Tuesday, February 16, 2010

Town of Pawling Tax Rate Increases 28.4 Percent

The Town of Pawling's 2010 property tax rate increased a whopping 28.4 percent over Pawling's 2009 tax rate.  Although all but two towns in Dutchess County increased their tax rates in 2010, Pawling's tax rate increase is by far the largest.  The second largest tax rate increase of 19.0 percent, in the Town of Milan, is 9.4 percent lower. Yesterday's post to this blog gives a complete ranking of 2010 town tax rate increases in Dutchess County.

Pawling is adversely affected by a downward trend in property values.  Pawling's taxable market value is down 5.1 percent for 2010 property tax bills.  But this fact does nothing to explain why Pawling's tax rate increase is higher than in other towns, because every town in Dutchess County has this problem.  Indeed, all of Dutchess County's taxable market value is down 5 percent.

The Three Causes of Pawling's Problem

I spoke with Town of Pawling Supervisor David Kelly to learn why Pawling's tax rate has increased so much more than other towns'. My understanding of our conversation is that Pawling's tax rate increase has three causes:
  1. Library Referendum:  Voters in the Town of Pawling approved a library referendum last November — before Kelly took office — resulting in an additional tax levy for the town of $270,000 in 2010 (and similar amounts in future years).
  2. 2009 Appropriated Fund Balance:   At the end of 2008, Pawling had an extra $200,000 unspent.  This appropriated fund balance was used to lower the 2009 tax rate.  This fortunate circumstance in 2009 has the effect of making the 2010 tax rate increase larger than it would otherwise have been.
  3. Budget Items:  The Town of Pawling budgeted various items as needed to support town services.
One way to understand what all this means is with the following bar chart:

If Pawling taxpayers had the same tax rate as last year (no rate increase), the tax levy outside the Village of Pawling would have been $2,669,726, as shown by the bar on left.  The actual tax levy of $3,428,060, resulting in a 28.4 percent tax rate increase, is shown by the bar on right.  The green and orange portions of the bar on right represent the library referendum and 2009 appropriated fund balance contributions, prorated to exclude the 15.1 percent of these contributions that presumably would be paid by taxpayers in the Village of Pawling.

The Components of Pawling's Tax Rate Increase

The difference between the left and right bars can be seen more clearly in the following pie chart:

The percentages for each component show the contributions to the 28.4 percent tax rate increase.  (Rounding causes a small error in the sum.)  Comparing the above figures with the chart of 2010 town tax rate increases in my last post allows one to make the following observations:
  1. Even if the library referendum had been rejected by voters, Pawling's tax rate increase would have been 19.9 percent — still the highest of any town in Dutchess County. So one cannot blame the library referendum alone for Pawling's top ranking in the tax increase contest.
  2. If the library referendum had been rejected and the 2009 appropriated fund balance did not exist, Pawling's tax rate increase from budget items alone would have been 13.5 percent — the fifth highest tax rate increase of all 20 towns in Dutchess County.  So the budget items alone put Pawling in the top quarter of towns for tax increases.
  3. If Town of Pawling officials had limited 2010 budgetary spending so as to avoid increasing the tax rate; that is, if the above “excess” budget items were zero instead of 13.5 percent, then the remaining library referendum and 2009 appropriated fund balance would still increase Pawling's tax rate by 15.0 percent.  In this case, Pawling would still have the fourth highest tax rate increase for towns in Dutchess County, placing Pawling in the top fifth.
To sum up, each of these three pieces of pie is so big that even one of them contributes a significant increase to Pawling's tax rate.  Pawling must now eat all three pieces. Property taxpayers will have a stomach ache.

Library Referendum Was a Bad Idea

I'm grateful to Supervisor Kelly for generously sharing his perspective on Pawling's property tax situation with me.  Kelly has argued, correctly in my view, that submitting the library proposal to a referendum was a bad idea, because voters approved a large expenditure without seeing the whole fiscal picture. Now the town is stuck with a tax rate increase which is way out of line — probably not what the voters intended.  The limited foresight of voters is a general problem with referenda, and a good reason to prefer the more comprehensive vision of the budget process.  Indeed, there are numerous reasons to avoid referenda.  An extreme case of tax referenda gone wild is the State of California, which has been brought to its knees by Proposition 13 and other unwise ballot initiatives.

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