Towns prep budgets, keep 2% tax cap in mind

As Long Island’s town supervisors prepare budget proposals for 2012, they are dealing for the first time with a state-mandated cap: The tax levy can rise by no more than 2 percent.

At the same time, such big-ticket expenses as pension and health costs continue to rise, while revenue from sources such as mortgage taxes and landfill fees continues to fall.

For towns, the cap is relatively easy to override. It requires a 60 percent vote of the town board. On a five-member board — the case in most towns — that equates to a simple 3-2 majority vote.
Nevertheless, all of Long Island’s supervisors say they plan to stay within the cap, while acknowledging the extra pressure it creates in trying to balance budgets.

With budget proposals required to be submitted by Sept. 30, Newsday asked the leaders of Long Island’s 13 towns and two cities to share their thoughts on the process.

HEMPSTEAD

A Hempstead Town spokesman said Supervisor Kate Murray would not discuss issues surrounding the tax cap because the town plans to freeze taxes.

NORTH HEMPSTEAD

Supervisor Jon Kaiman said his goal is to stay within the cap. "The question is when we start looking at the numbers, how does that work?" Kaiman said. "What's going to go?"

Layoffs are not an option, he said. The town believes sales and property tax revenue will rise, and it can dip into reserves but not so much that "we risk our credit rating."

As for overriding the cap, which would require five votes on the seven-member board, "It's premature for us to answer that," he said. "Our goal, and I think every government's goal, will be to stay within the cap."

Although unforeseen events could provide reason to exceed the cap, he said, "I think the community expects this and every other government to operate within that cap. It was meant to be real. It was meant to challenge officials at every level."

BROOKHAVEN

Supervisor Mark Lesko said he supports the cap, but added, "Residents have to understand that in order to comply with the tax cap and freeze taxes, you're going to see public officials talking seriously about service reductions."

The town, which has its own 4 percent tax cap, is not considering an override, Lesko said.

The town has four "core services" it cannot trim, Lesko said -- garbage collection, road maintenance, land acquisitions and the animal shelter.

"Everything else you think has to be on the table for discussion," Lesko said. But the town has a "no layoff" clause in its recently renegotiated collective bargaining agreement.

"What the tax cap does is enforce strict discipline on policy makers," Lesko said. "But the discipline is painful."

GLEN COVE

Mayor Ralph Suozzi said his staff began discussing the cap last year and warned department heads to consider it when making 2012 requests.

Last year, property taxes rose 2.88 percent. This year, Suozzi said he has no plans to seek an override of the new law.

"We think we can achieve it this year, but it's tough, because the state didn't do anything to also reduce the economic drivers," he said, referring to decreases in mortgage tax revenue and increases in pension costs.

"The tax cap itself is a good idea, but it got implemented backwards," Suozzi said. "They put the cart before the horse."

OYSTER BAY

Supervisor John Venditto said he "wholeheartedly endorses the concept" of a cap, and that his plan to freeze taxes makes it somewhat a moot point, at least in the short term. "The tax cap doesn't even enter into the picture with regards to preparing this budget."

Everything else is conjecture, he said. But delivering the usual level of services in the future, while adhering to the cap, could be challenging if the economy doesn't improve.

"Then it's going to be a dilemma," he said. "But I don't know where it all goes from here."

HUNTINGTON

Government needs to balance budgets just as residents do in their own households, Supervisor Frank Petrone said.

"This is where the governor's intent behind that cap is so important," he said. "It's a dramatic move."

Petrone's proposed budget reduces spending by about $10 million and carries a tax increase of 1.1 percent, about $12 for the average homeowner.

"You just have to do it and not look at all the little technicalities of if you do this, that will be a problem," he said. "We're all having a problem. It's called the economy and we'll deal with it."

ISLIP

Supervisor Phil Nolan said the cap did not affect officials' thinking this year because they regularly aim for a zero percent tax increase each year.

The cap "institutionalizes what we've been doing," said Nolan, while adding that rising health care costs and retirement contributions make keeping taxes low a "challenge."

"We will continue to look for every possible savings we have to stay the course," Nolan said.

He said he wasn't sure when, if ever, the board would vote to override the cap. "The circumstances and the time are down the road and I don't know what people are going to be thinking at that point," he said.

BABYLON

"We intend to live within the cap," said Supervisor Steve Bellone, while noting the "extreme pressure" created by rising mandated expenses and declining revenue.

Babylon, he said, will not require drastic new measures because of cost-saving and efficiency efforts already in place.

He cited the replacement of most full-time public safety employees with seasonal employees and greater use of technology -- for example, using security cameras in parks to transmit images over the town's Wi-Fi network instead of off-hour patrols, and installing GPS devices in town vehicles to supervise workers more easily and plan smarter routes.

LONG BEACH

City Manager Charles Theofan said his goal "is to be well under" the cap but that "increased costs can mandate tax increases." Theofan added the city would soon have to pay $30 million to upgrade its sewage treatment facilities.

He said one way to avoid raising taxes is to find other revenue, like a bicycle sharing program where the company providing the service pays the city.

"My goal is whenever possible not to raise taxes," he said.

Long Beach will start working on its fiscal budget in February. "I try hard not to think about it," Theofan said.

SMITHTOWN

Despite a $1 million increase in the town's pension contributions, Supervisor Patrick Vecchio said the town will stay well within the tax cap. "There will not be a tax increase in the general fund. In the highway fund, there might be a small increase," he said.

Cleanup costs from Tropical Storm Irene forced the town to dip into reserves, though Vecchio could not say how much. That will leave less money to offset future tax hikes, he said.

"It's been tough with the tax cap and everything," Vecchio said. "It's not going to be good times ahead for town governments, and not for taxpayers."

RIVERHEAD

Supervisor Sean Walter said the town might keep under the cap for four or five years by using the last of its special reserve funds, but no town will be able to stay within the cap forever. "At some point, it becomes unsustainable," he said. "Not only is it health insurance costs, but the state comes down and says you have to upgrade your sewage treatment plant but you can only raise taxes two percent. . . . That's unsustainable."

For more than a decade, Riverhead officials have kept taxes down by spending part of a $20 million surplus the town acquired when it sold the developed part of the former Grumman manufacturing facility at Calverton; the money is expected to run out in a few years.

SOUTHOLD

Supervisor Scott Russell was able to stay under the cap for next year's budget, but said it will get harder if the economy doesn't improve. Real changes, he said, cannot be made by a tax cap alone, but by getting rid of mandates that are a substantial part of costs.

"If the state is serious, they should talk about the real issues like our ability to negotiate with unions for retirement benefits," he said.

The economic downturn continues to have devastating effects on revenue, Russell said.

The town anticipates about $1.06 million in mortgage tax revenue in 2012. Before the recession, Southold could expect $6 million to $7 million, he said.

EAST HAMPTON

Len Bernard, the town's budget officer, said ongoing labor negotiation might make it "real tough to stay under the cap, especially if health costs keep going up and retirement contributions keep going up."

He noted the town made significant cuts in staffing and services last year, and might decide to tap its surplus reserves to keep tax increases down next year. And, he added, that's not something the town can do year after year.

SOUTHAMPTON

Supervisor Anna Throne-Holst plans to adhere to the cap but adds, "As much as I appreciate that tool of discipline, everyone has to realize it's a near-impossible thing to do when juxtaposed with a sizable increase in our fixed costs."

The town budget is about $80 million, and the local levy is $56 million. A 2 percent increase in the levy will bring in an additional $1 million or so, she says. "That's not enough to keep up with our fixed costs."

She is looking at other forms of revenue, such as increasing the town's share of its justice court fees and fines, and more importantly, is trying to gain concessions from the union. Failing that, she said, the town might have to resort to layoffs.

"We're going to do what we have to do here, but a cap and no relief makes a difficult balancing act. We're looking at having to cut somewhere around $4 million out of our costs of last year."

SHELTER ISLAND

Supervisor James Dougherty said earlier this month the budgeting process was more difficult than usual because of a lack of information about specific regulations in the cap legislation.

"I really don't have an opinion yet," he said about the cap. "It will be tough. I'm determined to comply -- it's the law of the state -- but it's really new ground."