Long-time Fairview advocate Virginia “Ginny” Buechele was elected Fairview Fire Commissioner last evening, as was Dutchess County 9-1-1 Emergency Communications Center shift supervisor Andrew Calamari. Buechele will serve for one year, completing the term of Jack Burghardt, who resigned as commissioner this year. Calamari will serve for five years.
One-Year Commissioner Slot
Out of 130 votes cast for the one-year slot, Buechele, leader of the Fairness for Fairview advocacy organization, received 77 votes. Her opponent, John Anspach, Fairview's Board Chairperson until 2009, received 50 votes. Three additional votes went to write-ins. As in the 2008 and 2009 elections, this contest was a choice between a newcomer aligned with taxpayer advocacy and a veteran aligned with the fire station. Just as in those previous years, voter turnout was substantial, and just as in those previous years, the newcomer won.
Five-Year Commissioner Slot
Calamari's election was officially uncontested. However, just as in 2009's election, which was also officially uncontested, there appeared to be an organized write-in effort — or perhaps more than one. Of the 108 votes for the “uncontested” five-year slot, Calamari received only 70 votes. Former Fairview Fire Commissioner Clinton Kershaw received a respectable 23 write-in votes — more than the total number of votes cast in the truly uncontested 2007 election. It is embarrassing to report that your devoted blogger received 11 write-in votes, putting me in third place. The remaining 4 write-in votes were all for single-vote names. In summary, 35 percent of the votes for this “uncontested” position went to someone other than the winner. I'm not sure what's going on here. Calamari only moved into Fairview this year. Kershaw, though he was a commissioner in the past, has not been active here in recent years. Neither man is well known to many people who have been involved in fire district issues in recent years.
Fairview's Board of Fire Commissioners Has Been Completely Transformed
In the spring of 2008, when I first became involved in Fairview Fire District issues, the Board comprised five veterans, all closely associated with the fire station. Since then, newcomers have gradually replaced veterans on the Board. With the resignation of veteran Jack Burghardt earlier this year, and the defeat of John Anspach in yesterday's election, the transformation of the board from all veterans to all newcomers is complete.
Yet Another Board Change Is Expected
On November 8, Commissioner Joe Petito won election as Hyde Park Town Councilman. This means that he is expected to resign as Commissioner by January, leaving an empty slot on the Board. The four remaining commissioners will then have the opportunity to nominate a replacement until the next election in December, 2012.
Wednesday, December 14, 2011
Thursday, October 13, 2011
Fairview Fire District Proposed 2012 Budget May Deepen Financial Crisis
The Fairview Fire District Long Range Planning Committee announced at a public workshop meeting on May 26, 2011, that recent budgets have not contributed enough money to the apparatus and equipment reserve fund. The money that should have been set aside was
used instead to decrease the fire tax levy. If Fairview continues this strategy, it will be out of money when future obligations come due. Fairview's proposed 2012 budget continues this strategy, therefore threatening to deepen Fairview's long term financial crisis.
How much should be contributed to reserve fund?
Fairview Fire Commissioner Bob Gephard is justifiably proud of the fact that he initiated the first long range planning study of the District in quite some time. One result of this work is the Long Range Committee Capital Equipment and Building Plan posted on the District’s website, which shows specific apparatus and equipment expenditures going out 15 years to 2026. This document shows that if nothing is ever contributed to the apparatus and equipment reserve fund, the District will be in the hole about $4.1 million by 2026. However, the current fund balance is actually about $335,000 more than that document assumed, so the District only needs to come up with $3.8 million. On the other hand, it needs to come up with it by 2025, not 2026, because 2025 is when the last significant expenditure occurs. Dividing the $3.8 million by 14 years gives about $270,000 per year that the District must contribute to the apparatus and equipment reserve fund in order to meet anticipated expenses.
The following chart shows how this would play out on a year-by-year basis.
The red bars show the amount projected to be spent each year, according to the Long Range Committee Capital Equipment and Building Plan. The blue bars show the amount available in the Fund at the beginning of each year. The green bars show the amount contributed to the Fund each year – in this case $270,000. Note that in 2026, the blue bar is zero, indicating that the yearly contribution of $270,000 is just enough to carry the district into 2026, paying for everything with no money left over.
What if less than $270,000 is contributed to the reserve fund?
If only $153,000 is contributed to the apparatus and equipment reserve fund every year beginning in 2012, there will be just enough money to carry the district into 2020. Unfortunately, the District's ladder truck, which will then be 18 years old, is scheduled for replacement that year, and the reserve fund will be nearly $1 million short of the projected $1,716,160 replacement cost. Oops!
How much does proposed 2012 budget contribute to the reserve fund?
Fairview's 2010 budget contributed only about $143,000 to the apparatus and equipment reserve fund, and Fairview's 2011 budget contributed nothing to the reserve fund. Fire Commissioner Bob Gephard stated at the May 26 meeting that he regretted supporting the move to not contribute to the reserve funds, seeing that neglect of the reserve funds is at the heart of Fairview's long term financial crisis.
So on September 26, 2011, after careful consideration, the Fairview Fire Commissioners passed a proposed 2012 budget that contributes nothing to the apparatus and equipment reserve fund. Zero! Zilch! Zip! Scratch! Null! Nix! Nada! Even Fairview's Treasurer, James Passikoff, during his presentation of the proposed budget, noted that adding nothing to the reserve funds, “ ... is probably not a good move.” Under the circumstances, this strikes me as a bit of an understatement. In my view, the failure of the proposed 2012 budget to contribute $270,000 to the apparatus and equipment reserve fund is the single most inexplicable decision. It appears that the Board has learned nothing from the May 26 meeting which described the long-term financial crisis.
Proposed 2012 budget makes high-risk assumptions
Unfortunately, the proposed 2012 budget makes a series of high-risk assumptions on smaller items. Consider the following quotes from Passikoff's budget presentation on September 26 (emphasis added):
Proposed 2012 tax levy is low-ball
The proposed 2012 tax levy continues Fairview's strategy, begun in 2009, of starving the District of resources, as I explained in Big Three Fire Districts Use Divergent Tax Strategies. It's true that the proposed 2012 tax levy is 9.3 percent higher than 2011's (or 10.7 percent higher, if you take the budget viewpoint). The problem is that Fairview's 2011 tax levy is artificially low in part because it contributed nothing to the reserve funds. If the 2011 budget had contributed a nominal $250,000 to reserve funds (lower than the $270,000 that's now needed), then the proposed 2012 tax levy would actually be slightly lower than 2011's. A similar analysis shows that if the 2010 budget had fully contributed to reserve funds, the proposed 2012 tax levy would be lower than 2010's. In other words, it's only because recent budgets have neglected the reserve funds that the 2012 tax levy seems large.
In my view, it is more relevant to note that the proposed 2012 tax levy is 5 percent lower than Fairview's pre-meltdown 2008 tax levy. In other words, one could add $150,000 to Fairview's proposed 2012 tax levy and still not exceed Fairview's 2008 tax levy. From the perspective of 2008, Fairview's proposed 2012 tax levy is low indeed.
Fairview's Financial Crisis May Deepen
Given the difficult times we've lived in since the economic meltdown of 2008, it is understandable that Fairview's 2012 budget cannot in any way reverse or compensate for the mistakes of the past. But one can reasonably expect a budget that does not make Fairview's dire financial situation worse. Fairview's proposed 2012 budget, by underfunding the apparatus and equipment reserve by $270,000, and by making $220,000 of other high-risk assumptions, threatens to do just that.
How much should be contributed to reserve fund?
Fairview Fire Commissioner Bob Gephard is justifiably proud of the fact that he initiated the first long range planning study of the District in quite some time. One result of this work is the Long Range Committee Capital Equipment and Building Plan posted on the District’s website, which shows specific apparatus and equipment expenditures going out 15 years to 2026. This document shows that if nothing is ever contributed to the apparatus and equipment reserve fund, the District will be in the hole about $4.1 million by 2026. However, the current fund balance is actually about $335,000 more than that document assumed, so the District only needs to come up with $3.8 million. On the other hand, it needs to come up with it by 2025, not 2026, because 2025 is when the last significant expenditure occurs. Dividing the $3.8 million by 14 years gives about $270,000 per year that the District must contribute to the apparatus and equipment reserve fund in order to meet anticipated expenses.
The following chart shows how this would play out on a year-by-year basis.
The red bars show the amount projected to be spent each year, according to the Long Range Committee Capital Equipment and Building Plan. The blue bars show the amount available in the Fund at the beginning of each year. The green bars show the amount contributed to the Fund each year – in this case $270,000. Note that in 2026, the blue bar is zero, indicating that the yearly contribution of $270,000 is just enough to carry the district into 2026, paying for everything with no money left over.
What if less than $270,000 is contributed to the reserve fund?
If only $153,000 is contributed to the apparatus and equipment reserve fund every year beginning in 2012, there will be just enough money to carry the district into 2020. Unfortunately, the District's ladder truck, which will then be 18 years old, is scheduled for replacement that year, and the reserve fund will be nearly $1 million short of the projected $1,716,160 replacement cost. Oops!
How much does proposed 2012 budget contribute to the reserve fund?
Fairview's 2010 budget contributed only about $143,000 to the apparatus and equipment reserve fund, and Fairview's 2011 budget contributed nothing to the reserve fund. Fire Commissioner Bob Gephard stated at the May 26 meeting that he regretted supporting the move to not contribute to the reserve funds, seeing that neglect of the reserve funds is at the heart of Fairview's long term financial crisis.
So on September 26, 2011, after careful consideration, the Fairview Fire Commissioners passed a proposed 2012 budget that contributes nothing to the apparatus and equipment reserve fund. Zero! Zilch! Zip! Scratch! Null! Nix! Nada! Even Fairview's Treasurer, James Passikoff, during his presentation of the proposed budget, noted that adding nothing to the reserve funds, “ ... is probably not a good move.” Under the circumstances, this strikes me as a bit of an understatement. In my view, the failure of the proposed 2012 budget to contribute $270,000 to the apparatus and equipment reserve fund is the single most inexplicable decision. It appears that the Board has learned nothing from the May 26 meeting which described the long-term financial crisis.
Proposed 2012 budget makes high-risk assumptions
Unfortunately, the proposed 2012 budget makes a series of high-risk assumptions on smaller items. Consider the following quotes from Passikoff's budget presentation on September 26 (emphasis added):
- “We've got a potential to get another $45,000 from Dutchess Community College when the dorms open next September.”
- “We also have a chance of getting a SAEFER grant of $75,000.”
- Fairview currently has four firefighters eligible to retire. An early draft 2012 budget contained $100,000 needed for a “buyout” in case one of them retired. Passikoff said, “We ended up taking that out. We're gambling that nobody's going to [retire].”
Proposed 2012 tax levy is low-ball
The proposed 2012 tax levy continues Fairview's strategy, begun in 2009, of starving the District of resources, as I explained in Big Three Fire Districts Use Divergent Tax Strategies. It's true that the proposed 2012 tax levy is 9.3 percent higher than 2011's (or 10.7 percent higher, if you take the budget viewpoint). The problem is that Fairview's 2011 tax levy is artificially low in part because it contributed nothing to the reserve funds. If the 2011 budget had contributed a nominal $250,000 to reserve funds (lower than the $270,000 that's now needed), then the proposed 2012 tax levy would actually be slightly lower than 2011's. A similar analysis shows that if the 2010 budget had fully contributed to reserve funds, the proposed 2012 tax levy would be lower than 2010's. In other words, it's only because recent budgets have neglected the reserve funds that the 2012 tax levy seems large.
In my view, it is more relevant to note that the proposed 2012 tax levy is 5 percent lower than Fairview's pre-meltdown 2008 tax levy. In other words, one could add $150,000 to Fairview's proposed 2012 tax levy and still not exceed Fairview's 2008 tax levy. From the perspective of 2008, Fairview's proposed 2012 tax levy is low indeed.
Fairview's Financial Crisis May Deepen
Given the difficult times we've lived in since the economic meltdown of 2008, it is understandable that Fairview's 2012 budget cannot in any way reverse or compensate for the mistakes of the past. But one can reasonably expect a budget that does not make Fairview's dire financial situation worse. Fairview's proposed 2012 budget, by underfunding the apparatus and equipment reserve by $270,000, and by making $220,000 of other high-risk assumptions, threatens to do just that.
Friday, October 7, 2011
Big Three Fire Districts Use Divergent Tax Strategies
Each of the Big Three Fire Districts of Dutchess County — Arlington, LaGrange, and Fairview — seems to have employed its own tax strategy for meeting the continuing fiscal challenges of the 2008 economic meltdown. LaGrange's strategy seems a relatively moderate reflection of the
economic meltdown, Arlington appears to be on a spending spree, while
Fairview appears to be starving the District of resources. This
viewpoint about Fairview is consistent with the fact that Fairview has
not been contributing adequately to its reserve funds in recent years,
as described here.
The following chart gives one way to see the dramatic differences among the three strategies:
Each bar in the above chart shows the cumulative increase in tax levy, compared with the 2008 tax levy. That is, each bar shows how much more money has been collected between 2008 and that year than would have been collected if every tax levy to that point were equal to the 2008 tax levy. For example, a 2009 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy, expressed as a percent of the 2008 tax levy; a 2010 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy plus the difference between the 2010 tax levy and the 2008 tax levy, expressed as a percent of the 2008 tax levy. Another way to describe this chart is to say that it illustrates the effect over time of deviating from a strategy of holding the tax levy flat at the 2008 level. Because all changes are normalized relative to each District's 2008 tax levy, this chart makes it possible to directly compare each of the Big Three fire districts with each other.
Strategies of the Big Three — Tax Levy Viewpoint
The LaGrange Fire District has taken the moderate strategy of maintaining its tax levy relatively close to its 2008 level. Thus, its bars are barely visible until 2012. The amount of additional tax money LaGrange will have collected through 2012 is just 2.5 percent of LaGrange's 2008 tax levy, or $120,000. That's the meaning of LaGrange's 2012 bar of 2.5 percent.
The Arlington Fire District has taken the strategy of significantly increasing the tax levy almost every year, so that the cumulative increase in Arlington's fire tax levy from 2008 until 2012 (proposed budget) is nearly 60 percent. Thus, the amount of additional tax money Arlington will have collected through 2012 is 60 percent of Arlington's 2008 tax levy, or about $7.8 million.
Now we come to poor Fairview. And I mean poor. The Fairview Fire District has taken the opposite strategy from Arlington by decreasing its tax levy almost every year. The cumulative decrease in Fairview's fire tax levy from 2008 until 2012 (proposed budget) is 26.5 percent. This means that the amount of tax money Fairview has failed to collect through 2012 is 26.5 percent of Fairview's 2008 tax levy, or about $800,000.
Strategies of the Big Three — Tax Rate Viewpoint
Taxable market values in the big three fire districts have fallen every year since 2008. For the period 2008 to 2012, they will have fallen a total of about 22 percent in LaGrange and Arlington, but only 15 percent in Fairview. Fairview's shallower decline means that Fairview's tax rate has taken less of a hit than LaGrange and Arlington have incurred. Nevertheless, the differing strategies of the Big Three are starkly evident in this chart of cumulative tax rate increase since 2008:
The above chart is easier to explain than the previous one. Each bar is simply the percent increase in the true value tax rate for the year, compared with the corresponding 2008 tax rate (rather than compared with the previous year's tax rate). Because all tax rates are normalized relative to each District's 2008 tax rate, this chart makes it possible to directly compare the strategies of each of the Big
Three fire districts.
The true value tax rate is a good measure of how steeply taxpayers' wealth — measured by the market value of their properties — is taxed. Therefore, the above chart shows, for each fire district, how much more steeply taxpayers are being taxed compared with the meltdown year of 2008. Looking at the proposed 2012 budgets, Arlington will tax 52 percent more steeply; LaGrange will tax 31 percent more steeply; poor Fairview will only tax 11.5 percent more steeply.
The Proposed 2012 Budgets Continue These Divergent Strategies
The proposed 2012 budgets for all three fire districts are not isolated decisions, but are continuations of strategies that have been followed by each district since the economic meltdown of 2008. I plan to say more about Fairview's proposed 2012 budget in a subsequent post.
The following chart gives one way to see the dramatic differences among the three strategies:
Each bar in the above chart shows the cumulative increase in tax levy, compared with the 2008 tax levy. That is, each bar shows how much more money has been collected between 2008 and that year than would have been collected if every tax levy to that point were equal to the 2008 tax levy. For example, a 2009 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy, expressed as a percent of the 2008 tax levy; a 2010 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy plus the difference between the 2010 tax levy and the 2008 tax levy, expressed as a percent of the 2008 tax levy. Another way to describe this chart is to say that it illustrates the effect over time of deviating from a strategy of holding the tax levy flat at the 2008 level. Because all changes are normalized relative to each District's 2008 tax levy, this chart makes it possible to directly compare each of the Big Three fire districts with each other.
Strategies of the Big Three — Tax Levy Viewpoint
The LaGrange Fire District has taken the moderate strategy of maintaining its tax levy relatively close to its 2008 level. Thus, its bars are barely visible until 2012. The amount of additional tax money LaGrange will have collected through 2012 is just 2.5 percent of LaGrange's 2008 tax levy, or $120,000. That's the meaning of LaGrange's 2012 bar of 2.5 percent.
The Arlington Fire District has taken the strategy of significantly increasing the tax levy almost every year, so that the cumulative increase in Arlington's fire tax levy from 2008 until 2012 (proposed budget) is nearly 60 percent. Thus, the amount of additional tax money Arlington will have collected through 2012 is 60 percent of Arlington's 2008 tax levy, or about $7.8 million.
Now we come to poor Fairview. And I mean poor. The Fairview Fire District has taken the opposite strategy from Arlington by decreasing its tax levy almost every year. The cumulative decrease in Fairview's fire tax levy from 2008 until 2012 (proposed budget) is 26.5 percent. This means that the amount of tax money Fairview has failed to collect through 2012 is 26.5 percent of Fairview's 2008 tax levy, or about $800,000.
Strategies of the Big Three — Tax Rate Viewpoint
Taxable market values in the big three fire districts have fallen every year since 2008. For the period 2008 to 2012, they will have fallen a total of about 22 percent in LaGrange and Arlington, but only 15 percent in Fairview. Fairview's shallower decline means that Fairview's tax rate has taken less of a hit than LaGrange and Arlington have incurred. Nevertheless, the differing strategies of the Big Three are starkly evident in this chart of cumulative tax rate increase since 2008:
The true value tax rate is a good measure of how steeply taxpayers' wealth — measured by the market value of their properties — is taxed. Therefore, the above chart shows, for each fire district, how much more steeply taxpayers are being taxed compared with the meltdown year of 2008. Looking at the proposed 2012 budgets, Arlington will tax 52 percent more steeply; LaGrange will tax 31 percent more steeply; poor Fairview will only tax 11.5 percent more steeply.
The Proposed 2012 Budgets Continue These Divergent Strategies
The proposed 2012 budgets for all three fire districts are not isolated decisions, but are continuations of strategies that have been followed by each district since the economic meltdown of 2008. I plan to say more about Fairview's proposed 2012 budget in a subsequent post.
Tuesday, October 4, 2011
Fairview Fire District Commissioners Approve Flawed Budget Document
I considered an alternate title for this post: “Fairview Fire District Treasurer Presents Flawed Budget Document” Both titles are accurate. But the commissioners actions indicate they wish to take some of the blame for embarrassing the Fairview Fire District.
On September 26, 2011, Fairview Fire District Treasurer James Passikoff presented a proposed budget document to the board of fire commissioners at a budget workshop meeting, and it was approved unanimously by the commissioners with little comment. This budget document contains so many flaws, it's hard to know where to start. If this is sounding like yet another rant against Passikoff, well, that's really only half true. When it comes to the fiscal aspects of the Fairview Fire District, when it comes to following Fairview's budgetary money, when it comes to understanding the financial facts of Fairview, my view is that Passikoff is the smartest guy in the room. To some extent, that's as it should be. The problem is that the standard for smartness that is acceptable to Fairview's board of fire commissioners is so low that Passikoff can present just about anything, it seems, and the board will uncritically accept it.
Officials Don't Understand Fairview Fire Tax Issues
As I see it, Passikoff has a great depth of knowledge concerning many fire district fiscal issues. Unfortunately, when it comes to property tax issues, Passikoff has repeatedly demonstrated that he does not grasp some essential facts about assessed value and equalization rate. See here. More unfortunately, he has not shown an interest in correcting this weakness. Even more unfortunately, Fairview's board has shown itself indifferent to whether the budget numbers presented to the public — or to themselves — make any sense.
Garbage in Budget Document
To find flaws, one need look no further than the first line of numbers on the first page of the proposed budget document. This line, purporting to show a change in Fairview's “assessed property valuation” is all meaningless garbage. Similar garbage is shown on the “Total Assessed Valuation” line on the next to last page. This garbage is an exact repeat from the budget projections spreadsheet presented at the May 26 public workshop meeting. The reason this is garbage is explained in detail here. I sent essentially the same explanation to Passikoff, Commissioner Bob Gephard, and Commissioner Joe Petito on May 24. I received no effective response from any of them, despite months of making myself annoying. Apparently they are all indifferent at best about understanding, correcting, or even repeating this blunder.
Contradictions in Budget Document
The last two pages of the budget document contain data about 2012 assessed value and 2012 proposed tax rate. Each page contains numbers for both assessed value and tax rate, but the numbers do not agree with each other. So which is right? I wrote here that the first set is right. Silly me! It turns out that both sets are wrong! (For details, see my 9/29/2011 comment appended to that blog post.) It's not just a couple of misprints. All the numbers derived from the wrong numbers are wrong too. That's right, the Treasurer presented, and the commissioners passed, a budget with two contradictory tax rates — and both are wrong.
The treasurer didn't look at this beforehand? None of the commissioners looked at this beforehand? Or is it that the tax rate — the rate at which property owners' wealth is taxed — doesn't really matter? One thing is obvious: The commissioners had no idea what the proposed 2012 tax rate really was when they approved the budget. This is more than a little disturbing. It shows a board that has no hand on the wheel. The board doesn't even know there is a wheel.
On September 26, 2011, Fairview Fire District Treasurer James Passikoff presented a proposed budget document to the board of fire commissioners at a budget workshop meeting, and it was approved unanimously by the commissioners with little comment. This budget document contains so many flaws, it's hard to know where to start. If this is sounding like yet another rant against Passikoff, well, that's really only half true. When it comes to the fiscal aspects of the Fairview Fire District, when it comes to following Fairview's budgetary money, when it comes to understanding the financial facts of Fairview, my view is that Passikoff is the smartest guy in the room. To some extent, that's as it should be. The problem is that the standard for smartness that is acceptable to Fairview's board of fire commissioners is so low that Passikoff can present just about anything, it seems, and the board will uncritically accept it.
Officials Don't Understand Fairview Fire Tax Issues
As I see it, Passikoff has a great depth of knowledge concerning many fire district fiscal issues. Unfortunately, when it comes to property tax issues, Passikoff has repeatedly demonstrated that he does not grasp some essential facts about assessed value and equalization rate. See here. More unfortunately, he has not shown an interest in correcting this weakness. Even more unfortunately, Fairview's board has shown itself indifferent to whether the budget numbers presented to the public — or to themselves — make any sense.
Garbage in Budget Document
To find flaws, one need look no further than the first line of numbers on the first page of the proposed budget document. This line, purporting to show a change in Fairview's “assessed property valuation” is all meaningless garbage. Similar garbage is shown on the “Total Assessed Valuation” line on the next to last page. This garbage is an exact repeat from the budget projections spreadsheet presented at the May 26 public workshop meeting. The reason this is garbage is explained in detail here. I sent essentially the same explanation to Passikoff, Commissioner Bob Gephard, and Commissioner Joe Petito on May 24. I received no effective response from any of them, despite months of making myself annoying. Apparently they are all indifferent at best about understanding, correcting, or even repeating this blunder.
Contradictions in Budget Document
The last two pages of the budget document contain data about 2012 assessed value and 2012 proposed tax rate. Each page contains numbers for both assessed value and tax rate, but the numbers do not agree with each other. So which is right? I wrote here that the first set is right. Silly me! It turns out that both sets are wrong! (For details, see my 9/29/2011 comment appended to that blog post.) It's not just a couple of misprints. All the numbers derived from the wrong numbers are wrong too. That's right, the Treasurer presented, and the commissioners passed, a budget with two contradictory tax rates — and both are wrong.
The treasurer didn't look at this beforehand? None of the commissioners looked at this beforehand? Or is it that the tax rate — the rate at which property owners' wealth is taxed — doesn't really matter? One thing is obvious: The commissioners had no idea what the proposed 2012 tax rate really was when they approved the budget. This is more than a little disturbing. It shows a board that has no hand on the wheel. The board doesn't even know there is a wheel.
Tuesday, September 27, 2011
Fairview Fire District Proposes 13.2 Percent Tax Rate Increase
The Fairview Fire District's proposed 2012 budget approved by Fairview's fire commissioners last evening calls for a true value tax rate of $5.79 per thousand dollars of market value, the highest in a decade. Under this budget, property taxpayers will pay Fairview a greater portion of their wealth — as measured by the market value of their property — than at any time since 2001, when the tax rate was $6.07.
Tax Rate Increase
Fairview's proposed tax rate increase is 13.2 percent, the highest tax rate increase in a decade, according to my analysis of the budget document from a taxpayer viewpoint. The tax rate increase from a budget viewpoint is 14.6 percent. The taxpayer viewpoint represents taxpayer experience, while the budget viewpoint represents the fire district government's experience. For more details, see Tax Rate Viewpoints — Taxpayer Versus Budget.
It is a little-known fact that Fairview's true value tax rate has decreased for most years of this decade, as shown in the following chart:
Next year will be only the third year this decade that Fairview's tax rate has increased.
In my view, charts like the one above tell a much richer story about what has happened and what is happening with Fairview's taxes than I can tell in words. If you agree, I strongly encourage you to view all six charts in my report Fairview Fire District Property Tax Data. Detailed numerical data is also included.
Tax Levy
The proposed 2012 tax levy of about $2.9 million is the third highest in Fairview's history, exceeded only by the tax levies in 2008 and 2009. The proposed tax levy increase is 9.3 percent, according to my analysis of the budget document from a taxpayer viewpoint. The tax levy increase from a budget viewpoint is 10.7 percent.
Market Value
Fairview's taxable market value for 2012 taxes has fallen for the forth straight year, reflecting the continuing real estate meltdown. Fairview's taxable market value is now just under a half billion dollars, for the first time since 2006. Fairview's taxable market value has dropped 15.3 percent since its high of $586 million in 2008, including 3.5 percent since last year. The market value decreases in recent years have been a major factor in increasing Fairview's true value tax rates over what they would otherwise have been.
Why did I write this post?
Why did I write this post describing Fairview's proposed tax rate increase and trends from previous years? After all, anyone can just look at the proposed 2012 budget document itself and get the same information, right? ... Right?
If you've tried this at home — or even at yesterday's budget workshop where the document was presented — you know the answer: No, you can't.
Well, you can get a few of the numbers: Fairview's proposed tax levy, and even the tax levy increase percent. But the tax rate increase percent? The document does contain a number for this, but the number is incorrect. What about the tax rate itself? And what about the market value of Fairview? The document contains both correct numbers and incorrect numbers for each of these key parameters! Can you tell which is which? I couldn't, without out of band information.
So now you know why I wrote this post. I'll have more to say about Fairview's proposed 2012 budget document in a subsequent post.
Tax Rate Increase
Fairview's proposed tax rate increase is 13.2 percent, the highest tax rate increase in a decade, according to my analysis of the budget document from a taxpayer viewpoint. The tax rate increase from a budget viewpoint is 14.6 percent. The taxpayer viewpoint represents taxpayer experience, while the budget viewpoint represents the fire district government's experience. For more details, see Tax Rate Viewpoints — Taxpayer Versus Budget.
It is a little-known fact that Fairview's true value tax rate has decreased for most years of this decade, as shown in the following chart:
Next year will be only the third year this decade that Fairview's tax rate has increased.
In my view, charts like the one above tell a much richer story about what has happened and what is happening with Fairview's taxes than I can tell in words. If you agree, I strongly encourage you to view all six charts in my report Fairview Fire District Property Tax Data. Detailed numerical data is also included.
Tax Levy
The proposed 2012 tax levy of about $2.9 million is the third highest in Fairview's history, exceeded only by the tax levies in 2008 and 2009. The proposed tax levy increase is 9.3 percent, according to my analysis of the budget document from a taxpayer viewpoint. The tax levy increase from a budget viewpoint is 10.7 percent.
Market Value
Fairview's taxable market value for 2012 taxes has fallen for the forth straight year, reflecting the continuing real estate meltdown. Fairview's taxable market value is now just under a half billion dollars, for the first time since 2006. Fairview's taxable market value has dropped 15.3 percent since its high of $586 million in 2008, including 3.5 percent since last year. The market value decreases in recent years have been a major factor in increasing Fairview's true value tax rates over what they would otherwise have been.
Why did I write this post?
Why did I write this post describing Fairview's proposed tax rate increase and trends from previous years? After all, anyone can just look at the proposed 2012 budget document itself and get the same information, right? ... Right?
If you've tried this at home — or even at yesterday's budget workshop where the document was presented — you know the answer: No, you can't.
Well, you can get a few of the numbers: Fairview's proposed tax levy, and even the tax levy increase percent. But the tax rate increase percent? The document does contain a number for this, but the number is incorrect. What about the tax rate itself? And what about the market value of Fairview? The document contains both correct numbers and incorrect numbers for each of these key parameters! Can you tell which is which? I couldn't, without out of band information.
So now you know why I wrote this post. I'll have more to say about Fairview's proposed 2012 budget document in a subsequent post.
Monday, September 26, 2011
Tax Rate Viewpoints — Taxpayer Versus Budget
This post explains why tax rates on property tax bills can be somewhat higher than tax rates in municipal budgets. This topic is a little more geeky than my usual post.
Around this time of year, local government officials in taxing municipalities (towns, villages, cities, fire districts, other special districts, and, yes, even Dutchess County government) prepare budgets for the next year. (School districts do the same thing in the spring.) As part of the budget preparation process, they set the tax levy — the amount of money the municipality decides to collect from property taxes in the next year. The tax levy divided by the municipality's taxable market value — which is set on the previous July 1 by the town assessor — is the true value tax rate. The true value tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — will be taxed by the municipality. As such, it is a key parameter for municipal governments, taxpayers, and all other stakeholders.
When tax bills are sent out in January (or in September for school taxes), it is exactly this tax rate which appears on tax bills, and is used to calculate the amount of taxes for the municipality ... in an ideal world. But we don't live in an ideal world, do we?
The Tax Situation in the Real World
In the real world, its not quite that simple. In the real world, property owners sometimes don't pay their taxes. And then they go bankrupt or disappear, and the money is never collected. In the real world, taxable property can be sold at any time to a tax exempt organization, taking it off the tax rolls. In the real world, property owners sometimes take legal action to reduce their taxable assessed value — sometimes even retroactively. All these situations mean that the municipality doesn't collect as much tax in February as it planned for in the budget process the previous fall. Not only that, but sometimes court decisions require that property tax that had been collected from a property owner in previous years “in error” must be given back.
All these real world situations pose a dilemma for the municipality. There is the prospect that the municipality will not receive the full tax levy in its budget, or that it will need to refund money it hasn't budgeted for. So when there's a shortfall of any of these kinds, who do you think is left in the lurch? Who do you think loses out? Who do you think gets left holding the bag?
If you guessed “the municipality”, you've just became the laughing stock of the party. If you're a taxable property owner in the municipality, the correct answer is, ”You!”
How Taxpayers Get To Pay For Budget Shortfalls
Here's how this works in Dutchess County: In February when property taxes are collected, if a municipality has a shortfall, the government of Dutchess County fronts the money to the municipality to make it whole. That way, municipalities don't need to go through any painful re-budgeting process in the middle of the year just because some taxpayer went bankrupt, or some court ordered a refund.
But Dutchess County government doesn't eat these extra costs. After all, it doesn't have any extra money to throw around either. Instead, it remembers its generosity to the municipality, and demands full payback the next year. Payback does not occur through the municipality's budget process. Instead, the town which collects the municipality's tax adds an increment to the municipality's tax rate of just the right size to pay back Dutchess County. By the way, Dutchess County, in its beneficence, declines to charge interest on the money it fronts. It just eats those costs, which are small potatoes. Well, I guess you get to pay even the interest, through county taxes. See? There's no escaping death and ...
This Is a Reasonable System
One advantage of this system is that the municipality is insulated from all these real world situations. It can do its budgeting just once a year, rather than being whipped around by every court decision or bankrupt taxpayer. But it means that taxpayers pay each year for all the extra costs incurred the previous year. In other words, taxpayers pay at a slightly higher tax rate than what the municipality's budget says it's charging them. This is why there's a taxpayer viewpoint and a budget viewpoint for tax rates.
This Blog Focuses on Taxpayer Viewpoint
In my property tax investigations, I prefer the taxpayer viewpoint, because the taxpayer rates are the rates at which taxpayers actually pay taxes. The taxpayer rates are readily available in tax rate pamphlets published each year by the Dutchess County Real Property Tax Service Agency. But the thing is, the taxpayer rates for 2012 aren't available until, well, January 2012. In the fall of 2011, the only 2012 tax rates available are those in municipal budgets. I take these budget tax rates as the best available estimates of the (yet unknown) 2012 taxpayer tax rates. Such tax rates will tend to underestimate the tax rates on tax bills, but generally not by much.
Tax Rate Increases
When the latest tax rate is only a budget tax rate, and not a taxpayer tax rate, the tax rate increase compared with the previous year will be reasonably close to the (yet unknown) taxpayer-view tax rate increase, but will tend to underestimate it. Budget documents, if they show tax rate increases at all, will ordinarily use only budget tax rates, in keeping with the municipality's viewpoint. The result is that these budget tax rate increases will tend to not reflect taxpayer experience as well as my approach. The budget tax rate increases reflect municipality experience.
Example — Arlington Fire District
An example of what I'm talking about can be seen in the Arlington Fire District's proposed 2012 budget. I state here that this budget proposes a 10.1 percent tax rate increase over 2011. The 10.1 percent is figured by comparing Arlington's proposed budget 2012 tax rate of $4.87 with the 2011 taxpayer-view tax rate of $4.43. (Calculations carried to many significant figures, of course.) On the other hand, if the tax rate increase percent is calculated using only budget tax rates, the budget tax rate increase would be 10.4 percent, as I describe here. Both the 10.1 and the 10.4 figures are reasonable, depending on one's point of view. From the taxpayer's viewpoint, the 10.1 figure is the more appropriate.
School Tax Rate Comparisons — Two Viewpoints
Long-time readers of this blog may wonder how the two tax rate viewpoints discussed above relate to the two tax rate viewpoints discussed in School Tax Rate Comparisons — Two Viewpoints. The short answer is that they're unrelated. The viewpoints in that previous post apply only to school districts, not to other municipalities. Both kinds of tax rates discussed in that previous post are taxpayer viewpoint tax rates in the sense of this post. On the other hand, the taxpayer and budget viewpoints of this post can certainly be applied to school districts, further complicating what starts out as a very simple idea.
Around this time of year, local government officials in taxing municipalities (towns, villages, cities, fire districts, other special districts, and, yes, even Dutchess County government) prepare budgets for the next year. (School districts do the same thing in the spring.) As part of the budget preparation process, they set the tax levy — the amount of money the municipality decides to collect from property taxes in the next year. The tax levy divided by the municipality's taxable market value — which is set on the previous July 1 by the town assessor — is the true value tax rate. The true value tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — will be taxed by the municipality. As such, it is a key parameter for municipal governments, taxpayers, and all other stakeholders.
When tax bills are sent out in January (or in September for school taxes), it is exactly this tax rate which appears on tax bills, and is used to calculate the amount of taxes for the municipality ... in an ideal world. But we don't live in an ideal world, do we?
The Tax Situation in the Real World
In the real world, its not quite that simple. In the real world, property owners sometimes don't pay their taxes. And then they go bankrupt or disappear, and the money is never collected. In the real world, taxable property can be sold at any time to a tax exempt organization, taking it off the tax rolls. In the real world, property owners sometimes take legal action to reduce their taxable assessed value — sometimes even retroactively. All these situations mean that the municipality doesn't collect as much tax in February as it planned for in the budget process the previous fall. Not only that, but sometimes court decisions require that property tax that had been collected from a property owner in previous years “in error” must be given back.
All these real world situations pose a dilemma for the municipality. There is the prospect that the municipality will not receive the full tax levy in its budget, or that it will need to refund money it hasn't budgeted for. So when there's a shortfall of any of these kinds, who do you think is left in the lurch? Who do you think loses out? Who do you think gets left holding the bag?
If you guessed “the municipality”, you've just became the laughing stock of the party. If you're a taxable property owner in the municipality, the correct answer is, ”You!”
How Taxpayers Get To Pay For Budget Shortfalls
Here's how this works in Dutchess County: In February when property taxes are collected, if a municipality has a shortfall, the government of Dutchess County fronts the money to the municipality to make it whole. That way, municipalities don't need to go through any painful re-budgeting process in the middle of the year just because some taxpayer went bankrupt, or some court ordered a refund.
But Dutchess County government doesn't eat these extra costs. After all, it doesn't have any extra money to throw around either. Instead, it remembers its generosity to the municipality, and demands full payback the next year. Payback does not occur through the municipality's budget process. Instead, the town which collects the municipality's tax adds an increment to the municipality's tax rate of just the right size to pay back Dutchess County. By the way, Dutchess County, in its beneficence, declines to charge interest on the money it fronts. It just eats those costs, which are small potatoes. Well, I guess you get to pay even the interest, through county taxes. See? There's no escaping death and ...
This Is a Reasonable System
One advantage of this system is that the municipality is insulated from all these real world situations. It can do its budgeting just once a year, rather than being whipped around by every court decision or bankrupt taxpayer. But it means that taxpayers pay each year for all the extra costs incurred the previous year. In other words, taxpayers pay at a slightly higher tax rate than what the municipality's budget says it's charging them. This is why there's a taxpayer viewpoint and a budget viewpoint for tax rates.
This Blog Focuses on Taxpayer Viewpoint
In my property tax investigations, I prefer the taxpayer viewpoint, because the taxpayer rates are the rates at which taxpayers actually pay taxes. The taxpayer rates are readily available in tax rate pamphlets published each year by the Dutchess County Real Property Tax Service Agency. But the thing is, the taxpayer rates for 2012 aren't available until, well, January 2012. In the fall of 2011, the only 2012 tax rates available are those in municipal budgets. I take these budget tax rates as the best available estimates of the (yet unknown) 2012 taxpayer tax rates. Such tax rates will tend to underestimate the tax rates on tax bills, but generally not by much.
Tax Rate Increases
When the latest tax rate is only a budget tax rate, and not a taxpayer tax rate, the tax rate increase compared with the previous year will be reasonably close to the (yet unknown) taxpayer-view tax rate increase, but will tend to underestimate it. Budget documents, if they show tax rate increases at all, will ordinarily use only budget tax rates, in keeping with the municipality's viewpoint. The result is that these budget tax rate increases will tend to not reflect taxpayer experience as well as my approach. The budget tax rate increases reflect municipality experience.
Example — Arlington Fire District
An example of what I'm talking about can be seen in the Arlington Fire District's proposed 2012 budget. I state here that this budget proposes a 10.1 percent tax rate increase over 2011. The 10.1 percent is figured by comparing Arlington's proposed budget 2012 tax rate of $4.87 with the 2011 taxpayer-view tax rate of $4.43. (Calculations carried to many significant figures, of course.) On the other hand, if the tax rate increase percent is calculated using only budget tax rates, the budget tax rate increase would be 10.4 percent, as I describe here. Both the 10.1 and the 10.4 figures are reasonable, depending on one's point of view. From the taxpayer's viewpoint, the 10.1 figure is the more appropriate.
School Tax Rate Comparisons — Two Viewpoints
Long-time readers of this blog may wonder how the two tax rate viewpoints discussed above relate to the two tax rate viewpoints discussed in School Tax Rate Comparisons — Two Viewpoints. The short answer is that they're unrelated. The viewpoints in that previous post apply only to school districts, not to other municipalities. Both kinds of tax rates discussed in that previous post are taxpayer viewpoint tax rates in the sense of this post. On the other hand, the taxpayer and budget viewpoints of this post can certainly be applied to school districts, further complicating what starts out as a very simple idea.
Sunday, September 25, 2011
Arlington Fire District Treasurer Misleads About Tax Rate Increases
I recently reported that the Arlington Fire District's 2012 proposed budget calls for a 10.1 percent tax rate increase, and that this fact is not mentioned anywhere in the proposed budget. The tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — is taxed. The tax rate increase expresses how much steeper the taxation is becoming. The omission of the tax rate increase from Arlington's proposed budget
makes it difficult for all stakeholders — taxpayers, residents, and even
the fire commissioners themselves — to understand how the tax rate is changing.
It's bad enough that the proposed budget document does not contain any tax rate increases, but this document does something worse: It contains percent increase numbers that many people would assume are tax rate increases, but that are not. Stakeholders reviewing this document will therefore be misled, thinking they know what Arlington's tax rate increases are, when they really don't. In my view, thinking you know — but being wrong — is worse than not knowing at all.
Examining Arlington's 2012 Proposed Budget Document
The last three rows on the last page of Arlington's 2012 proposed budget document are labeled as follows:
The third row is the point of issue. Since the second row is the amount of tax rate increase, the third row should be the percent of tax rate increase. It is not. To calculate the percent of tax rate increase, one would divide the amount of tax rate increase by the tax rate of the previous year. Instead, the numbers in the third row are the amount of tax rate increase divided by the tax rate of the current year. The numbers in the last row represent nothing of much interest, and they certainly don't represent tax rate increases. When tax rates are rising, as they have been for Arlington in recent years, these numbers understate the actual tax rate increases.
Numbers Deliberately Differ From Tax Rate Increases
The percentage increase numbers in the last row of the proposed budget are not a mistake. They were calculated that way on purpose. I don't know what that purpose is, since these numbers have no use that I know of. But the effect, in my view, is that many stakeholders reading the budget document will be misled.
The author of the budget document is James F. Passikoff, Treasurer of the Arlington Fire District. As a certified public accountant, Passikoff knows the formula for percent increase that we all learned in eighth grade (or maybe fifth grade these days). Passikoff confirmed to me that his percentage increase numbers were calculated by dividing by the tax rate of the current year, not the previous year, and he agreed that these numbers do not represent the tax rate increase percent. I expressed concern that many readers would be misled into thinking that these numbers represent the tax rate increase percent. Passikoff responded that nobody understands these numbers anyway.
I have to admit, based on my three years of property tax investigations in Dutchess County, that I have considerable sympathy with Passikoff's skeptical view of his readers. On the other hand, stakeholders can hardly expect to understand tax matters when they are given numbers which look, feel, and smell like tax rate increase percentages — but aren't. Seemingly unconcerned with this outcome, Passikoff told me he is satisfied with what he did, and does not consider these calculations a mistake. I have no reason to think that Passikoff is intentionally trying to mislead stakeholders. On the other hand, his responses seemed to show an indifference to whether stakeholders might be misled.
Correcting the Record
Using the values for tax levy and assessed value in Arlington's 2012 proposed budget, the 2012 proposed tax rate increase is 10.4 percent — not the 9.4 percent number calculated by Passikoff. Alert readers will notice that the 10.4 percent increase is different from the 10.1 percent increase I claimed in my last blog post. The difference is because the 10.1 percent increase is from the taxpayer's view — my preferred viewpoint — but the 10.4 percent increase is from the municipality's view, an appropriate view for a budget document. Each viewpoint is suitable to its own domain. For more detail on this point, see my forthcoming post Tax Rate Viewpoints — Taxpayer Versus Budget.
Recommendation
I recommend that the Arlington Fire District's 2012 budget document be revised prior to the October 18, 2011, public hearing, to include tax rate increase percentages in place of the misleading numbers in “Percentage increase of Tax Bills going out Jan 1”. That way, stakeholders will not be needlessly misled about Arlington's tax rate increases.
It's bad enough that the proposed budget document does not contain any tax rate increases, but this document does something worse: It contains percent increase numbers that many people would assume are tax rate increases, but that are not. Stakeholders reviewing this document will therefore be misled, thinking they know what Arlington's tax rate increases are, when they really don't. In my view, thinking you know — but being wrong — is worse than not knowing at all.
Examining Arlington's 2012 Proposed Budget Document
The last three rows on the last page of Arlington's 2012 proposed budget document are labeled as follows:
- Rate per Thousand of Assessed valuation for Tax Bills going out Jan 1 (sic)
- Increase Per Thousand Over last year (sic)
- Percentage increase of Tax Bills going out Jan 1 (sic)
The third row is the point of issue. Since the second row is the amount of tax rate increase, the third row should be the percent of tax rate increase. It is not. To calculate the percent of tax rate increase, one would divide the amount of tax rate increase by the tax rate of the previous year. Instead, the numbers in the third row are the amount of tax rate increase divided by the tax rate of the current year. The numbers in the last row represent nothing of much interest, and they certainly don't represent tax rate increases. When tax rates are rising, as they have been for Arlington in recent years, these numbers understate the actual tax rate increases.
Numbers Deliberately Differ From Tax Rate Increases
The percentage increase numbers in the last row of the proposed budget are not a mistake. They were calculated that way on purpose. I don't know what that purpose is, since these numbers have no use that I know of. But the effect, in my view, is that many stakeholders reading the budget document will be misled.
The author of the budget document is James F. Passikoff, Treasurer of the Arlington Fire District. As a certified public accountant, Passikoff knows the formula for percent increase that we all learned in eighth grade (or maybe fifth grade these days). Passikoff confirmed to me that his percentage increase numbers were calculated by dividing by the tax rate of the current year, not the previous year, and he agreed that these numbers do not represent the tax rate increase percent. I expressed concern that many readers would be misled into thinking that these numbers represent the tax rate increase percent. Passikoff responded that nobody understands these numbers anyway.
I have to admit, based on my three years of property tax investigations in Dutchess County, that I have considerable sympathy with Passikoff's skeptical view of his readers. On the other hand, stakeholders can hardly expect to understand tax matters when they are given numbers which look, feel, and smell like tax rate increase percentages — but aren't. Seemingly unconcerned with this outcome, Passikoff told me he is satisfied with what he did, and does not consider these calculations a mistake. I have no reason to think that Passikoff is intentionally trying to mislead stakeholders. On the other hand, his responses seemed to show an indifference to whether stakeholders might be misled.
Correcting the Record
Using the values for tax levy and assessed value in Arlington's 2012 proposed budget, the 2012 proposed tax rate increase is 10.4 percent — not the 9.4 percent number calculated by Passikoff. Alert readers will notice that the 10.4 percent increase is different from the 10.1 percent increase I claimed in my last blog post. The difference is because the 10.1 percent increase is from the taxpayer's view — my preferred viewpoint — but the 10.4 percent increase is from the municipality's view, an appropriate view for a budget document. Each viewpoint is suitable to its own domain. For more detail on this point, see my forthcoming post Tax Rate Viewpoints — Taxpayer Versus Budget.
Recommendation
I recommend that the Arlington Fire District's 2012 budget document be revised prior to the October 18, 2011, public hearing, to include tax rate increase percentages in place of the misleading numbers in “Percentage increase of Tax Bills going out Jan 1”. That way, stakeholders will not be needlessly misled about Arlington's tax rate increases.
Friday, September 23, 2011
Arlington Fire District Proposes 10.1 Percent Tax Rate Increase
The Arlington Fire District's 2012 tax rate will be $4.87 per thousand dollars of market (or assessed ) value, up 10.1 percent from 2011, according to Arlington's proposed budget, which was finalized September 19. But you won't find the 10.1 percent tax rate increase mentioned anywhere in Arlington's proposed budget, making it difficult for taxpayers, residents, and even Arlington Fire District officials to understand what's going on. I'll have more to say about this omission in a subsequent post. Meanwhile, this post is just about Arlington's proposed 2012 fire taxes in historical perspective, and in relation to the Fairview Fire District.
The proposed $4.87 tax rate would be the highest for Arlington in this millennium. Arlington's proposed 2012 tax levy of $15.4 million would be the highest in its history. The corresponding tax levy increase of 3.1 percent exceeds New York's “two percent tax cap” by 1.1 percent. (The tax cap doesn't really affect fire districts, as I note here.) Arlington's tax situation can be seen in historical perspective as follows:
Another useful way to see the big picture is by displaying columns of the above table as bar charts, such as this one for tax rate:
The true value tax rates shown in this chart express how steeply a property owner's wealth, as measured by the market value of his property, is taxed. For this reason, the true value tax rate is the most important property tax parameter, in my view. The above chart clearly shows the effect of the 2008 economic meltdown: From 2003 to 2008, Arlington's true value tax rate held fairly steady in the approximate range $3.15 to $3.45. But beginning in 2009, Arlington's tax rate reached a new historical high every year. The 2012 data is in yellow, because it is only proposed. You can find charts of the other five columns of the above table, and more commentary, in my report Arlington Fire District Property Tax Data.
Comparison with Fairview
The Fairview Fire District is famous for having the highest true value fire tax rate in Dutchess County, and one of the highest in New York State. Until recently, Arlington has been a not-very-close second in Dutchess County. Fairview's tax rate has hovered in the neighborhood of $5.00 per thousand dollars of market value for nearly a decade, while Arlington's has been well below $4.00 until as recently as 2010. But with Arlington's double-digit tax rate increases in 2009, 2010, and now 2012 (proposed), it might appear that Arlington will soon pass Fairview for the “honor” of highest fire tax rate in Dutchess County.
But not to worry. Fairview has kept its tax rate artificially low the last few years by failing to contribute to its reserve funds. There's every reason to believe that Fairview's board will now begin to make up for these past lapses by increasing its tax rate well above $5.00 in 2012. In fact, according to a preliminary estimate of Fairview's 2012 tax base, Fairview's 2012 tax rate will rise to $5.25 even in the unlikely event it doesn't increase its tax levy at all. These considerations should keep Fairview safely in first place for the next few years.
It's worth noting here that if it weren't for the fact that nonprofit institutions escape fire taxes, Fairview would have had a lower fire tax rate than Arlington in recent years. My report The Big Three Fire Districts of Dutchess County shows that Arlington's 2010 universal fire tax rate — the tax rate if exempt properties paid fire tax — is 30 percent greater than Fairview's. As Arlington has been “catching up”with Fairview's tax rate since then, its cost for services is becoming even less favorable, compared with Fairview. This is particularly surprising because economies of scale should have favored Arlington, which is four times larger than Fairview, both in total market value and number of fire stations.
Why Can't I Find Tax Rate Increase Percents in Arlington's Proposed Budget?
Have you actually looked at Arlington's proposed 2012 budget document? If so, you might have noticed that its last row, labeled “Percentage increase of Tax Bills going out Jan 1”, contains percent values that one might reasonably think are tax rate increase amounts for each year. If one thought that, one would be wrong. There's a whole story behind this surprise, which I plan to tell in a forthcoming post.
The proposed $4.87 tax rate would be the highest for Arlington in this millennium. Arlington's proposed 2012 tax levy of $15.4 million would be the highest in its history. The corresponding tax levy increase of 3.1 percent exceeds New York's “two percent tax cap” by 1.1 percent. (The tax cap doesn't really affect fire districts, as I note here.) Arlington's tax situation can be seen in historical perspective as follows:
Another useful way to see the big picture is by displaying columns of the above table as bar charts, such as this one for tax rate:
The true value tax rates shown in this chart express how steeply a property owner's wealth, as measured by the market value of his property, is taxed. For this reason, the true value tax rate is the most important property tax parameter, in my view. The above chart clearly shows the effect of the 2008 economic meltdown: From 2003 to 2008, Arlington's true value tax rate held fairly steady in the approximate range $3.15 to $3.45. But beginning in 2009, Arlington's tax rate reached a new historical high every year. The 2012 data is in yellow, because it is only proposed. You can find charts of the other five columns of the above table, and more commentary, in my report Arlington Fire District Property Tax Data.
Comparison with Fairview
The Fairview Fire District is famous for having the highest true value fire tax rate in Dutchess County, and one of the highest in New York State. Until recently, Arlington has been a not-very-close second in Dutchess County. Fairview's tax rate has hovered in the neighborhood of $5.00 per thousand dollars of market value for nearly a decade, while Arlington's has been well below $4.00 until as recently as 2010. But with Arlington's double-digit tax rate increases in 2009, 2010, and now 2012 (proposed), it might appear that Arlington will soon pass Fairview for the “honor” of highest fire tax rate in Dutchess County.
But not to worry. Fairview has kept its tax rate artificially low the last few years by failing to contribute to its reserve funds. There's every reason to believe that Fairview's board will now begin to make up for these past lapses by increasing its tax rate well above $5.00 in 2012. In fact, according to a preliminary estimate of Fairview's 2012 tax base, Fairview's 2012 tax rate will rise to $5.25 even in the unlikely event it doesn't increase its tax levy at all. These considerations should keep Fairview safely in first place for the next few years.
It's worth noting here that if it weren't for the fact that nonprofit institutions escape fire taxes, Fairview would have had a lower fire tax rate than Arlington in recent years. My report The Big Three Fire Districts of Dutchess County shows that Arlington's 2010 universal fire tax rate — the tax rate if exempt properties paid fire tax — is 30 percent greater than Fairview's. As Arlington has been “catching up”with Fairview's tax rate since then, its cost for services is becoming even less favorable, compared with Fairview. This is particularly surprising because economies of scale should have favored Arlington, which is four times larger than Fairview, both in total market value and number of fire stations.
Why Can't I Find Tax Rate Increase Percents in Arlington's Proposed Budget?
Have you actually looked at Arlington's proposed 2012 budget document? If so, you might have noticed that its last row, labeled “Percentage increase of Tax Bills going out Jan 1”, contains percent values that one might reasonably think are tax rate increase amounts for each year. If one thought that, one would be wrong. There's a whole story behind this surprise, which I plan to tell in a forthcoming post.
Sunday, September 11, 2011
Fairview Fire District's Staffing Crisis Continues
I reported in May that the Fairview Fire District is in crisis.
At a public workshop meeting on May 26, Fairview officials revealed that
there is a short-term crisis in under-staffing, and a long-term crisis
in financing. If these crises cannot be resolved, the level of service
in Fairview will need to be reduced. Such a reduction would represent a
game-changing dismantling of part of Fairview's mission, resulting in
increased risk to life and property, as well as increases in insurance
rates for all Fairview property owners. This post is an update on the staffing crisis.
What is the staffing crisis?
The staffing crisis was explained at the May 26 meeting by Fairview Firefighter Mark Bendel as follows: The fire station must be staffed by four career firefighters at all times (24x7) in order to maintain Fairview's level of service in the District. This staffing level requires at least 16 career firefighters to fill all shifts, assuming a “normal” 42 hour work week. Three firefighters have recently left the District (retirement and transfer), and one more is unavailable because of medical leave. To continue Fairview's level of service, the remaining 12 firefighters have been working major amounts of overtime (mostly at straight-time pay) for many months. Although the financial cost of this arrangement to the District is minimal, the stress on firefighters is extreme, and unsustainable. Firefighters are overworked, morale is low, and additional firefighters are said to be considering leaving the District, which would further exacerbate the crisis.
The District cannot simply reduce the fire station staffing from four per shift to three, even temporarily, without major repercussions. Bendel explained that having only three firefighters available to fight a structure fire would dramatically reduce the level of service, resulting in significant increases in risk to both life and property. Not only that, but the reduced level of service would cause all property insurance rates in the fire district to increase considerably. All stakeholders would be substantially affected by a reduced level of service.
Board of Fire Commissioners Eventually Hires Two Firefighters
The staffing crisis was well known to Fairview's board of fire commissioners even before the May 26 meeting. At the April 5 commissioners meeting, firefighters union representatives pleaded with the commissioners to authorize the hiring of three additional firefighters, but the commissioners took no action at that time. However, at the June 7 commissioners meeting, they passed a resolution authorizing the hiring of two firefighters. Two firefighters were hired at the beginning of July.
So problem solved, or at least alleviated, right?
Unfortunately, not. For one thing, the District didn't really hire two firefighters. It hired two EMTs, who must still be trained in firefighting, at District expense. (If the District had just hired “off the street”, the employees would have had to be trained in EMT and firefighting, at much greater time and expense. So hiring EMTs was a big advantage.)
The two EMTs are currently being trained at the New York State Academy of Fire Science in Montour Falls, and cannot be deployed in the department until November. Meanwhile, Fairview's firefighters have continued to struggle under massive amounts of overtime, since only 12 out of a needed 16 firefighters are available. On average, firefighters have been working 56 hours per week, every week. But overtime cannot be distributed evenly, for a variety of reasons. Some firefighters have been working 70 hours a week for many weeks in a row.
OK, so in November, problem alleviated, right?
Unfortunately, not so much. In November, when the two new firefighters are to be deployed in the station, the staffing shortfall was expected to have been reduced from 4 to 2. But in an ironic turn of events, it was announced during the September 6 commissioners meeting that yet another firefighter has submitted his resignation, and will be leaving the District by the end of this month. So the staffing shortfall in October will be an outrageous 5 firefighters out of 16, meaning that the average firefighter will work 61 hours during that month. Beginning in November when the two new firefighters will be deployed, the staffing shortage will still be 3 out of 16 — almost as bad as it's been since last spring.
It Gets Worse
The irony is increased further by the fact that the resigning firefighter is none other than Mark Bendel, the eloquent spokesman for the firefighters at the May 26 meeting. Bendel has been a major asset to the District. His loss will be deeply felt.
And It Could Get Even Worse
As things now stand, Fairview is faced with the need to hire two more firefighters, just to bring staffing up to the minimum of 16 firefighters on staff. And even then, one of those firefighters is on medical leave, so overtime will still be necessary until he returns. But the staffing situation could easily get worse. Four firefighters are eligible to retire, and could do so at any time. And considering the low morale, other firefighters may transfer to other districts, where they can expect to work only 42 hours a week instead of up to 70. During the public comment session of the September 6 commissioners meeting, former Fairview Fire Commissioner and Board Chairman (and current volunteer safety officer for the District) John Anspach reprimanded the current board of fire commissioners for not authorizing full staffing, pointing out that the sustained excessive overtime decreases safety for all the firefighters. At the same meeting, Fairview firefighters union president Tim Gilnack announced that the union was considering filing a formal grievance against the District. Regardless of the outcome of a grievance filing, it would take time, energy, and money away from solving Fairview's problems.
Fairview's Fundamental Problem
If staffing were Fairview's only problem, it could easily be solved: Just hire more firefighters. But as I see it, under-staffing is only a symptom of Fairview's fundamental problem, a shortage of money in the long term. Most of Fairview's budget pays for firefighters' hourly wages and benefits, and most of Fairview's income comes from the fire tax levy to property owners. In other words, unless Fairview can acquire a significant new source of income, the number of firefighters per shift that Fairview can support is roughly proportional to Fairview's fire tax levy.
Fairview's fire tax levy is already high compared with Fairview's tax base. The ratio of the two, which measures how steeply taxpayers' wealth is taxed by the fire district, is called the true value tax rate. Fairview already has the highest true value fire tax rate in Dutchess County, and one of the highest in New York State. Significantly increasing this tax rate may not be politically tenable. Unfortunately, Fairview's tax base is shrinking. This means that even without increasing Fairview's 2012 tax levy at all, Fairview's 2012 tax rate is projected to increase 2.8 percent to $5.25 per thousand dollars of market value, making it Fairview's highest tax rate in a decade.
What Were the Fire Commissioners Thinking?
My understanding is that Fairview's long-term financial crisis is the reason why some commissioners have been hesitant to increase staffing. The commissioners say they authorized two new firefighters in June only because of new concessions by the firefighters union, worth $80,000 over two years. By taking this action, the commissioners may have allowed the District to limp along a little while longer before the day of reckoning arrives. But as the staffing situation continues to be unstable, it's difficult to say how much time this action will buy. If firefighters continue to leave the district, the morale of Fairview's overworked firefighters will continue to deteriorate, accelerating a downward spiral that has already begun.
My thanks to Fairview Fire Chief Chris Maeder and other members of the department for graciously providing me with information about staffing.
What is the staffing crisis?
The staffing crisis was explained at the May 26 meeting by Fairview Firefighter Mark Bendel as follows: The fire station must be staffed by four career firefighters at all times (24x7) in order to maintain Fairview's level of service in the District. This staffing level requires at least 16 career firefighters to fill all shifts, assuming a “normal” 42 hour work week. Three firefighters have recently left the District (retirement and transfer), and one more is unavailable because of medical leave. To continue Fairview's level of service, the remaining 12 firefighters have been working major amounts of overtime (mostly at straight-time pay) for many months. Although the financial cost of this arrangement to the District is minimal, the stress on firefighters is extreme, and unsustainable. Firefighters are overworked, morale is low, and additional firefighters are said to be considering leaving the District, which would further exacerbate the crisis.
The District cannot simply reduce the fire station staffing from four per shift to three, even temporarily, without major repercussions. Bendel explained that having only three firefighters available to fight a structure fire would dramatically reduce the level of service, resulting in significant increases in risk to both life and property. Not only that, but the reduced level of service would cause all property insurance rates in the fire district to increase considerably. All stakeholders would be substantially affected by a reduced level of service.
Board of Fire Commissioners Eventually Hires Two Firefighters
The staffing crisis was well known to Fairview's board of fire commissioners even before the May 26 meeting. At the April 5 commissioners meeting, firefighters union representatives pleaded with the commissioners to authorize the hiring of three additional firefighters, but the commissioners took no action at that time. However, at the June 7 commissioners meeting, they passed a resolution authorizing the hiring of two firefighters. Two firefighters were hired at the beginning of July.
So problem solved, or at least alleviated, right?
Unfortunately, not. For one thing, the District didn't really hire two firefighters. It hired two EMTs, who must still be trained in firefighting, at District expense. (If the District had just hired “off the street”, the employees would have had to be trained in EMT and firefighting, at much greater time and expense. So hiring EMTs was a big advantage.)
The two EMTs are currently being trained at the New York State Academy of Fire Science in Montour Falls, and cannot be deployed in the department until November. Meanwhile, Fairview's firefighters have continued to struggle under massive amounts of overtime, since only 12 out of a needed 16 firefighters are available. On average, firefighters have been working 56 hours per week, every week. But overtime cannot be distributed evenly, for a variety of reasons. Some firefighters have been working 70 hours a week for many weeks in a row.
OK, so in November, problem alleviated, right?
Unfortunately, not so much. In November, when the two new firefighters are to be deployed in the station, the staffing shortfall was expected to have been reduced from 4 to 2. But in an ironic turn of events, it was announced during the September 6 commissioners meeting that yet another firefighter has submitted his resignation, and will be leaving the District by the end of this month. So the staffing shortfall in October will be an outrageous 5 firefighters out of 16, meaning that the average firefighter will work 61 hours during that month. Beginning in November when the two new firefighters will be deployed, the staffing shortage will still be 3 out of 16 — almost as bad as it's been since last spring.
It Gets Worse
The irony is increased further by the fact that the resigning firefighter is none other than Mark Bendel, the eloquent spokesman for the firefighters at the May 26 meeting. Bendel has been a major asset to the District. His loss will be deeply felt.
And It Could Get Even Worse
As things now stand, Fairview is faced with the need to hire two more firefighters, just to bring staffing up to the minimum of 16 firefighters on staff. And even then, one of those firefighters is on medical leave, so overtime will still be necessary until he returns. But the staffing situation could easily get worse. Four firefighters are eligible to retire, and could do so at any time. And considering the low morale, other firefighters may transfer to other districts, where they can expect to work only 42 hours a week instead of up to 70. During the public comment session of the September 6 commissioners meeting, former Fairview Fire Commissioner and Board Chairman (and current volunteer safety officer for the District) John Anspach reprimanded the current board of fire commissioners for not authorizing full staffing, pointing out that the sustained excessive overtime decreases safety for all the firefighters. At the same meeting, Fairview firefighters union president Tim Gilnack announced that the union was considering filing a formal grievance against the District. Regardless of the outcome of a grievance filing, it would take time, energy, and money away from solving Fairview's problems.
Fairview's Fundamental Problem
If staffing were Fairview's only problem, it could easily be solved: Just hire more firefighters. But as I see it, under-staffing is only a symptom of Fairview's fundamental problem, a shortage of money in the long term. Most of Fairview's budget pays for firefighters' hourly wages and benefits, and most of Fairview's income comes from the fire tax levy to property owners. In other words, unless Fairview can acquire a significant new source of income, the number of firefighters per shift that Fairview can support is roughly proportional to Fairview's fire tax levy.
Fairview's fire tax levy is already high compared with Fairview's tax base. The ratio of the two, which measures how steeply taxpayers' wealth is taxed by the fire district, is called the true value tax rate. Fairview already has the highest true value fire tax rate in Dutchess County, and one of the highest in New York State. Significantly increasing this tax rate may not be politically tenable. Unfortunately, Fairview's tax base is shrinking. This means that even without increasing Fairview's 2012 tax levy at all, Fairview's 2012 tax rate is projected to increase 2.8 percent to $5.25 per thousand dollars of market value, making it Fairview's highest tax rate in a decade.
What Were the Fire Commissioners Thinking?
My understanding is that Fairview's long-term financial crisis is the reason why some commissioners have been hesitant to increase staffing. The commissioners say they authorized two new firefighters in June only because of new concessions by the firefighters union, worth $80,000 over two years. By taking this action, the commissioners may have allowed the District to limp along a little while longer before the day of reckoning arrives. But as the staffing situation continues to be unstable, it's difficult to say how much time this action will buy. If firefighters continue to leave the district, the morale of Fairview's overworked firefighters will continue to deteriorate, accelerating a downward spiral that has already begun.
My thanks to Fairview Fire Chief Chris Maeder and other members of the department for graciously providing me with information about staffing.
Wednesday, September 7, 2011
Two Percent Tax Cap Does Not Affect Fire Districts
A key part of Andrew Cuomo's successful campaign for Governor of New York was his five-point plan to build a “new NY”. His second point — controlling government spending — included a local property tax cap. Cuomo signed into law a two percent cap on local property tax levy increases on June 30, 2011. Since then, all local governments in New York, including fire districts, have been wringing their collective hands, trying to determine how the new law affects them. I have just learned that as far as fire districts are concerned, it doesn't.
As always, the devil is in the details. Here they are: The property tax cap law states that the two percent limit on tax levy increases can be overridden by a vote of “sixty percent of the governing body” of the local government. In the case of a fire district, the governing body is a board of up to five commissioners. Sixty percent of that is three commissioners. OK, so three commissioners are needed to override the tax cap. But here's the thing: Three commissioners are needed anyway to pass any budget, regardless of the budget's size. So a board of fire commissioners needs no more support to exceed the two percent cap than to not exceed it.
Technicalities
To conform with the mechanics of the tax cap law, the board must take two votes instead of one: The first to override the tax cap law (if needed), and the second to pass the budget. But this technicality has no practical effect on what boards of fire commissioners can do. As a political matter, however, boards may be reluctant to be seen as thwarting the intent of Cuomo's pledge to control government spending. Or maybe not.
Says Who?
The fact that the two percent tax cap does not affect fire districts isn't just my opinion. It is also the opinion of David B. Garwood, attorney with Scicchitano & Pinsky, PLLC, a law firm marketing itself as “an authority on fire protection and EMS law in New York State”. Garwood stated his opinion to Fairview's board of fire commissioners at a public meeting last evening.
Fire District Spending Out of Control, or Dodging a Bullet?
So is the inefficacy of the two percent tax cap for fire districts bad news or good news? It depends who you ask. For many local property owners hoping for property tax relief, it's bad news. For boards of fire commissioners, it's good news. Most local government officials in New York State have fought bitterly against the passage of this law, warning of dire consequences if it is enacted. Now it seems that fire districts are effectively free from any spending restrictions in the property tax cap law.
As always, the devil is in the details. Here they are: The property tax cap law states that the two percent limit on tax levy increases can be overridden by a vote of “sixty percent of the governing body” of the local government. In the case of a fire district, the governing body is a board of up to five commissioners. Sixty percent of that is three commissioners. OK, so three commissioners are needed to override the tax cap. But here's the thing: Three commissioners are needed anyway to pass any budget, regardless of the budget's size. So a board of fire commissioners needs no more support to exceed the two percent cap than to not exceed it.
Technicalities
To conform with the mechanics of the tax cap law, the board must take two votes instead of one: The first to override the tax cap law (if needed), and the second to pass the budget. But this technicality has no practical effect on what boards of fire commissioners can do. As a political matter, however, boards may be reluctant to be seen as thwarting the intent of Cuomo's pledge to control government spending. Or maybe not.
Says Who?
The fact that the two percent tax cap does not affect fire districts isn't just my opinion. It is also the opinion of David B. Garwood, attorney with Scicchitano & Pinsky, PLLC, a law firm marketing itself as “an authority on fire protection and EMS law in New York State”. Garwood stated his opinion to Fairview's board of fire commissioners at a public meeting last evening.
Fire District Spending Out of Control, or Dodging a Bullet?
So is the inefficacy of the two percent tax cap for fire districts bad news or good news? It depends who you ask. For many local property owners hoping for property tax relief, it's bad news. For boards of fire commissioners, it's good news. Most local government officials in New York State have fought bitterly against the passage of this law, warning of dire consequences if it is enacted. Now it seems that fire districts are effectively free from any spending restrictions in the property tax cap law.
Tuesday, September 6, 2011
Suggestions to Improve Fairview's Fire Tax Projections
As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the third in a series stemming from my attempt to analyze the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.
As I reported recently, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Unfortunately, even if these flaws are corrected, stakeholders will still have a difficult time understanding Fairview's financial status. That's because the spreadsheet format contains a great deal of extraneous detail, so that it's very difficult to see the big picture. What's needed is a simpler and cleaner presentation of the financial facts. This post suggests some specific ways to improve this presentation.
The first order of business, in my view, is to get rid of the single spreadsheet form of presentation, and replace it with multiple tables and charts, each dealing with a major aspect of budgeting, such as income, expenses, reserve funds, taxes. For now, here are my suggestions for tax-related projections:
but with years extending more into the future and less into the past. The above table is from page 1 of my May 23, 2011, report Fairview Fire District Property Tax Data. The last 6 pages of this report display each column of the table in convenient chart form, showing trends at a glance. For example, Fairview's tax rate trend (page 7) is as follows:
This report was published in conjunction with my blog post Fairview Fire District Tax Base Projected to Drop 2.7 Percent.
Teamwork?
I would be happy to contribute my Microsoft® Excel workbook, used to generate the table and charts, for use by Fairview officials. It can be modified easily to add future years and remove past years. I would also be happy to work with Fairview officials to facilitate this. In my view, the above style of presentation will be easier for may stakeholders to understand than that in the current budget projections spreadsheet.
As I reported recently, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Unfortunately, even if these flaws are corrected, stakeholders will still have a difficult time understanding Fairview's financial status. That's because the spreadsheet format contains a great deal of extraneous detail, so that it's very difficult to see the big picture. What's needed is a simpler and cleaner presentation of the financial facts. This post suggests some specific ways to improve this presentation.
The first order of business, in my view, is to get rid of the single spreadsheet form of presentation, and replace it with multiple tables and charts, each dealing with a major aspect of budgeting, such as income, expenses, reserve funds, taxes. For now, here are my suggestions for tax-related projections:
- Do not display any data involving assessed values or equalization rates. This means not only assessed values directly, but also tax rates measured in dollars per thousand dollars of assessed value. Assessed values and equalization rates are simply artifacts of the legacy way of collecting property taxes, and are not meaningful for planning purposes. Replace these parameters with market values (also known as home values, true values, full values, etc.) and tax rates measured in dollars per thousand dollars of market value (also known as true value tax rates). Once this is done, separate tax rates for Poughkeepsie and Hyde Park become redundant (because they're the same). Replace these separate tax rates by a Fairview Fire District tax rate.
- Do not display any parameters for the Hyde Park and Poughkeepsie portions of Fairview. None of these parameters affect tax projections.
- Display the year-to-year percent changes in taxable market value and tax levy, just as is done for tax rate. These parameters are important for seeing trends.
- Transpose the table of projections. That way, long-term planning can be carried out for any number of years into the future — or past — while keeping a constant table width.
but with years extending more into the future and less into the past. The above table is from page 1 of my May 23, 2011, report Fairview Fire District Property Tax Data. The last 6 pages of this report display each column of the table in convenient chart form, showing trends at a glance. For example, Fairview's tax rate trend (page 7) is as follows:
This report was published in conjunction with my blog post Fairview Fire District Tax Base Projected to Drop 2.7 Percent.
Teamwork?
I would be happy to contribute my Microsoft® Excel workbook, used to generate the table and charts, for use by Fairview officials. It can be modified easily to add future years and remove past years. I would also be happy to work with Fairview officials to facilitate this. In my view, the above style of presentation will be easier for may stakeholders to understand than that in the current budget projections spreadsheet.
Monday, September 5, 2011
Fairview Fire District Board Chairperson Withholds Tax Calculations
As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the second in a series stemming from my attempt to analyze the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.
As I reported yesterday, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.
In attempting to analyze these flaws, I naturally wanted access not just to the tabular data appearing on the Fairview Fire District website, but also to the underlying Microsoft Excel workbook file it was derived from. That way, I'd be able to see the formulas used to calculate the various entries, and to verify how the calculations were performed. Accordingly, I asked Fairview Fire District Secretary Cathy Gallinger for this file.
Access Denied
Gallinger informed me that under Fairview's new Freedom of Information Law Policy (FOIL Policy), I can't just ask for this file, but I must submit a written FOIL request to Fairview Fire District Records Officer and Fire Chief Chris Maeder. No problem. I emailed my FOIL request to Maeder on 7/8/2011. Maeder responded that he was on a week's vacation, and was delegating his response to Galllinger. Still no problem. Next, Gallinger denied my request, saying, “The requested sheets are not public documents as they are draft worksheets and possibly personal notes.”
Now it's starting to be a problem. But I wasn't foiled — yet. I knew that under New York State's FOIL act, an initial denial can be appealed. In the case of Fairview, the appeals officer is Fairview Board of Fire Commissioners Chairperson Jill Line, who has made openness and avoidance of secrecy a hallmark of her chairpersonship. Thus, I had some reason to expect a favorable outcome.
Still, in my emailed FOIL appeal to Line, I was careful to state my case as forcefully as I could. I emphasized that the Fairview Fire District owns the Excel workbook file, that New York's FOIL act provides for the presumption of access, with certain exceptions based on potential for harm. In the present case, not only is there no potential for harm, but there are benefits of public scrutiny of tax calculations. But my strongest argument, as I see it, was that the FOIL act is only intended to require government to grant access in most cases. There is nothing in the FOIL act which prohibits government from granting access to records, if the government chooses to do so.
No matter. Line's short denial letter, obviously written in the voice of Fairview Fire District Attorney Brad Pinsky, gives two reasons for denial:
Reason #1: It's true that the spreadsheet formulas I requested are embedded metadata. I don't know whether embedded metadata is in a grey area of possible FOIL access exceptions. But assuming it is, as Line/Pinsky claim, the letter gives no justification for denying access. It's just an arbitrary decision.
Reason #2: The “trade secret of the accounting firm” argument is in my view completely absurd. In the first place, the spreadsheet was not produced by an accounting firm. It was produced by James Passikoff acting as a paid officer (Treasurer) of the Fairview Fire District. The fact that Passikoff is also a principal in a CPA firm is irrelevant to his work for the District. Fire district treasurers are not even required to be CPAs, and most fire district treasurers in New York State are not. The Fairview Fire District has no contract with Passikoff's accounting firm, as far as I know. And even if it has, the standard for government contractors regarding FOIL requests is the same as for the government itself. In other words, a government cannot conceal records from the public just by contracting out the development of these records. In the second place, the trivial formulas used for calculating property taxes in New York State can be trade secrets? You gotta be kidding me!
In summary, the denial developed by Pinsky is a contrived legalistic argument of questionable merit. What I suspect happened is that Passikoff didn't want the Excel workbook released, and Pinsky, as a good lawyer should, found a way to justify not releasing it.
Where was Line in all of this?
In the normal course of human affairs, people in power generally attempt to do what they want, within the various constraints of their office. That's what it means to have power: You get to decide. An outside observer with this understanding of power might reasonably assume that Line wanted to withhold access to the spreadsheet formulas, and she found a way, through Pinsky's contrived legalisms, to do so.
I don't think that's what happened. I think that, to the contrary, Line wanted to grant access to the spreadsheet formulas. She just didn't understand how to exercise the power of her office. Line delegated to Pinsky the task of responding to my FOIL appeal. That in itself is not a problem. The problem is that in doing so, Line did not direct Pinsky to attempt to satisfy her wishes. Instead of saying to Pinsky, “Is there a reasonable way I can grant Rubin's FOIL request?”, she more likely said something passive like, “Please write a response for my signature.” In the absence of direction from Line, Pinsky did the most reasonable thing under the circumstances: He executed his task to conform with the wishes of the most manifest source of power: James Passikoff.
My Appeal Could Have Been Granted
Had Line asserted her authority and directed Pinsky to try to find the outcome she wanted, the dynamics would have been completely different. Since Passikoff is appointed by the Board, Line's power overrides Passikoff's. Pinsky, recognizing this, would have tried to execute his task to conform with Line's wishes over Passikoff's. This would have been easy for him to do in any number of ways. One way would have been to throw out the ridiculous reason #2, and reverse the arbitrary decision on reason #1. But even easier would have been to simply throw out the entire FOIL legal question, and just grant access because she can. To quote from my FOIL appeal to Line, “... if you choose to do so, you can can grant me access to this file, even if FOIL doesn't force you to do so.”
Well, these last two sections are all just speculation on my part, since I don't really know what transpired among the parties. If the above scenario is incorrect, I'm happy to be corrected.
As I reported yesterday, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.
In attempting to analyze these flaws, I naturally wanted access not just to the tabular data appearing on the Fairview Fire District website, but also to the underlying Microsoft Excel workbook file it was derived from. That way, I'd be able to see the formulas used to calculate the various entries, and to verify how the calculations were performed. Accordingly, I asked Fairview Fire District Secretary Cathy Gallinger for this file.
Access Denied
Gallinger informed me that under Fairview's new Freedom of Information Law Policy (FOIL Policy), I can't just ask for this file, but I must submit a written FOIL request to Fairview Fire District Records Officer and Fire Chief Chris Maeder. No problem. I emailed my FOIL request to Maeder on 7/8/2011. Maeder responded that he was on a week's vacation, and was delegating his response to Galllinger. Still no problem. Next, Gallinger denied my request, saying, “The requested sheets are not public documents as they are draft worksheets and possibly personal notes.”
Now it's starting to be a problem. But I wasn't foiled — yet. I knew that under New York State's FOIL act, an initial denial can be appealed. In the case of Fairview, the appeals officer is Fairview Board of Fire Commissioners Chairperson Jill Line, who has made openness and avoidance of secrecy a hallmark of her chairpersonship. Thus, I had some reason to expect a favorable outcome.
Still, in my emailed FOIL appeal to Line, I was careful to state my case as forcefully as I could. I emphasized that the Fairview Fire District owns the Excel workbook file, that New York's FOIL act provides for the presumption of access, with certain exceptions based on potential for harm. In the present case, not only is there no potential for harm, but there are benefits of public scrutiny of tax calculations. But my strongest argument, as I see it, was that the FOIL act is only intended to require government to grant access in most cases. There is nothing in the FOIL act which prohibits government from granting access to records, if the government chooses to do so.
No matter. Line's short denial letter, obviously written in the voice of Fairview Fire District Attorney Brad Pinsky, gives two reasons for denial:
- The spreadsheet formulas I requested are embedded metadata, which is in a grey area of possible FOIL access exceptions. Line/Pinsky have determined that these formulas “should not” be disclosed.
- “We further opine that the formulas utilized may constitute a ‘trade secret’ of the accounting firm used to produce the spreadsheets.”
Reason #1: It's true that the spreadsheet formulas I requested are embedded metadata. I don't know whether embedded metadata is in a grey area of possible FOIL access exceptions. But assuming it is, as Line/Pinsky claim, the letter gives no justification for denying access. It's just an arbitrary decision.
Reason #2: The “trade secret of the accounting firm” argument is in my view completely absurd. In the first place, the spreadsheet was not produced by an accounting firm. It was produced by James Passikoff acting as a paid officer (Treasurer) of the Fairview Fire District. The fact that Passikoff is also a principal in a CPA firm is irrelevant to his work for the District. Fire district treasurers are not even required to be CPAs, and most fire district treasurers in New York State are not. The Fairview Fire District has no contract with Passikoff's accounting firm, as far as I know. And even if it has, the standard for government contractors regarding FOIL requests is the same as for the government itself. In other words, a government cannot conceal records from the public just by contracting out the development of these records. In the second place, the trivial formulas used for calculating property taxes in New York State can be trade secrets? You gotta be kidding me!
In summary, the denial developed by Pinsky is a contrived legalistic argument of questionable merit. What I suspect happened is that Passikoff didn't want the Excel workbook released, and Pinsky, as a good lawyer should, found a way to justify not releasing it.
Where was Line in all of this?
In the normal course of human affairs, people in power generally attempt to do what they want, within the various constraints of their office. That's what it means to have power: You get to decide. An outside observer with this understanding of power might reasonably assume that Line wanted to withhold access to the spreadsheet formulas, and she found a way, through Pinsky's contrived legalisms, to do so.
I don't think that's what happened. I think that, to the contrary, Line wanted to grant access to the spreadsheet formulas. She just didn't understand how to exercise the power of her office. Line delegated to Pinsky the task of responding to my FOIL appeal. That in itself is not a problem. The problem is that in doing so, Line did not direct Pinsky to attempt to satisfy her wishes. Instead of saying to Pinsky, “Is there a reasonable way I can grant Rubin's FOIL request?”, she more likely said something passive like, “Please write a response for my signature.” In the absence of direction from Line, Pinsky did the most reasonable thing under the circumstances: He executed his task to conform with the wishes of the most manifest source of power: James Passikoff.
My Appeal Could Have Been Granted
Had Line asserted her authority and directed Pinsky to try to find the outcome she wanted, the dynamics would have been completely different. Since Passikoff is appointed by the Board, Line's power overrides Passikoff's. Pinsky, recognizing this, would have tried to execute his task to conform with Line's wishes over Passikoff's. This would have been easy for him to do in any number of ways. One way would have been to throw out the ridiculous reason #2, and reverse the arbitrary decision on reason #1. But even easier would have been to simply throw out the entire FOIL legal question, and just grant access because she can. To quote from my FOIL appeal to Line, “... if you choose to do so, you can can grant me access to this file, even if FOIL doesn't force you to do so.”
Well, these last two sections are all just speculation on my part, since I don't really know what transpired among the parties. If the above scenario is incorrect, I'm happy to be corrected.
Sunday, September 4, 2011
Fairview Fire District Treasurer Bungles Tax Calculations — Again
As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the first in a series stemming from my attempt to analysis the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.
As I reported in May, Fairview Fire District Commissioner Bob Gephard revealed the dire state of the District's long-term finances at a public workshop meeting on May 26. Gephard's presentation centered around a spreadsheet of budget projections prepared by Fairview Fire District Treasurer James C. Passikoff and posted on the District's website here. Although the general thrust of Gephard's presentation — that Fairview has a long-term financial crisis — is undoubtedly correct, the spreadsheet is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.
Garbage Data
Almost halfway down page 2 of the Budget Projections Spreadsheet is a row labeled “Total Assessed Valuation”. For each column, the entries in this row can be seen to be the sum of the assessed valuations of the Poughkeepsie and Hyde Park portions of the Fairview Fire District. These sums are garbage. There's no polite way to say it.
For example, consider the 2011 column. In round numbers, the assessed valuations are $375 million for Poughkeepsie and $75 million for Hyde Park. Passikoff simply adds these numbers to get the bogus value of $450 million. The problem is that although Hyde Park's assessed valuation of $75 million is conventionally written in units of dollars, it isn't really dollars as we normally think of dollars, and therefore cannot meaningfully be added to Poughkeepsie's $375 million. That's because Hyde Park's equalization rate is not 100 percent. One needs to divide Hyde Park's assessed valuation by its corresponding 2011 equalization rate of 54 percent, thus converting it to market value, before one can add it to Poughkeepsie's, whose equalization rate is 100 percent. Assessed values corresponding to different equalization rates must be converted to market value (or some other convenient unit) before they can be added.
Passikoff's calculation is like saying, “I delivered 375 pounds of bricks to Poughkeepsie and 75 kilograms of bricks to Hyde Park, for a total of 450 weight of bricks.” No. The total is 540 pounds of bricks or 245 kilograms of bricks. It's not 450 anything of bricks. Passikoff actually performed the correct calculation in the “Total Full Valuation” row directly below, arriving at $514 million for 2011. But including correct results doesn't change the fact that the spreadsheet contains garbage.
As it turns out, Passikoff's mistake — not understanding the true significance of assessed value and equalization rate — is unfortunately all too common in Dutchess County among people who should know better. The most frequent offender is the Poughkeepsie Journal, which made exactly the same mistake last year, as I describe here.
Incorrect Data
The last few rows of the Budget Projection Spreadsheet, labeled “Rate per Thousand of Assessed Valuation” and “Percentage change from last year” for Poughkeepsie and Hyde Park are troubling because they contain data that is not especially relevant for the purposes of budget projection. I will have more to say about this in a subsequent post. But for now, the point is that the data in the last row, showing the percent change in Hyde Park's tax rate for each year from 2010 through 2014, appear to have been calculated incorrectly. In any case, the result is that most of these values are incorrect.
Tax rates expressed in dollars per thousand dollars of assessed value, like those in Passikoff's spreadsheet, cannot be compared with each other (such as by calculating percent changes) unless they correspond to the same equalization rates. Before comparing such tax rates, they must first be converted to the same equalization rate. Typically, one would do this by choosing 100 percent equalization rate (so-called true value tax rate). However, for 2012, Hyde Park's equalization rate happens to be the same as 2011's. Therefore, the tax rate change for Hyde Park for 2012 (three revisions) is correct by accident. For all the other years, it's incorrect.
Passikoff's calculation is like saying, “I accelerated from 50 miles per hour to 100 kilometers per hour, so my speed increased by 100 percent.” No, my speed only increased by 24 percent, because 100 kilometers per hour is “really” 62 miles per hour. (Or if you prefer, 50 miles per hour is really 80 kilometers per hour.)
Perceptive readers will recognize that the percent change mistake is simply another form of the total assessed valuation mistake. It's all about not understanding the true significance of assessed value and equalization rate. This form of the mistake is even more common than the first form among people who should know better. I've already posted about how officials in the Towns of Hyde Park and Pleasant Valley have been making this form of the mistake for years. The Poughkeepsie Journal is another chronic offender on this mistake.
If Fairview's Hyde Park percent changes are calculated correctly, they will be the same as the corresponding Poughkeepsie percent changes. It is therefore pointless to display a separate row for Hyde Park in the Budget Projection Spreadsheet. More on this in a subsequent post.
Mistakes Are Part of a Pattern
This is not the first time Passikoff has made mistakes involving tax calculations with assessed values and equalization rates in the Fairview Fire District. His mistakes in apportioning the fire tax levy between Hyde Park and Poughkeepsie between 2001 and 2008 cost Hyde Park taxpayers more than $200,000 in unfair tax over-billings, as is extensively documented here and especially here.
Feedback from Fairview Officials
The above analysis of the Budget Projections Spreadsheet may be news to many readers of this blog, but it is not news to Fairview's Treasurer James Passikoff or Fairview Commissioners Bob Gephard and Joe Petito. I emailed the main points of the above analysis to all of them on May 24 — two days before their public meeting. Both commissioners indicated to me that Passikoff is solely responsible for the spreadsheet. Unfortunately, I never heard from Passikoff on this matter. Gephard made a concerted effort to provide me with some material feedback, but ultimately he was not able to answer all my questions.
Many Questions Remain
As I see it, the above analysis of the budget projections spreadsheet only begs more questions:
As I reported in May, Fairview Fire District Commissioner Bob Gephard revealed the dire state of the District's long-term finances at a public workshop meeting on May 26. Gephard's presentation centered around a spreadsheet of budget projections prepared by Fairview Fire District Treasurer James C. Passikoff and posted on the District's website here. Although the general thrust of Gephard's presentation — that Fairview has a long-term financial crisis — is undoubtedly correct, the spreadsheet is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.
Garbage Data
Almost halfway down page 2 of the Budget Projections Spreadsheet is a row labeled “Total Assessed Valuation”. For each column, the entries in this row can be seen to be the sum of the assessed valuations of the Poughkeepsie and Hyde Park portions of the Fairview Fire District. These sums are garbage. There's no polite way to say it.
For example, consider the 2011 column. In round numbers, the assessed valuations are $375 million for Poughkeepsie and $75 million for Hyde Park. Passikoff simply adds these numbers to get the bogus value of $450 million. The problem is that although Hyde Park's assessed valuation of $75 million is conventionally written in units of dollars, it isn't really dollars as we normally think of dollars, and therefore cannot meaningfully be added to Poughkeepsie's $375 million. That's because Hyde Park's equalization rate is not 100 percent. One needs to divide Hyde Park's assessed valuation by its corresponding 2011 equalization rate of 54 percent, thus converting it to market value, before one can add it to Poughkeepsie's, whose equalization rate is 100 percent. Assessed values corresponding to different equalization rates must be converted to market value (or some other convenient unit) before they can be added.
Passikoff's calculation is like saying, “I delivered 375 pounds of bricks to Poughkeepsie and 75 kilograms of bricks to Hyde Park, for a total of 450 weight of bricks.” No. The total is 540 pounds of bricks or 245 kilograms of bricks. It's not 450 anything of bricks. Passikoff actually performed the correct calculation in the “Total Full Valuation” row directly below, arriving at $514 million for 2011. But including correct results doesn't change the fact that the spreadsheet contains garbage.
As it turns out, Passikoff's mistake — not understanding the true significance of assessed value and equalization rate — is unfortunately all too common in Dutchess County among people who should know better. The most frequent offender is the Poughkeepsie Journal, which made exactly the same mistake last year, as I describe here.
Incorrect Data
The last few rows of the Budget Projection Spreadsheet, labeled “Rate per Thousand of Assessed Valuation” and “Percentage change from last year” for Poughkeepsie and Hyde Park are troubling because they contain data that is not especially relevant for the purposes of budget projection. I will have more to say about this in a subsequent post. But for now, the point is that the data in the last row, showing the percent change in Hyde Park's tax rate for each year from 2010 through 2014, appear to have been calculated incorrectly. In any case, the result is that most of these values are incorrect.
Tax rates expressed in dollars per thousand dollars of assessed value, like those in Passikoff's spreadsheet, cannot be compared with each other (such as by calculating percent changes) unless they correspond to the same equalization rates. Before comparing such tax rates, they must first be converted to the same equalization rate. Typically, one would do this by choosing 100 percent equalization rate (so-called true value tax rate). However, for 2012, Hyde Park's equalization rate happens to be the same as 2011's. Therefore, the tax rate change for Hyde Park for 2012 (three revisions) is correct by accident. For all the other years, it's incorrect.
Passikoff's calculation is like saying, “I accelerated from 50 miles per hour to 100 kilometers per hour, so my speed increased by 100 percent.” No, my speed only increased by 24 percent, because 100 kilometers per hour is “really” 62 miles per hour. (Or if you prefer, 50 miles per hour is really 80 kilometers per hour.)
Perceptive readers will recognize that the percent change mistake is simply another form of the total assessed valuation mistake. It's all about not understanding the true significance of assessed value and equalization rate. This form of the mistake is even more common than the first form among people who should know better. I've already posted about how officials in the Towns of Hyde Park and Pleasant Valley have been making this form of the mistake for years. The Poughkeepsie Journal is another chronic offender on this mistake.
If Fairview's Hyde Park percent changes are calculated correctly, they will be the same as the corresponding Poughkeepsie percent changes. It is therefore pointless to display a separate row for Hyde Park in the Budget Projection Spreadsheet. More on this in a subsequent post.
Mistakes Are Part of a Pattern
This is not the first time Passikoff has made mistakes involving tax calculations with assessed values and equalization rates in the Fairview Fire District. His mistakes in apportioning the fire tax levy between Hyde Park and Poughkeepsie between 2001 and 2008 cost Hyde Park taxpayers more than $200,000 in unfair tax over-billings, as is extensively documented here and especially here.
Feedback from Fairview Officials
The above analysis of the Budget Projections Spreadsheet may be news to many readers of this blog, but it is not news to Fairview's Treasurer James Passikoff or Fairview Commissioners Bob Gephard and Joe Petito. I emailed the main points of the above analysis to all of them on May 24 — two days before their public meeting. Both commissioners indicated to me that Passikoff is solely responsible for the spreadsheet. Unfortunately, I never heard from Passikoff on this matter. Gephard made a concerted effort to provide me with some material feedback, but ultimately he was not able to answer all my questions.
Many Questions Remain
As I see it, the above analysis of the budget projections spreadsheet only begs more questions:
- Why do I hedge that the data in the last row “appear to have been calculated incorrectly” rather than just saying straight out that they have been? (It turns out that there's a whole sad story behind this.)
- Why couldn't I get a satisfactory response from Commissioner Gephard about the spreadsheet he presented? Or from Treasurer Passikoff who developed it?
- How can the budget projections spreadsheet be improved to present a more useful picture of Fairview's long term financial situation?
Sunday, August 28, 2011
Fairview Fire District Raids Reserve Funds — NOT
As I reported here on May 28, recent Fairview Fire District (FFD) budgets have not set aside sufficient funds for future maintenance and replacement of apparatus and equipment and other obligations. The money that should have been reserved was used instead to decrease the fire tax levy. As a result, Fairview is now faced with a long-term financial crisis. These facts were publicized at the May 26 meeting of FFD's budget and long term planning committees, and are not in dispute.
However, a month ago I learned that this failure to add to the reserve funds may have understated the true problem. It has been alleged that not only was no money set aside, but money that had previously been set aside in reserve funds was removed and used to lower the fire tax levy. Such an action would constitute what I call raiding the reserve funds. I learned of this allegation from what I consider a well-informed and reliable source. If this allegation were true, then the actions of the Fairview Board of Fire Commissioners were even more ill-advised than previously assumed. But this allegation is not true.
How Can One Determine Whether Reserve Funds Were Raided?
It would seem a simple matter to determine whether Fairview's reserve funds have been raided. I found quite the contrary. Satisfying myself that the reserve funds were not raided was actually a long painstaking process involving considerable analysis on my part, as well as back-and-forth with various officials of the fire district.
My first step was to send a detailed written request to Fairview Fire Chief Chris Maeder, asking for annual data for each reserve fund for the last 5 years. Within a few days, Chief Maeder forwarded to me a relatively complex spreadsheet he obtained from FFD Treasurer James C. Passikoff. Upon examining this spreadsheet, containing a myriad of data and cryptic labels, it was by no means obvious to me what was happening with the reserve funds. Fortunately, Passikoff was willing to spend over an hour on the phone explaining the meaning of the various entries. Based on these conversations, I was able to develop, with some effort, a simple table showing the flow of money in each reserve fund for each of the last 5 years. You can find this summary of Fairview's reserve funds here. The column labeled “Amount Used for Other Purposes” is my polite label for the amount that was raided from each fund. You can see that this amount is zero in every single case. In other words, none of the reserve funds have been raided in the last 5 years.
Although this might seem to be the end of the matter, I knew that my work was not finished. The clearest recent statements about Fairview's financial condition have come not from the Fairview Fire Commissioners or its Treasurer, but from the Fairview Firefighters Union. The Union made the most professional and most understandable of the presentations at the May 26 meeting of the budget committee. The Union even went so far as to hire a consultant CPA (Deborah Bailey Brown) to examine Fairview's financial data. On the other hand, when I asked union president Tim Gilnack by email about the possibility that the reserve funds may have been raided, his initial written response was ambiguous. Later, I met with Gilnack and other union officials, where it was quickly established that the union does not believe the reserve funds were raided. Instead, funds unspent at the end of the budget year, which traditionally had been added to reserve funds, were instead diverted to lower the tax levy.
Why was this question so difficult to answer?
So the question is resolved. Fairview's reserve funds were not raided.
But apart from this conclusion, how did the rumor arise that Fairview's reserve funds were raided, and why did it persist? Why was the union's initial response to my query ambiguous? Part of the answer, in my view, is that official information about the reserve funds was not readily available. And the official information I received was not intelligible without considerable verbal explanation. In other words, there is no straightforward way for an interested stakeholder to determine what was happening with the reserve funds. In this situation, half-truths and ambiguous statements can easily morph into rumors that cannot easily be confirmed or denied. If the Fairview Fire District had produced and made public a simple annual summary of its reserve fund activity like the one I developed, it would have avoided a lot of misinformation. I'll have more to say about this in a subsequent post.
However, a month ago I learned that this failure to add to the reserve funds may have understated the true problem. It has been alleged that not only was no money set aside, but money that had previously been set aside in reserve funds was removed and used to lower the fire tax levy. Such an action would constitute what I call raiding the reserve funds. I learned of this allegation from what I consider a well-informed and reliable source. If this allegation were true, then the actions of the Fairview Board of Fire Commissioners were even more ill-advised than previously assumed. But this allegation is not true.
How Can One Determine Whether Reserve Funds Were Raided?
It would seem a simple matter to determine whether Fairview's reserve funds have been raided. I found quite the contrary. Satisfying myself that the reserve funds were not raided was actually a long painstaking process involving considerable analysis on my part, as well as back-and-forth with various officials of the fire district.
My first step was to send a detailed written request to Fairview Fire Chief Chris Maeder, asking for annual data for each reserve fund for the last 5 years. Within a few days, Chief Maeder forwarded to me a relatively complex spreadsheet he obtained from FFD Treasurer James C. Passikoff. Upon examining this spreadsheet, containing a myriad of data and cryptic labels, it was by no means obvious to me what was happening with the reserve funds. Fortunately, Passikoff was willing to spend over an hour on the phone explaining the meaning of the various entries. Based on these conversations, I was able to develop, with some effort, a simple table showing the flow of money in each reserve fund for each of the last 5 years. You can find this summary of Fairview's reserve funds here. The column labeled “Amount Used for Other Purposes” is my polite label for the amount that was raided from each fund. You can see that this amount is zero in every single case. In other words, none of the reserve funds have been raided in the last 5 years.
Although this might seem to be the end of the matter, I knew that my work was not finished. The clearest recent statements about Fairview's financial condition have come not from the Fairview Fire Commissioners or its Treasurer, but from the Fairview Firefighters Union. The Union made the most professional and most understandable of the presentations at the May 26 meeting of the budget committee. The Union even went so far as to hire a consultant CPA (Deborah Bailey Brown) to examine Fairview's financial data. On the other hand, when I asked union president Tim Gilnack by email about the possibility that the reserve funds may have been raided, his initial written response was ambiguous. Later, I met with Gilnack and other union officials, where it was quickly established that the union does not believe the reserve funds were raided. Instead, funds unspent at the end of the budget year, which traditionally had been added to reserve funds, were instead diverted to lower the tax levy.
Why was this question so difficult to answer?
So the question is resolved. Fairview's reserve funds were not raided.
But apart from this conclusion, how did the rumor arise that Fairview's reserve funds were raided, and why did it persist? Why was the union's initial response to my query ambiguous? Part of the answer, in my view, is that official information about the reserve funds was not readily available. And the official information I received was not intelligible without considerable verbal explanation. In other words, there is no straightforward way for an interested stakeholder to determine what was happening with the reserve funds. In this situation, half-truths and ambiguous statements can easily morph into rumors that cannot easily be confirmed or denied. If the Fairview Fire District had produced and made public a simple annual summary of its reserve fund activity like the one I developed, it would have avoided a lot of misinformation. I'll have more to say about this in a subsequent post.
Saturday, July 16, 2011
Is There Reason for Hope in Fairview?
I recently received an email from a veteran of many years of service to the Fairview Fire District, someone whose knowledge and wisdom I respect very highly. Reflecting on Fairview's dire situation, this veteran lamented the fact that nothing seems to change, despite years and years of effort on the part of many creative people. “There are still far too many people who have egos, power trips, political aspirations ... for anything to change.” “... those who should be working together as a team have turned on each other looking for ... a scapegoat to blame for all of the troubles in the world of Fairview and beyond.”
As an engineer by training, I'm essentially a professional pessimist. But you don't need to be cynical to understand that Fairview's difficult situation in the past has now become a crisis. Still, I've found a few reasons to hope that Fairview's problems can be alleviated. All these reasons are new, appearing within the last three years:
The other major force in play is our economic system, in which people and institutions tend to act in their own self interest. Such motives can be viewed as having caused Fairview's problem in the first place. But as Items 5, 6, and 7 show, economic self-interest can also act in Fairview's favor.
With these seven reasons for hope, things should work out fine for Fairview. Just kidding! Nothing I've written above changes the fact that Fairview's situation is dire, and that dramatic actions must be taken for Fairview to avoid safety and/or financial disaster. It's just that a number of significant political and economic paths for change are now becoming available, paths that weren't on the horizon just three years ago.
As an engineer by training, I'm essentially a professional pessimist. But you don't need to be cynical to understand that Fairview's difficult situation in the past has now become a crisis. Still, I've found a few reasons to hope that Fairview's problems can be alleviated. All these reasons are new, appearing within the last three years:
- A relatively small group of committed people, beginning in 2008, was able to completely transform Fairview's board of fire commissioners by popular vote. To me, this is an inspiring story of the way democracy is supposed to work. The new board is not perfect by a long shot, but in my view, it's a big improvement over the old guard. Private citizens have far greater access to this board than to the old one.
- William Steinhaus, Dutchess County Executive for the last twenty years, will end his reign in half a year. Steinhaus has not shown interest in the plight of Fairview and other fire districts. Steinhaus' likely successor, Marc Molinaro, has already been making the correct noises regarding helping the fire districts, including looking at a consolidated county-wide system.
- As New York State Attorney General, Andrew Cuomo successfully fought for a New N.Y. Government Reorganization and Citizen Empowerment Act making it practical for local governments such as fire districts to consolidate. This significant new option allows fire services to be provided more efficiently. A few fire districts in other counties are already taking advantage of this new law.
- As Governor, Cuomo successfully fought for a two percent property tax cap law. If nothing else, this controversial law will prevent unbounded increases in property taxes.
- As I've come to understand what Fairview's firefighters really do (see my Fairview Fire Tax Dollars at Work), it's changed my view somewhat of our high fire taxes: We pay a lot, but we get a lot too, that others who pay less don't get. I know this is little comfort to those on a tight budget, that is, to most people. Perhaps part of the solution to Fairview's high fire tax is to educate people better about what they're getting for their money. As I see it, Fairview's firefighters union has been doing that for a long time, but Fairview's fire commissioners, not so much.
- Two of the big three fire districts of Dutchess County, Arlington and LaGrange (the third is Fairview), have seen their tax rates increase dramatically in each of the last three years. This fact can only increase the pressure for fire district consolidation in Dutchess County.
- Fairview's crisis might still be eased within Fairview. Fairview's tax exempt institutions may now want to contribute significant Payments in Lieu of Taxes (PILOTs) in their own self interest, to avoid incurring increased insurance costs and decreased safety.
The other major force in play is our economic system, in which people and institutions tend to act in their own self interest. Such motives can be viewed as having caused Fairview's problem in the first place. But as Items 5, 6, and 7 show, economic self-interest can also act in Fairview's favor.
With these seven reasons for hope, things should work out fine for Fairview. Just kidding! Nothing I've written above changes the fact that Fairview's situation is dire, and that dramatic actions must be taken for Fairview to avoid safety and/or financial disaster. It's just that a number of significant political and economic paths for change are now becoming available, paths that weren't on the horizon just three years ago.
Saturday, June 4, 2011
The Big Three Tax Exempt Institutions of Fairview
This is the third in a recent series of posts about the crisis in the Fairview Fire District. Fairview's long-term crisis is that it has not set aside sufficient funds to pay for future obligations. If Fairview cannot increase its income, it will be forced to take the drastic step of reducing service. Reducing service would increase risk to life and property in measurable ways, and it would also increase insurance rates for all property owners in Fairview.
Approximately 95 percent of Fairview's income comes from the fire tax levy. But simply increasing the tax levy is problematic for two reasons:
For these reasons, it makes sense for Fairview to look beyond the tax levy to other sources of income. A longstanding proposal is to ask Fairview's tax exempt institutions for Payments In Lieu Of Taxes (PILOTs). Tax exempt institutions represent 48 percent of Fairview's total market value. Indeed, these exempt properties represent a major reason for Fairview's high tax rate. Accordingly, this post focuses on Fairview's tax exempt institutions.
The Big Three
The following pie chart shows the components of Fairview's tax exempt market value, which I compiled from the tentative assessment rolls applicable to the 2012 tax bill:
Note that this chart differs only slightly from the 2010 chart published on page 11 of The Big Three Fire Districts of Dutchess County. Marist College, St. Francis Hospital, and Dutchess Community College can be called the big three tax exempt institutions of Fairview. Together, they comprise more than three quarters of Fairview's exempt market value:
In the last few years, the general trend of property values in Dutchess County has been downward, and this trend has continued for 2012. Thus, St. Francis Hospital's tax exempt market value is down 9 percent from 2010, and Dutchess Community College's is down 4 percent. Most parcels of Marist College are down 4 to 8 percent; however, one of Marist's parcels increased in value from $274,000 to $17.8 million due to the construction of residence halls. The net effect is that Marist College's exempt market value has increased by 3 percent from 2010.
Hudson River Psychiatric Center
The fourth largest tax exempt institution in Fairview is the Hudson River Psychiatric Center (HRPC). However, this is destined to change soon. The New York State Office of Mental Health has recently announced that it will close Hudson River Psychiatric Center by October 1, 2011. Once HRPC is gone, the big three tax exempt institutions will dominate Fairview's tax exempt landscape even further.
PILOTs From the Big Three
Marist College has been contributing PILOTs to the Fairview Fire District every year for a number of years. The yearly contribution amount has been trending upward, with the most recent yearly contribution being $125,000. But to put this number into perspective, if Marist College were entirely taxable (instead of almost entirely tax exempt), its annual Fairview fire tax would exceed one million dollars. To the best of my knowledge, St. Francis Hospital has not contributed PILOTs in recent years. However, it has contributed some services to the fire district with monetary value per year in the low 5-figure range. I believe Dutchess Community College has occasionally contributed one-time PILOTs to Fairview in the low 5-figure range.
Can the Big Three Save Fairview?
The Fairview Fire District faces a long-term financial crisis which, if not resolved, could result in reduced services to all Fairview property owners and residents. These reduced services have quantifiable costs: All property owners would see increased insurance rates. There are also unquantifiable costs in reduced safety, resulting in greater risk of injuries and deaths. The Big Three Tax Exempt Institutions of Fairview may feel these costs more than some other stakeholders. It may be in their self-interest to avoid these costs by bailing out the fire district with new or increased PILOTs.
Approximately 95 percent of Fairview's income comes from the fire tax levy. But simply increasing the tax levy is problematic for two reasons:
- Fairview's fire tax rate is already the highest in Dutchess County, and one of the highest in New York State. With the continuing drop in property values, Fairview's 2012 fire tax rate is projected to increase 2.8 percent even if the tax levy is held constant. The resulting true value fire tax rate will be $5.25 per thousand dollars of market value — the highest in a decade. Fairview property owners have argued that the fire tax is already too high.
- If Gov. Cuomo's 2 percent tax cap becomes law, it may be difficult or impossible for Fairview to substantially increase the fire tax levy.
For these reasons, it makes sense for Fairview to look beyond the tax levy to other sources of income. A longstanding proposal is to ask Fairview's tax exempt institutions for Payments In Lieu Of Taxes (PILOTs). Tax exempt institutions represent 48 percent of Fairview's total market value. Indeed, these exempt properties represent a major reason for Fairview's high tax rate. Accordingly, this post focuses on Fairview's tax exempt institutions.
The Big Three
The following pie chart shows the components of Fairview's tax exempt market value, which I compiled from the tentative assessment rolls applicable to the 2012 tax bill:
Note that this chart differs only slightly from the 2010 chart published on page 11 of The Big Three Fire Districts of Dutchess County. Marist College, St. Francis Hospital, and Dutchess Community College can be called the big three tax exempt institutions of Fairview. Together, they comprise more than three quarters of Fairview's exempt market value:
| Institution | Market Value | Percent |
|---|---|---|
| Marist College | $218,248,000 | 42.1% |
| St. Francis Hospital | $120,114,500 | 23.2% |
| Dutchess Community College | $56,007,500 | 10.8% |
| all others | $123,527,889 | 23.9% |
| Total: | $517,897,889 | 100% |
In the last few years, the general trend of property values in Dutchess County has been downward, and this trend has continued for 2012. Thus, St. Francis Hospital's tax exempt market value is down 9 percent from 2010, and Dutchess Community College's is down 4 percent. Most parcels of Marist College are down 4 to 8 percent; however, one of Marist's parcels increased in value from $274,000 to $17.8 million due to the construction of residence halls. The net effect is that Marist College's exempt market value has increased by 3 percent from 2010.
Hudson River Psychiatric Center
The fourth largest tax exempt institution in Fairview is the Hudson River Psychiatric Center (HRPC). However, this is destined to change soon. The New York State Office of Mental Health has recently announced that it will close Hudson River Psychiatric Center by October 1, 2011. Once HRPC is gone, the big three tax exempt institutions will dominate Fairview's tax exempt landscape even further.
PILOTs From the Big Three
Marist College has been contributing PILOTs to the Fairview Fire District every year for a number of years. The yearly contribution amount has been trending upward, with the most recent yearly contribution being $125,000. But to put this number into perspective, if Marist College were entirely taxable (instead of almost entirely tax exempt), its annual Fairview fire tax would exceed one million dollars. To the best of my knowledge, St. Francis Hospital has not contributed PILOTs in recent years. However, it has contributed some services to the fire district with monetary value per year in the low 5-figure range. I believe Dutchess Community College has occasionally contributed one-time PILOTs to Fairview in the low 5-figure range.
Can the Big Three Save Fairview?
The Fairview Fire District faces a long-term financial crisis which, if not resolved, could result in reduced services to all Fairview property owners and residents. These reduced services have quantifiable costs: All property owners would see increased insurance rates. There are also unquantifiable costs in reduced safety, resulting in greater risk of injuries and deaths. The Big Three Tax Exempt Institutions of Fairview may feel these costs more than some other stakeholders. It may be in their self-interest to avoid these costs by bailing out the fire district with new or increased PILOTs.
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