Can City Council Hold the Line on Property Taxes?

In our previous two posts about the 2009 budget process, ("Council Visioning" and "Budgeting Around Priorities") we indicated that if the new City Manager followed the priorities that Council set, we expected a 0% tax increase. And that’s 0% talking both about the tax rate and the rate of reassessment, not the kind of “back door tax increase” that one of our readers called last year’s political stunt (you can read the comment here).

Truth be told, we weren’t sure it would happen. In years past, just when it looked clear what the next logical, reasonable step would be, we’d end up unpleasantly surprised by some new kink in the works. So, we had to look twice when the budget proposal was released. You can read it for yourself here.

This year the only assessment increases come from individual properties that have undertaken significant improvements. The total increase to the assessment rolls was less than 1/2 of 1 percent. In municipal finance terms that means that, if the tax rate stays the same, people’s tax bills stay the same. It’s called ‘holding the line’ on taxes. This fact sheet put out by the NYS Office of Real Property Services provides some more explanation of how your property taxes are calculated.

The 2009 City budget proposal, as put forward by City Manager Horn, does not call for an increase in the tax rate. No assessment increase + No rate increase = No tax increase. Really. No doublespeak like last year’s “no tax increase” budget, no “back door increase”, just a stable balanced budget.

How was it done? The major change appears to be a restructuring of retiree health benefits. Currently the City pays 100% of the premiums for a health insurance product that provides rather limited coverage. The upside of the current plan seems to be its prescription drug benefit. However, there exists a better plan that covers more diagnostic services and specialist appointments as well as better hospitalization and supplement benefits like vision, but has a more costly prescription co-pay schedule. That makes the premium the City pays significantly lower. Staff could have made the argument that changing plans but continuing to pay 100% of the premiums was a good deal for retirees and a good deal for taxpayers. But staff understood the importance of that prescription drug benefit to the retirees and wanted to share some of the City’s cost savings in a way that was sensitive to those concerns. Therefore, in addition to paying 100% of the health care premiums, the new proposal is that each retiree receives an annual health saving account of $750. This should cover the difference between the current prescription copays and the new plan. Let’s take an example of a retiree who needs 6 prescriptions per month. The current health insurance plan has a flat $2/month co-pay. So that retiree currently pays $12/month out of pocket, or $144 annually. The new plan uses a three tier system with the most expensive class of drugs carrying a $40 co-pay. But the new plan also allows prescriptions to be filled with a 90 day supply rather than 30 days. So let’s assume that our hypothetical retiree’s prescriptions are mostly expensive, name brand drugs at the top end of the tier. That means total co-pays of about $185 every three months, or $740 annually. With the $750 HSA, this retiree not only has all of his/her prescriptions covered (saving the $144 out of pocket currently paid) but also has $10 to spend on things like gym memberships or other health related items. A side-by-side comparison of the two plans appears on pages 14-15 of the budget message.

The budget also brings the police department to full strength but postpones the hiring of that community aide position that was a last-minute addition to the 2008 budget. The restructuring of the City Attorney position also yields a cost savings as Council agreed to eliminate the full time secretary position and the benefits associated with that.

But the 2009 budget isn’t all about cuts, it’s about priorities. Like we said in a previous post, the first priority Council established at its worksession was increasing value for the tax dollar. Keeping taxes stable and maintaining the same level of service means that the value of the tax dollar doesn’t decrease, but it would take some additional initiatives to show an increase value. Enter “GenevaWorx.” This program, making its debut in the 2009 budget proposal is an effort to use the City’s GIS programs in a way that coordinates city efforts on yet another priority area: Improving Neighborhood Conditions. You know the expression, “the left hand doesn’t know what the right is doing?” Well, sometimes this describes the operations of city government. Code enforcement doesn’t always know that the property with multiple code violations also happens to be the one that is getting notices from the Comptroller’s office for tax delinquencies or the one the Police department has been called out to every Friday night. Having this information brought together in one system will allow staff, Council, and the public to diagnose and address conditions that threaten neighborhood health.

The one area in the budget that shows no change from 2008 is ‘outside agencies.’ But, if history is any guide, it is this segment of the budget that receives the most attention and is most likely to result in changes that potentially increase the tax rate. We’ll have more to say about that, about the appropriation of city tax dollars to community agencies, but for now we hope that City Council can take a look at their work, at the budget process, and commit to its logical outcome: Voting in favor of the 2009 no-tax-increase budget.