may result in permanent increases in the rate at which our wealth is taxed. This is a big story, and it's being played out in almost every local government jurisdiction. But you'd never know it from reading the Poughkeepsie Journal.

Government Officials are Just Doing Their Jobs

You won't hear this story from most government officials. When government officials discuss property tax issues in today's economic climate, it is to their advantage to deemphasize — or even omit — the tax rate and the change in the tax rate. Instead, they focus on the tax levy and/or the typical tax bill. In today's declining real estate market, increases in the tax levy and in the typical tax bill will be smaller than increases in the tax rate. By focusing on tax levies and typical tax bills, officials can make the tax situation seem not as bad as it really is, without actually lying. Putting the best face on a bad situation is what any good politician needs to do.

Truth in Taxing

Prominent disclosure of the tax rate and the change in tax rate is what I call truth-in-taxing. We cannot expect government officials to provide truth in taxing, because of their obvious conflict of interest. However, news sources such as the Poughkeepsie Journal have as a key purpose to inform the public about the workings of government. For stories related to property tax, such reporting means going beyond simply parroting the PR of government officials, especially when it is known that this PR is deliberately misleading. In property tax stories, the key issue is the tax rate and changes in the tax rate. This is always what the story is about, whether government officials wish to talk about it or not. Readers of the Poughkeepsie Journal need the tax rate and change in tax rate in order to understand the essence of what's happening. This means they need the change in the tax rate in the headline itself, in the lead sentence, and possibly also in the sidebar information — not buried in the tenth paragraph, or omitted entirely. The change in the tax rate is the story. Most recent Poughkeepsie Journal stories related to property taxes have failed to provide truth in taxing disclosures. I would very much like truth in taxing to become standard policy in the Poughkeepsie Journal's property tax reporting.

Sunday, October 18, 2009

Truth in Taxing

Before 1968, consumers had very little protection in credit transactions. Lenders often used misleading figures to describe loan offers, so that it was impossible for most consumers to know whether a loan offer was good, bad, or indifferent, or to compare different loan offers. Lenders were not required to clearly disclose the cost of a loan. The truth in lending act, which became a federal law in 1968, changed all that. Now, lenders are required by law to disclose the annual percentage rate, or APR. The APR gives a standard measure of the cost of a loan, and allows direct comparison among loan offers.

In a sense, property taxpayers live in a pre-1968 world. Government officials often use misleading figures to describe property taxes, so that it is impossible for most property taxpayers to know whether a proposed property tax is good, bad, or indifferent, or to compare property taxes from one year to the next, or among municipal jurisdictions.

Truth in Taxing

Property taxpayers need something like truth in lending. I call it truth in taxing. And just as truth in lending has the APR, a standard measure of how much a loan costs you, truth in taxing has the tax rate as a standard measure of how steeply your wealth, measured by the market value of your property, is being taxed. For example, a tax rate of $2.00 per thousand dollars of market value means that you get to pay $2.00 for every $1,000 of market value of your property. If your property is worth $100,000 in the market (as determined by the tax assessor), then your tax is $200. If your property tax rate last year was $2.00 per thousand dollars of market value, and this year it's $2.20 per thousand dollars of market value, then your tax rate has increased $0.20, or 10 percent. Truth-in-taxing means that changes in property taxes are expressed as percentage changes in the tax rate. Other measures of changes such as changes in the tax levy or changes in the the average tax bill may be of some interest (no pun intended), but do not directly disclose how heavily a property owner's wealth is taxed. Only the tax rate expresses directly how heavily a property owner's wealth is taxed, and only changes in the tax rate measure how much more heavily (or less heavily) that wealth is taxed.

Your Property Tax Bill Implements Truth-in-Taxing

Under New York State law, property tax bills are required to display truth-in-taxing information, or at least come pretty close to displaying it. This fact indicates to me that New York State law recognizes the utility of the truth-in-taxing concept. Tax bills are required to display:
  • The tax rate for each taxing purpose (such as town tax, county tax, fire tax, etc.). Unfortunately, the tax rate is given in dollars per thousand dollars of assessed value, rather than of market value. More on this below.
  • The market value of your property.
  • The equalization rate, confusingly called the uniform percentage of value on your bill.
When the equalization rate is 100 percent, all assessed value numbers are the same as market value numbers. For example, tax rates per thousand dollars of assessed value are numerically equal to tax rates per thousand dollars of market value. In this case, your tax bill directly displays the tax rates determining how steeply your wealth is taxed.

When the equalization rate is not 100 percent, one can convert tax rate in dollars per thousand dollars of assessed valuation to dollars per thousand dollars of market value simply by multiplying the former by the equalization rate.

Who Should Be Responsible for Truth-in-Taxing Disclosures?

I'm not suggesting that truth in taxing should be a law, as truth in lending is. I'm just suggesting that truth-in-taxing is a convenient label for disclosures which clearly state the meaning of property taxes for taxpayers. It would be asking too much of government officials to focus their press releases on truth-in-taxing. They simply have too strong a conflicting interest in obscuring this information, especially in a declining real estate market. But news sources intending to inform the public about property tax matters, rather than to promote a partisan view, would do well to focus on tax rate as the key component of truth-in-taxing. More on this in a subsequent post.

Friday, October 16, 2009

City of Poughkeepsie Proposes 5 to 7 Percent Tax Increase

If you've been reading this blog lately, you've read posts like this one too many times already. Well, I think five times is too many. For at least the sixth time in recent weeks, the Poughkeepsie Journal has reported a story related to property taxes in which the most important part of the story is obscured or omitted entirely. The most important part of a story on property taxes is the tax rate, and changes in the tax rate.

In this case, the story about the City of Poughkeepsie by reporter Michael Valkys in today's web edition of the Poughkeepsie Journal is entitled “Budget plan avoids layoffs, may cut taxes for some.” In the print edition, the front page title in the Mid-Hudson section reads, “City budget plan avoids layoffs,” with the title on the page 2 continuation reading, “CITY: Some would pay less in taxes.” The second sentence in the story describes a budget “that officials said calls for property tax decreases for many homeowners ... ”. City officials have gone about as far as they can go without actually lying, to make it seem as though taxes are going down. Their message is not technically false, but is totally misleading.

The Real Story

The real story is that the City of Poughkeepsie property tax rate would increase 5 to 7 percent, as I've titled this post. That's 5 percent for homesteads and 7 percent for non-homestead (commercial) properties. The 5 percent number actually appears in Tkazyik's 4-page letter to the Common Council as 4.79 percent, though it's buried at the bottom of the third page. The 7 percent number can be computed from the non-homestead tax rates mentioned in a side-bar to the story. Neither number is mentioned in the Poughkeepsie Journal story.

Ironically, the only tax rate changes mentioned in the story are those of “competing” cities in other counties: The story claims that the City of Newburgh proposed an 82.5 percent property tax increase for homeowners, and the City of Kingston a 10 percent increase. Why didn't the story mention the 5 percent increase for Poughkeepsie? Once again, the Poughkeepsie Journal has followed a fairly consistent pattern of obscuring the main story about property taxes, and instead has parroted the congratulatory PR of government officials.

Government Officials Are Just Doing Their Job

It is not my intent at all to bash City of Poughkeepsie Mayor John Tkazyik or his budget. I take no position on whether his budget is good, bad, or indifferent. But Tkazyik is doing what any good politician needs to do: Put the best face on a bad situation. And don't kid yourself, the situation is bad, not just in the City of Poughkeepsie, but throughout Dutchess County, New York State, and indeed the nation. When government officials discuss property tax issues in today's economic climate, it is to their advantage to deemphasize — or even omit — the tax rate and the change in the tax rate.

Poughkeepsie Journal Fails its Readers — Again

In my view, it is the Poughkeepsie Journal that has been serving its readers poorly by not presenting the real story — the increase in the tax rate. This has been a consistent pattern with the Poughkeepsie Journal. This story on the City of Poughkeepsie is just the latest example.

Tuesday, October 13, 2009

Perfect Calm Averts Major Fairview Fire Tax Increase

You've heard of a perfect storm, and the calm before the storm, right? I figure a perfect calm must be the opposite of a perfect storm.

The Perfect Calm in Fairview

Earlier this year, Fairview Fire District Treasurer James Passikoff announced that the District had a $600,000 fund balance at the end of 2008. This amount represents roughly 20 percent of the 2008 budget. When asked how it was possible that such a large fraction of the 2008 budget went unspent, Passikoff explained that a combination of factors were involved. Many major uncertainties in cost estimates for 2008 all ended up on the low end of their range. Passikoff agreed that what happened in 2008 was “the opposite of a perfect storm”. In other words, a perfect calm. (No, I don't mean the perfume or the relaxation exercises.)

Tax Rate Remains Constant

The proposed 2010 budget for the Fairview Fire District allocates $450,000 of this $600,000 fund balance to reduce the tax levy for 2010 to $2,832,000. Since Fairview's market value for the 2010 tax year is $566,452,002, the result is a projected fire tax rate of $5.00 per thousand dollars of market value. This tax rate is almost 2 percent lower than Fairview's 2009 fire tax rate of $5.09. In summary, Fairview's projected 2010 fire tax rate continues a trend begun in 2003, in which Fairview's fire tax rate is essentially constant, within just a few percent of $5.00 per thousand dollars of market value.

Perfect Calm Averts Tax Rate Increase

But the continuation of this trend of constant fire tax rate into 2010 is due only to the infusion of $450,000 from 2008's perfect calm. Without this infusion, Fairview's tax levy would have been $3,282,000, resulting a tax rate of $5.79 per thousand dollars of market value. This tax rate is almost 14 percent higher than Fairview's 2009 fire tax rate of $5.09. In summary, without the perfect calm of 2008, Fairview's 2010 fire tax rate would have increased nearly 14 percent.

Future Tax Rate Increases Expected

It is reasonable to assume that the Fairview Fire District will not see another perfect calm anytime soon. In addition, market values in Fairview are continuing to drop, following a national trend. Therefore, in the absence of dramatic changes, Fairview fire tax rate seems destined for significant increases in future years. This prediction is consistent with the dirty little secret of property taxes.

Fairview already has the highest fire tax rate in Dutchess County, and possibly the highest in New York State. The current analysis suggests that without some dramatic changes, Fairview taxpayers will continue to suffer this burden for at least the next few years.

Acknowledgement: My thanks to Ginny Buechele for calculating the tax rate that would result without the $450,000 infusion.

Sunday, October 11, 2009

Poughkeepsie Journal Opposes Cost Shifting

The unsigned editorial in today's Poughkeepsie Journal, Cost shifts do nothing to help taxpayers, declares cost shifting among governments to be “outrageous”, and calls on governments to “look for efficiencies and savings and to share services better.” Though the focus of the Poughkeepsie Journal editorial is primarily on shifting costs among New York State, counties and towns, fire districts are also mentioned. These sentiments are in alignment with my own view of Joel Miller's cost-shifting proposals for fire districts.

I've commented numerous times in this blog about how Poughkeepsie Journal news stories about property taxes have presented the viewpoints of government officials, and have neglected the taxpayer perspective. I'm pleased that the Poughkeepsie Journal editor is taking the taxpayer's viewpoint on cost shifting. Cost shifting just wastes motion at best, and adds complexity — and further cost — to the system at worst.

Joel Miller Responds to Criticism of His Fire Tax Proposals

It is gratifying to learn that New York State Assemblyman Joel Miller agrees with much of my recent blog post, Joel Miller's Flawed Proposals for Funding Fire Districts. In a lengthy phone conversation on October 7, Miller agreed that his three proposals do not reduce the costs of providing fire protection and emergency services, but only shift these costs around. He also agreed that consolidation is the right approach for reducing the cost of these services — in the long run.

However, Miller's position is that consolidation is not politically feasible in the short run so long as there are great disparities in fire tax rates among consolidating fire districts. Districts with low fire tax rates will simply not be willing to consolidate with high tax rate districts, thereby increasing their own taxes for no apparent gain. Miller claims his proposals would tend to reduce the disparities in tax rates among fire districts. Once the disparities have been reduced, fire districts will be more willing to consolidate, thereby achieving cost savings.

Miller's Response Prompts More Questions

As I see it, Miller's viewpoint is worth further discussion. His proposals would tend to reduce the disparities in tax rates among fire districts. But would more equal fire tax rates make consolidation — and the resultant savings to taxpayers — easier to achieve, or more difficult? On the one hand, low-tax fire districts would be less likely to object to consolidation, since their tax rates would not increase as much. But on the other hand, the political pressure to consolidate would be decreased as well, since this pressure comes mainly from the high tax fire districts. If the symptom — high fire taxes — is alleviated, how willing will stakeholders be to attack the sickness — waste and inefficiency in fire protection and emergency services?

Also, to what extent would Miller's proposals add complexity and therefore further cost to a tax system that is already overly complex? Miller downplayed this effect, but in my view, the cost of complex systems is under-appreciated. Do we really want to move our tax system in the direction of the health care industry, where administrative costs are already a major problem? (Hmmm, we're already there, but that's not a reason to make it worse.)

Your Views Wanted

These questions don't have easy answers. I'd like to hear from readers who can add to the discussion. You are invited to post your comments.

Friday, October 9, 2009

East Fishkill Might See 9 Percent Tax Increase

A story in today's Poughkeepsie Journal by reporter Michael Woyton (print edition) was headlined “East Fishkill property tax could drop a bit in 2010”. The subtitle says, "Town proposes 1.3% less spending, 8.87% lower homeowner levy". The web edition's headline is “East Fishkill might see slight tax decrease”. Sounds like everything is down. Great news for property taxpayers in these difficult economic times, right?

Wrong! The real story, buried in the tenth paragraph, is that the tax rate would increase by 8.87 percent (essentially 9 percent). And the tax rate is all that matters. That's why this blog post says “9 percent tax increase”. All those other statistics are just spin, intended by East Fishkill Town Supervisor John Hickman to mislead the public into thinking that things aren't as bad as they really are.

East Fishkill is now the fifth local jurisdiction I've commented on in recent weeks for which the Poughkeepsie Journal's stories on property taxes are misleading. As I predicted in The Dirty Little Secret of Property Taxes, it is in the interests of local government officials to downplay the tax rate increases in times of falling property values. And for at least the fifth time, a Poughkeepsie Journal reporter fell for — or has gone along with — this deception. Most readers, especially those that only read the headlines, won't recognize the true story either.

To Hickman's credit, he clearly explained why tax bills are slightly decreasing even though the tax rate is increasing 9 percent: It's primarily because taxpayer wealth, as measured by property values in East Fishkill, has decreased by 8.3 percent ($500,000 house is now worth $458,650). A considerably less important reason is that the tax levy shows a slight (under 0.1 percent) decrease. These facts are exactly in line with my predictions, as discussed in detail in The Dirty Little Secret of Property Taxes.

In my view, readers of the Poughkeepsie Journal are not well served by stories like this which simply parrot the PR of local government officials.

Thursday, October 8, 2009

Town of Red Hook Gets It Almost Right

After my previous posts about how the Arlington School District, the Town of Poughkeepsie, and the Town of LaGrange have tried to mislead the public about the true extent of property tax increases, it's a pleasure to report that the Town of Red Hook has made a serious attempt to tell it like it is. This is especially commendable since the news is very bad: In a press release dated September 30, 2009, Red Hook Town Supervisor Sue Crane announced a 25 percent property tax increase in the Town's proposed 2010 budget.

Unfortunately, the press release does not specifically say exactly what “25 percent property tax increase” really means. Does it mean a 25 percent increase in the tax rate? In the tax levy? In the typical tax bill? There's no way to know from reading the press release. If you've been reading my recent blog posts on this subject, it really makes a difference. The tax rate is all that matters. What's needed is the percent increase in the tax rate. With all the deception commonly practiced by other jurisdictions, as reported in this blog, one can't assume that “25 percent property tax increase” necessarily means “25 percent property tax rate increase”.

But I'm happy to report that it does mean exactly that. Town of Red Hook Deputy Supervisor Jim Ross confirmed this fact in a recent phone conversation. Ross and I agreed that it would have been more informative for the press release to have explicitly mentioned that the 25 percent increase is in the tax rate. The omission of this information is the only issue I found with the tax increase announcement, and is the reason for my “almost right” qualification.

Poughkeepsie Journal Echos Officials — Again

A story by reporter Rasheed Oluwa appeared in the Poughkeepsie Journal's October 5 edition under the headline “Red Hook weighs 25% tax hike”. Unfortunately, this story is nothing more than a paraphrase of the Town of Red Hook's press release. The same ambiguity about the meaning of “25 percent” that appears in the press release is simply repeated in the Poughkeepsie Journal's story. It would have better served readers if the reporter had investigated sufficiently to clarify this important matter. Regrettably, this is not the first time that a Poughkeepsie Journal story has comprised nothing more than a parroting of government officials.

Wednesday, October 7, 2009

Valerie Hail Responds to Charges of Deceit

If you believe Valerie Hail, the falsehood on her reelection campaign website really isn't her fault! In a phone conversation with me this morning, she said the website was crafted — without her awareness — by other high-ranking officials of the Town of Hyde Park, two of whom she named. I will withhold their names out of pity for them.

Hail takes the charges of deceit as being not a very serious matter, and she expressed surprise that others do. Her email response to me yesterday expressed a flippant attitude:
Great blog by the way, printed it out so I could read it on the road..also forwarded the letter two weeks ago .from their attorney to our atorney. We had quite a chukle. (Would like to FOIL that invoice and see how much we taxpayers had to pay for that)..
Hail told me — but only after I pressed her — that she will work with other Hyde Park officials to revise her campaign materials, and presumably to take down the offending falsehood. But this plan didn't sound as if it was a high priority.

Voters Will Judge

It hardly needs mentioning that even young children are taught to take responsibility for their own words. In attempting to blame others for her own campaign website, Valerie Hail seems not to have learned this lesson.

Hail probably thinks I'm doing her a favor by writing this post. Her first words to me were, “Bad press is better than no press.” She didn't sound as if she were joking. It remains to be seen whether Hyde Park voters in Ward 2 will agree with her.

Tuesday, October 6, 2009

Valerie Hail Versus the Fairview Fire District

There are no winners here, folks, in the battle between Hyde Park Town Councilwoman Valerie Hail and the Commissioners of the Fairview Fire District. Their dispute is about who should take credit for the dramatic (over 14 percent) drop in the fire tax rate in 2009 in the Hyde Park portion of the Fairview Fire District. Councilwoman Hail claims on her re-election web page that her primary accomplishment is that she “reduced 2009 Fairview Fire District taxes by 14.3%”. The Fairview Fire Commissioners, through their attorney, sent her a vehement — and I mean really vehement — open letter insisting that she had no hand in doing that.

The Commissioners are certainly right about Councilwoman Hail's role. Councilwoman Hail's claim is false, false, and false. There's no other way to say it, except maybe “baseless”. Her blatant fabrication deserves full denunciation.

That said, the irony for the Commissioners is that in calling attention to Councilwoman Hail's deceit, they must also confront their own embarrassing role in the 14 percent drop in fire tax rate. The lawyer's letter handles this artfully, by saying, “It was not you who reduced taxes. It was not you who reapportioned the valuations leading to the reduction in fire taxes in the Fairview Fire District portion of Hyde Park.”

More Blame than Credit

This carefully-worded statement is factually correct, but might lead many readers to the mistaken conclusion that whoever “reapportioned the valuations leading to the reduction in fire taxes” must be the person to be commended for the 14 percent drop in fire tax rate. The person who “reapportioned the valuations” for at least the last decade is James Passikoff, CPA, Treasurer of the Fairview Fire District. The lawyer's letter was careful not to state that Passikoff should be credited with the 14 percent drop in Hyde Park's tax rate, and for good reason: Not only is this conclusion wrong, it's backwards! Passikoff is to blame for overcharging Hyde Park taxpayers 15 percent in 2008, and lesser percentages in previous years, probably in violation of New York State's real property tax law. For 2009, Passikoff did not overcharge Hyde Park taxpayers, resulting in a 14 percent drop in Hyde Park's fire tax rate. The 2009 Hyde Park fire tax did not in any way compensate for Passikoff's previous mistakes; it merely meant that Passikoff did not make additional mistakes for the 2009 tax apportionment calculation. In other words, the 14 percent drop in Hyde Park's fire tax rate is due to the fact that fire tax overcharges stopped for Hyde Park in 2009.

Fire Commissioners' Role in Apportionment Mistakes

Under New York State law, the Fairview Fire Commissioners are ultimately responsible for everything that goes on in the Fairview Fire District. As is typical in fire districts, the Fairview Fire Commissioners delegate the responsibility for all financial and tax matters to the Treasurer of the Fire District. The Commissioners are responsible for electing or re-electing a Treasurer of the Fairview Fire District at the beginning of each year, and for setting his compensation during the fall budget process. When the Fairview Fire Commissioners learned of James Passikoff's apportionment mistakes in September 2008, they unanimously agreed not to re-elect him as Treasurer for 2009. Just kidding! What they actually did was to award him an 8.7 percent raise in the 2009 proposed budget. It was only after objections by taxpayer Beverly Allyn during the public hearing that Passikoff's raise was lowered to a smaller percentage in the final 2009 budget. (Full disclosure: Beverly Allyn is my wife.) The Commissioners unanimously voted to re-elect James Passikoff as Treasurer for 2009.

My Role in Uncovering This Mess

My own role in uncovering this mess, and in the 14 percent drop in Hyde Park's fire tax, has been publicly known for more than a year, and is documented in the Unfair Apportionment section of my companion website. Here's a brief summary: On July 29, 2008, after months of my own investigation, Beverly Allyn and I met with James Passikoff and Fairview Fire Chief Tory Gallante, in order for Passikoff to explain Fairview's 2008 apportionment calculation. Beverly and I documented a large number of separate mistakes of reasoning in Passikoff's procedure. On August 4, 2008, Beverly and I met with John Anspach, Chairman of the Board of Fairview Fire Commissioners to discuss our findings. Commissioner Anspach assured us at that meeting that the apportionment mistakes would no longer occur. I published my initial report, Unfairness in Fairview -- Inequitable Apportionment of the Fire Tax Levy, on September 11, 2008, (Document #5). A subsequent report predicted a 14.7 percent decrease in Hyde Park's 2009 fire tax rate.

Although my investigations revealed that responsibility for fair apportionment lies with the Fairview Fire District Board of Commissioners and its Treasurer, and that the inequitable apportionment was probably in violation of New York State's real property law, Commissioner Anspach made repeated public statements denying these findings, eventually insisting that his denials were based on advice from Fairview Fire District attorney Bill Spampinato. Commissioner Anspach's denials ended only after I documented my own conversation with Spampinato on October 23.

Why This Rant Now?

Valerie Hail's blatant falsehood in claiming credit for a 14 percent drop in Hyde Park's taxes gave the Fairview Fire Commissioners an opportunity to set the record straight, or at least to not further distort the record. Unfortunately, the commissioners chose a statement that's at best ambiguous:
“It was not you who reduced taxes. It was not you who reapportioned the valuations leading to the reduction in fire taxes in the Fairview Fire District portion of Hyde Park.”
This statement points not to a creditworthy party, as one would reasonably suppose, but to the blameworthy party, James Passikoff, Treasurer of the Fairview Fire District, whom the Commissioners have continued to support and even to reward. In my view, it is long past due for the Fairview Fire Commissioners to take responsibility for mistakes made on their watch, and to correct them — not to cover them up.

Monday, October 5, 2009

Joel Miller's Flawed Proposals for Funding Fire Districts

New York State Assemblyman Joel Miller's latest attempt to alleviate the burdens of property taxpayers in high-tax fire districts comprises three legislative proposals:
  1. Allow fire districts to bill insurance companies.
  2. Subsidize fire districts through county sales tax.
  3. Subsidize fire districts by introducing a college student safety fee, whose cost would be passed through to New York State.
These proposals, documented in Miller's letter to New York State Assembly Minority Leader Brian Kolb, with cover letter to Mark Bendel, Vice President of the Fairview firefighters' union, are fundamentally flawed. Miller's proposals do not address the basic problem with fire and emergency services, which is that these services cost more than they need to. New York State's current system of fire districts and fire protection districts is inefficient and wasteful. At the same time, evolution of this system since its origin nearly a century ago has resulted in great disparities among districts in both costs to taxpayers and levels of service, with costs and service levels often not related.

Consolidation Provides Efficiency and Fairness

Many government officials and thoughtful observers have come to recognize that levels of service can be increased, total costs can be reduced, and costs can be distributed more equitably by consolidating small fire districts into larger ones. In today's economy, larger enterprises have substantial advantages over smaller ones. The businesses of fire protection and emergency service can benefit greatly from economies of scale. By consolidating fire districts, the region as a whole wins with better and more consistent levels of service, and more equitable funding of fire protection and emergency services. Property taxpayers also win with lower fire taxes on average, because the total cost of these services is less.

Although consolidation of fire districts has great public benefit, restrictive New York State laws have made consolidation an impractical option — until now. As part of an initiative to reform local governments by Attorney General Andrew Cuomo, revisions to New York State laws were put in place a few months ago, so that it is now feasible for local governments such as fire districts to consolidate. It has never been easier for fire districts to consolidate than it is now.

Miller's Proposals Simply Shift Costs

None of Miller's proposals reduce the actual cost of providing fire and emergency services, but simply shift current costs away from property taxpayers to other parties. But who are these “other parties”? With Miller's proposals, it is insurance companies, county governments, and New York State. Where do all these other parties get their money? From us, homeowners (insurance), consumers (sales tax), and wage earners (state income tax). So if Miller's proposals shift costs to these other parties, we will pay for them, one way or another, even if we see our fire tax rates decrease.

Miller's Proposals Add Costs

Not only do Miller's proposals not reduce costs for fire and emergency services, but they add costs for other parties. The administrative costs of billing insurance companies for health care is already a significant (and, many say, needless) drain on patient resources. If fire districts billed insurance companies as Miller proposes, another layer of unneeded complexity and extra expense is introduced. The same holds for Miller's safety fee proposal. Saying that the insurance companies and the State pay these extra costs is just saying that we're paying them indirectly.

County-Wide Consolidation

Regarding Miller's proposal to subsidize fire districts from the county sales tax, it's worth considering the logical extreme of this policy: Suppose that Dutchess County didn't just subsidize its fire districts, but instead paid the full amount of all fire taxes for all 30 fire districts in the county! In such case, the County would be wise to conclude that since it was paying for everything in the fire districts, it should control everything in the fire districts. (“Where money goes, power flows.”) That way, the County could make changes which would reduce costs and improve levels of service at the same time. In effect, we would have one county-wide system for fire and emergency services under the county executive.

But there's no need for a new law to achieve a county-wide system for fire and emergency services. Under current law, it would be feasible — and much preferable — to simply consolidate all 30 fire districts of Dutchess County into a single county-wide fire district under a set of fire commissioners.

Miller Should Facilitate Consolidation

Consolidation of all 30 fire districts — or even consolidation of a few fire districts — will take time and effort. But the end result will be reduction of waste, improvement of service, and alleviation of inequitable fire taxes. Instead of working to prop up the current byzantine system of fire districts by making it even more convoluted, Miller should use his influence to facilitate consolidation.

Saturday, October 3, 2009

Town of LaGrange Proposes 14 Percent Tax Increase

A story in today's Poughkeepsie Journal (web edition) by reporter John Davis was headlined “LaGrange homeowners face 6 percent tax hike”. So why does this blog post say “14 percent increase”? Because the tax rate for homeowners would increase by 14 percent, and the tax rate is all that matters.

If you've been following my blog lately, this story should sound familiar. Once again, as I predicted in The Dirty Little Secret of Property Taxes, local government officials are attempting to mislead property taxpayers by focusing their public statements on tax levies, budgets, and tax bills. In today's economy, with falling real estate values, changes in tax levies, budgets, and tax bills all understate the true cost to taxpayers. That's why these officials prefer to focus on them. They can talk about tax levies, budgets, and tax bills all they want without making any false statements, and can leave the impression that things aren't as bad as they really are.

It's the Tax Rate, Stupid

As repeated many times already in this blog, the way to know how bad things are, and how much better or worse they're getting, is by looking at the tax rate, and changes in the tax rate. You already know things are getting worse. The thing is, they're getting worse faster than many of you think. How else can I say it? You've got to look at the tax rate.

Reporting Becomes a Little More Balanced

At this point, I'm pleased to credit reporter John Davis for some noticeable improvements in coverage, compared with both his previous story on the Arlington School District, and reporter Michael Valkys' story on the Town of Poughkeepsie. Unlike in those previous stories, Davis' story on LaGrange actually contains the key piece of information — the 14 percent increase in the tax rate — though it's buried in the seventh paragraph.

More Balanced Reporting Still Needed

There's still a great deal of room for improvement in coverage of property tax issues by the Poughkeepsie Journal: It's great that the most important part of the LaGrange story — the 14 percent increase in the tax rate — at least appears in the story, but it deserves more prominence. Ideally, it should be in the headline. But as a minimum, it should appear in the “Impact” statistics, along with less important measures like the budget and tax levy. It would also help to explain to readers how the tax rate relates to an example property whose assessed value decreases. See below.

Interpreting the Town of LaGrange PR

The LaGrange story describes an example home assessed at $400,000 whose owner would pay “only” $42 more (6 percent more) in tax next year. But this example also assumes that the home is assessed 7 percent lower next year. Ordinarily, if your wealth, as measured by your home value, decreased by 7 percent, you'd hope to pay 7 percent less in tax. Instead, you're paying 6 percent more. This is just another way of saying that the right way to look at it is that your wealth is being taxed at a 14 percent higher rate. It would have been helpful to readers of the LaGrange story to explain this simple fact.

LaGrange Town Councilman Ed Jessup is quoted in the story as saying, “A 6 percent increase in these times is pretty good.” Well, a 6 percent increase in these times may or may not be “pretty good”. The problem is that it's really a 14 percent increase. How good is that?

Friday, October 2, 2009

Town of Poughkeepsie Proposes 12.5% Tax Increase

Today's lead story in the Poughkeepsie Journal by reporter Michael Valkys was headlined “Town weighs 8.9% hike in tax levy”. So why does this blog post say “12.5% increase”? Because the tax rate for homeowners would increase by 12.5 percent, and the tax rate is all that matters. Actually, it's even worse for commercial properties. The tax rate for commercial properties would increase by a whopping 20.6 percent!

Balanced Reporting?

Unfortunately, you won't find these higher percentages in the story. (But you can compute them yourself from the 2009 tax rates and the projected 2010 tax rates, which are mentioned in the story.) If the tax rate increases are so important, why aren't they mentioned in the story? Two reasons:

1. Town of Poughkeepsie officials probably did not explicitly provide the tax rate increase numbers, because it is to their advantage not to do so. By focusing on tax levy instead of tax rate, the increase is made to appear smaller than it really is.

2. The Poughkeepsie Journal story presented the information that Town of Poughkeepsie officials wanted to publicize, which is fine. However, the story contained no hint that there might exist a different interpretation of the Town of Poughkeepsie tax situation than the one Town officials provided. Not so fine. Poughkeepsie Journal readers would be better served by more balanced reporting, so that they can hope to understand what's really going on.

If you've been following my blog, you may notice that the above reads almost exactly like my last post, which discussed the Arlington School District. This is no accident. A corollary to the dirty little secret of property taxes is that in a declining real estate market, property tax rates will tend to rise more than the tax levy. That's exactly what's happening in the Town of Poughkeepsie.

Interpreting the Town of Poughkeepsie PR

The second sentence of the Poughkeepsie Journal story is extremely misleading: “Officials estimated town tax bills for owners of homes assessed at $365,000 would increase $82 next year to $1,200.” The $82 increase (which represents a mere 6.9 percent increase in the amount of tax) is true only under the assumption that the home's assessed value drops 5 percent to $346,750. Poughkeepsie Town officials are well aware that most homes in the Town have in fact dropped 5 percent in assessed value. (I reported the 5 percent decrease for the Fairview portion of Poughkeepsie on May 8.) Although Town officials used the 5 percent decrease in assessed value in the calculation of the $82, this key fact is mentioned nowhere in the story. In summary, you'd pay “only” 6.9 percent more because your house is worth 5 percent less! All this is just another way of saying that your true increase is 12.5 percent.

Just as with the Arlington School District, Town of Poughkeepsie officials are exploiting taxpayers' generally weak understanding of property taxes to hide the true size of the proposed tax increase. If I sound like I'm repeating myself, it's because it's really just the same story as in my last post. And you can count on hearing this story again from government officials in other local jurisdictions. That's because the motive for misleading taxpayers as to the true cost represented by their property tax dollars is driven by the nation-wide decrease in market values of properties.