Rye City Council Updates from Mayor Douglas French: A Primer on Property Taxes

As the City prepares to pass its budget on December 21st, the number one question the City Council gets this time of year from residents is: “I pay so much in property taxes – where is it all going?”  As a taxpayer in Rye, the total property tax levy in 2011 was roughly $111M which breaks down as follows:  $64.5M (58%) for Rye City Schools, $21.6M (19%) for Westchester County, $19.4M (17%) for Rye City Government, and $5.7M (6%) for Sewer districts.  The portion for those in the Rye Neck School district is not included in this figure.  The $19.4M for Rye City Government combined with variable revenues of $10M to include sales tax, mortgage tax, interest income, fees and State Aid make up the City’s $30M total operating budget.

The Shrinking Revenue Pie

Two-thirds of the City Government budget is based on the property tax levy, but these are unprecedented times as for the first time in decades, the filed assessed value has not only gone down -- it has gone down 3 years in a row.  With declining values, tax rates are increased just to collect the same amount of taxes from the previous year.  For its part, the City has held the line on the property tax levy during these times.  From 2001 to 2009, the property tax levy grew from $10.3M to 19.1M or an average increase of $1.1M per year.  The last two years, the increase in the property tax levy averaged only $157k per year. In addition, variable revenues which make up the other one-third of the budget have dropped $2M or 20% since 2007.  State aid is expected to be reduced as well.  The overall revenue pie is shrinking.

The Shifting Expense Pie

While the City is holding the line on expenses, the make-up of the costs has shifted dramatically as employee benefits continue to grow at double-digit rates.  This is not an indictment on our workers who have gone above and beyond this past year in maintaining the quality level of services we expect in Rye – during one of the most challenging years in terms of emergencies and service demands.  It is a financial indictment on legislative decisions that have been made at all levels of government which have put the burden directly on the municipal taxpayer.  Employee retirement expenses are growing at a rate of 18% or $363,000 and are governed through the New York State legislature and the New York State Constitution.  Employee health insurance is increasing at a rate of $178,000 or just under 10% -- primarily driven by the Federal Healthcare legislation which is driving up premiums passed down to local governments.  All other costs for the most part are holding flat. 

A Tapped-Out Community

Unemployment, under-employment and significant drops in wealth are realities in Rye with no end in sight.  The economic crash in the Fall of 2008 was expected to rebound a year or two later.  Three years later we are looking at the likelihood of a default in the Country of Greece.  The market forces continue to push down on a community whose residents are closely tied to the financial services market.  The ability to pay is not there.

Managing and Transforming

Last year the City absorbed cost increases by transforming the organization through leveraging vendor contracts, reducing supervisory layers, and negotiating a fair and affordable labor deal.  This year, the City is not budgeting for any new significant capital improvement projects beyond the ones that are already underway.  The demand for City services has never been higher, and the Council and management team continue to gauge resident feedback.  The Council will be making financial and operational decisions as to what capital improvements can be funded, how to maintain basic service levels, and where to identify new sources of funding.  These will be very difficult decisions as the City Council balances the scope of the current government service footprint vs. the desires of the community for traditional programs and services.  Public workshops are scheduled for 8 pm on November 30th and December 5th as well as a public hearing on the budget on December 7th.  The Citizens Finance Committee will present their opinion during these sessions.  Final adoption will be voted on by the Council on December 21st.   

Additional information on these matters is posted on the City of Rye Website at www.ryeny.gov or, please contact me, your City Council members or the City Manager if you have questions or comments.  Your feedback is greatly encouraged.  Mayor Douglas French, mayor@ryeny.gov