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:
  1. 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.
  2.  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.
Payments In Lieu Of Taxes (PILOTs)

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:

InstitutionMarket ValuePercent
Marist College$218,248,00042.1%
St. Francis Hospital$120,114,50023.2%
Dutchess Community College$56,007,50010.8%
all others$123,527,88923.9%

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.