Understanding The 2% Tax Levy Cap

As has been widely publicized, New York State has instituted a tax levy cap on municipal entities, including school districts, effective for the 2012-2013 school year. As this is the first year of the new legislation, clarification is required on the actual mechanics of the cap and what it means to the individual school district.

The reality of the “2% cap” is that it is a misnomer. There is no 2% property tax levy cap. The ‘2% cap’ commonly referred to in media reports is actually a 2% growth factor that is part of a complex formula used to determine (on a district-by-district basis) the maximum allowable tax levy increase. Based on this state formula, the following are some local tax caps:

 

Syosset  

2.26% 

Oyster Bay 

2.55% 

Locust Valley 

2.68% 

North Shore 

3.49% 

Glen Cove 

3.65% 

Garden City 

4.29% 

 

Although the tax cap for many districts remains near the 2% that has been publicized, the actual number can be higher or lower (as shown above), depending on a number of factors in the formula including debt service for capital projects, PILOT payments, changes in state aid, etc. Thus far on Long Island, districts in Suffolk and Nassau have identified maximum allowable tax caps of as low as 1%, and as high as more than 5%. It all depends on a district’s financial profile.

Remember, the tax cap is imposed on the tax levy, which is the total amount of money collected from property owners; it is not the exact property tax which any resident will have to pay. Property taxes for each dwelling will be determined by your assessed value and other considerations that are not in any district’s control.

Using New York State’s formula, the Locust Valley tax cap for 2012-13 is 2.68%. Presuming that the LVCSD Board of Education adopts a budget at 2.68% or lower, for that budget to pass, 50% (plus one) of the participating voters must approve it.

Any adopted LVCSD budget that carries a tax levy of more than 2.68% will exceed the allowable LVCSD tax cap and therefore will require that 60% of participating voters approve it. At this time, it is NOT the intention of the LVCSD Board of Education to propose a budget that exceeds the state allowed LVCSD tax cap.

In order to obtain the LVCSD tax cap, a complicated state required calculation process was used. This calculation included the previous year’s tax levy, growth in the tax base, and PILOTS (payments in lieu of taxes).

To view the exact formula the State requires to calculate each school district’s tax cap, click here.