Message from the Mayor: Board passes budget
Posted on: April 27, 2018 - 10:57pm
Fellow Residents;
The Board of Trustees approved the budget this past Tuesday for the next fiscal year, which runs from June 1st 2018 through May 31st 2019. We approved a budget that lowers the tax rate on property to $6.13 for every thousand dollars in assessed value (down from $6.23), though the budget itself grew by 2.87% and most property owners will experience a small increase in taxes on the order of 2.4%, which amounts to less than $100 for the average home. How that is so will require a bit of explanation, as will the key drivers that affect the budget.
The core budget (the “General Fund”) at $15,542,302 was very tight: but for three line items. The areas where we saw significant jumps are: health insurance which increased $305,000, our bond expense, which climbed $267,000, and pensions which are up $65,000. Each deserve further explanation.
Before proceeding with the budget details, a reminder that village taxes are approximately 20% of your total property taxes. The school collects roughly 70% of your total taxes and the town and county together the remaining 10%. Each of these entities sets its budget independently with its own unique tax rate. The school budget is approved by a community vote later this spring.
Health Insurance
---------------------
Health insurance premiums climbed 16% ($305,000) over last year due to a combination of an estimated increased premium of about 9.5% and the rest due to the conversion of three part-time employees to full-time. Employees pay nominally or not at all toward these plans, though that has begun to shift. There’s no point in revisiting the extensive national discussion about health costs and insurance, or why these costs continue to climb faster than inflation. The fact is they do, and long-term pose a mortal threat to all municipal budgets. Keeping taxes at or below inflation will become impossible, over the long-term, when one of our single biggest line items increases annually at many times inflation rates.
Debt expense
--------------------
We saw a significant increase in borrowing costs annually (by $266,735) as we converted $2,724,500 we had been carrying in debt from something called “Bond Anticipation Notes” or BANs into standard serial bonds. BANs are temporary borrowings, at low interest rates that must be converted into serial bonds within 5 years of issuance. Last year we used BANs to fund $1.2 million of road and curbs repair and plan on spending an additional $800,000 in new funding for the road repair this year. When enough of these BAN borrowings accumulate, they get converted over into a traditional serial bond that sports a slightly higher interest rate but also require a repayment of principal. These conversions don’t happen often (as in home refinancing, fees must be paid to lawyers and bankers), and when the conversions do happen, there is a pop in the budget. The upside is that you get new roads or other infrastructure improvements now, when they are needed, and long-term the village often saves money by avoiding more costly delayed repairs as well as the future escalated costs of construction.
Pensions
-----------
Pension costs increased 5.5% (or $65,859): these are assessed by the State based on an actuarial calculation they carry out of how many employees we have, their current pay, date of hire and years to retirement (among other factors). While New York State is in far better shape than most states, pension costs remain a long-term liability and the costs continue to climb, even in the current positive economic climate. We have some small bit of good news here. There have been ongoing efforts at pension reform and every few years, the State comes up with a new pension plan that the newest employee are then automatically enrolled in. The latest are more affordable to communities in the long term, but these new plans only apply to new employees, and turn-over is low, so it will be a while before the impact of these new plans propagate through the workforce.
Pension costs and healthcare are the items that most threaten the long-term financial health of the Village budget. We have very limited control over them, and they are advancing far more quickly than inflation, slowly consuming a greater and greater portion of the budget, and crowding out other spending.
Budgets, Tax Assessments, Levys, Taxes
=================================
So, onto the annual effort to try to explain what assessing taxes actually means, further compounded by the more complex environment where assessments are rising.
Setting a budget
-----------------------
The Village Manager reviews the proposed budgets from each department during the winter and the Board gets this budget in March, along with the last ten years of actual expenses for each spending category (there are over 700 of these line items). Trustee Armacost acts as lead for the Board, comparing the proposed spending against these historical actual expenses. The Board meets with the individual department leaders and works with the Manager to adjust the budget.
Assessment Roll is Set
------------------------------
During this time period, the Town of Greenburgh’s Assessor’s office is fine-tuning its assessment roll for the Village. The roll is a listing of every property in Hastings and the Assessor’s estimate of its current value. Since the reassessment two years ago, the assessment roll of the Village more closely reflects the actual value of the (taxable) property in the Village. Changes in the assessment roll reflect new building (such as the lofts built by Ginsberg Development Corp on 9A), increases in home values due to improvements (every time you apply for a building permit, it is reviewed to see if the renovation significantly affects your home’s value and may lead to a reassessment upwards), and overall market conditions that affect house values. The total assessed value for all taxable property in Hastings is 1,808,253,522 which is up 5.4% from last year. Most of this increase in assessed value was a result of a blanket 4% increase in assessed value applied across most property last summer due to a rising property market.
Tax Levy is Set
-------------------
The levy is the part of the overall budget that must be paid for by property taxes. The tax levy covers all expenses that cannot be covered by other sources of revenue – this year that amount is $11,091,268. The levy that a municipality can charge has been capped by New York State at 2% above the previous year’s tax levy – an increase of more than 2% requires a majority vote of the Board. We have never breached the cap in the five years this cap has been in place. The 2018-19 tax levy increase from 2017-18 is below what the New York State cap would allow. Residents receive a tax refund when we stay below the cap.
Tax Rate
--------------
So. we have the levy, which must be collected in property taxes to balance the budget. And we have the total assessed value of the Village. The tax rate is calculated by dividing the levy by the total assessment and then multiplying by a 1000 to come up with a tax rate per thousand dollars of assessed value - which the fiscal year beginning June 1st, 2018 will be $6.13 per $1,000 of assessed value. If your house is worth $100,000, you will owe $613.00 in Village taxes. (That part was easy enough, right?)
What you’re going to pay
-----------------------------------
This year, that tax rate went down ten cents, or 1.56%. And yet, most people’s village taxes will go up on average 2.4%. How does that work? Simple enough. The rate per $1,000 went down 1.56% because there was a bigger pool of assessed value to divide the budget into. But most house values (assuming you did not renovate) went up 4% in value. So while the tax rate went down a bit, your house value went up a bit more, and so you owe a bit more in taxes. As an example, the average home’s assessed value went up from $642,474 to $668,173. While the tax rate went down a bit, your taxes are going to go up around $95.03, or 2.4%. If you renovated, your taxes may go up more. If your house stayed stable in value or went down, you’re paying less this year than last.
Hopefully, the main themes come through:
- The tax levy is significantly under the NY State 2% tax cap, so you’ll get a rebate.
- A flat budget went up only because pensions, health costs and borrowing costs went up. (Pensions and healthcare are a long-term threat.)
- Village assessments are climbing, reflecting increasing home values as well as renovations and some new development.
- Which means a lower tax rate.
- But if you are a home owner, your house probably went up 4% in assessed value and so you will owe a bit more.
We work hard to keep those rates and increases low – the increases are the lowest in the Rivertowns, and the tax rate remains the lowest as well. Thanks go to the Village Manager for his careful management, and to the Village employees who treat your tax money very sparingly. It shows at budget time.
Sincerely,
Peter Swiderski
Mayor