Compensating local governments for loss of tax base due to State ownership of land

September 1996

V. Fiscal impact

Introduction

The amount of state compensation payable to localities under the proposed PILOT program can be estimated using the acreage of state property shown on local assessment rolls. In the remainder of this section, estimates based on 1993 assessment rolls are presented. These figures must be regarded as tentative because acreage and property use codes may have been incorrectly recorded for some parcels on the rolls. Were the proposed program to be implemented, more accurate determinations would have to be made since large amounts of state revenue would be at stake.

Because the recommendations made regarding the proposed PILOT program (see Part M stop short of specifying the actual dollar amount per acre that would be paid to localities, the estimates given in this section provide a range of possible compensation scenarios rather than a single version. Obviously, the scenario chosen and compensation paid would depend on the available state funds. All compensation scenarios presented in this section share the feature that each local government is guaranteed the amount (taxes plus PILOTS) received in fiscal 1994, even though its payments as calculated under the new program might in some cases be smaller.

PILOT program compensation costs

Tables 12 through 14 present the estimated PILOT payments that would be made annually to local governments based on three assumed compensation schedules reflecting the fixed payment per acre concept recommended in Part IV of this report. The schedules compare the total payments that would be made to the local governments in each county under the new program with those made under the existing tax and PILOT programs.

The first schedule, as reflected in Table 12, is the simplest of the three alternatives. Under this option, each local government unit would receive one dollar per acre of eligible of state-owned land. Since this compensation level is quite low compared to existing levels in nearly all areas of the state, the great majority of local governments would receive compensation based on the 'hold harmless" level of fiscal 1994. However, those communities having eligible state land but currently receiving no taxes or PILOT payments would now receive one dollar per acre for each local government unit within whose boundaries the land is located. It is thus apparent that this version of the program would cost the state more that the current programs, since all would be guaranteed at least as much as is currently paid, and some could receive more if the new payment exceeded the old one.

The added cost to the state of this version of the program, based on 1993 assessment roll acreage, would have been approximately $694,000. This represents a relatively small increase (0.9 percent) over the total compensation paid under the current programs. The number of local governments receiving compensation payments would increase substantially, however, with counties increasing from 26 to 58, cities/towns from 428 to 781, school districts from 284 to 481, and villages from 21 to 126 (see Table 15). All told, a total of 1, 446 taxing units would receive payments, almost twice as many as receive them under current law (759).

As is to be expected, most taxing units that are currently receiving payments would continue to receive the same payment under the "hold harmless" feature, because their existing payment level exceeds one dollar per acre. In this category are 23 of the 26 counties, 363 of the 428 cities/towns, all 21 of the villages, and 270 of the 284 school districts. The largest beneficiaries of this version of the program would be those areas of the state with a high ratio of currently exempt land to currently taxable land (e.g., Suffolk, Columbia, and Onondaga Counties), and/or rural areas where land values are relatively low and where the currently taxable land may not be taxable for all purposes (e.g., Jefferson and St. Lawrence Counties).

Although this type of compensation program is simple, it may not adequate reflect the differential "cost" of exempt state land to different kinds of taxing units. Some taxing units, such as school districts, are particularly dependent on the property tax base, and their tax levies comprise the largest share of most tax bills. It may therefore be more appropriate to compensate taxing units in proportion to their shares of local property taxes rather than on an equal-payment-per-acre basis.

The next scenario presented (Table 13) reflects this approach. It also assumes that there is considerably more state funding available for the proposed PILOT program than assumed under the previous scenario. Under this version, a total of $ 10.00 per acre would be expended by the state on compensation payments, with local governments once again being "held harmless" if their current compensation payments are higher. The total payment of $10.00 would be apportioned among the different types of local governments according to their current statewide shares of the overall property tax rate. Schools would thus receive $5.60 per acre; counties and cities/towns $2.00 each; and villages $0.40. This level of compensation is about half the average per-acre compensation paid to all taxing units combined in fiscal 1994 ($19.73) and more than twice the median of $4.33 paid in the typical municipality. (The average is much higher than the median because some municipalities received very high per-acre payments, see Table 9.)

As can be seen in Table 13, this compensation scenario would cost about $5.1 million more than the existing tax and PILOT programs, an increase of approximately 7.2 percent. Once again, the number of taxing units receiving payments would nearly double, to 1,446. The largest shares of the additional payments would go to taxing units in Adirondack-area counties (e.g., Hamilton, Herkimer, Jefferson, Lewis, St. Lawrence), where the average payment per-acre is currently below $10.00 in many cases. Suffolk County taxing units would also be ma or beneficiaries, again due to the large exempt acreage in that area of the state. Other counties in the New York City metropolitan area (e.g., Putnam, Rockland) would see no increases in payments because the taxes or PILOTs they receive under current law substantially exceed $10.00 per acre. As is apparent in Table 15, the number of taxing units being paid under the proposed "hold harmless" provision would be smaller under this scenario than under the previous one-dollar-per-acre option.

A third and final version of the proposed PILOT program is shown in Table 14. In this scenario, the state would pay local governments a total of $20.00 per acre, approximately the same level of compensation paid on the average acre under current programs ($19.73). The payment would again be apportioned according to the same tax rate shares used in the previous example (schools, $11,20; counties and cities/towns, $4.00 each; and villages, $0.80). This Table 14 program would cost an additional $27.2 million, or about 34 percent more than current programs. The largest beneficiaries would once again be the Adirondack-area counties, primarily because they have large acreage of currently taxable state land on which the taxes amount to considerably less than $20.00 per acre. Suffolk County would receive almost $0.6 million for its predominantly tax-exempt acreage, and a significant number of rural/forested counties in various areas of the state would also receive substantially higher compensation payments due to the fact that their existing compensation, if any, is substantially less than $20.00 per acre. The only county receiving no additional funds under this scenario is Rockland, where all land is taxable and payments under current law amount to nearly $335.00 per acre. Table 15 indicates that, under this payment scenario, only 249 of the 1,446 taxing units receiving compensation payments would have the payments calculated under the "hold harmless" provision of the PILOT program.

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