ALBANY -- New York appears to be headed for its first-ever property-tax cap, after Gov. Andrew M. Cuomo and legislative leaders said Tuesday they reached a deal to limit hikes to 2 percent annually with certain exceptions.
The plan also would have to be renewed at the same time as rent-control laws, which affect millions of tenants in New York City. That's a condition favored by rank-and-file Democrats but opposed by most Republicans. Still, Cuomo, Senate Majority Leader Dean Skelos (R-Rockville Centre) and Assembly Speaker Sheldon Silver (D-Manhattan) saw that as a minor obstacle and guaranteed a cap would be enacted before the June 20 end of the legislative session.
Cuomo, who campaigned last fall promising a property-tax cap, called the agreement a "game changer" for the state. "I think this is the single most important development for the economy of New York in a long time," the governor said.
Cuomo said a cap would not go into effect until the 2012-13 academic year. The Democrat said it would remedy skyrocketing tax increases on Long Island and in upstate New York.
"People will get that this is a new New York," Cuomo said.
The announcement brought swift and harsh condemnation from school boards and superintendents, teachers unions and public-employee unions. They said a cap would rob residents of the power to control their own school budgets and would lead to layoffs and reductions in everything from classroom offerings to sports to municipal services. New York State United Teachers said a cap would "hurt students and fracture communities," especially in poor and rural school districts.
The one thing the union and Cuomo agreed on: New York could have the highest property-tax cap in the country, if the agreement in principle holds.
"New York would be devastated by the toughest cap in the nation at a time when its public schools have suffered three years of the toughest cuts to education," said NYSUT president Richard Ianuzzi.
In contrast, many business groups, such as Realtors and the New York Farm Bureau, applauded the plan. "We are encouraged," said Kevin Law, president of the Long Island Association, "that real progress is being made on a property tax cap . . . as our businesses on Long Island suffer from some of the highest property taxes in the state and in order to remain competitive they need property tax relief."
The proposal would limit property-tax increases to a maximum of 2 percent or the rate of inflation, now about 1.5 percent, whichever is less. The only exceptions that would not count against the cap would be payments for capital construction, legal settlements, growth due to new economic development projects and growth of up to 2 percentage points in the amount a local government has to pay into the pension system.
For example, municipalities this fall are projected to have to make a payment to the state teachers retirement system of about 8 percent of their salary base and 11 percent next year, a difference of 3 percentage points, said E.J. McMahon, an analyst for the conservative-leaning Empire Center. Subtract the 2 percentage points growth exception, and that means about 1 percentage point would be added to the cap in most localities, thus, the property-tax cap effectively would be about 3 percent in 2012-13.
The cap could be overridden only by a vote of the local governing board and a 60 percent majority in a local referendum.
Silver, long the holdout on a tax cap, unveiled the compromise legislation Tuesday. "With this legislation, we are finally able to bring property taxes under control and still provide critical services," Silver said in a statement.
Earlier this year, the Republican-led Senate backed a Cuomo plan for a 2 percent annual cap with fewer exemptions and no expiration date. Skelos had often said he would oppose a "watered-down" property-tax cap -- especially one that carried a "sunset" date.
Repeatedly questioned at a news conference, Skelos stopped short of saying he backed all the major details of the Silver proposal -- creating a slightly awkward moment when Cuomo stepped to the microphone to say that the Senate agreed on everything but the sunset date, which he assured would be worked out smoothly.
Still, Skelos was adamant when asked if agreement as announced would hold. "Don't have any doubt," he told reporters. "It's going to be done."