Southold officials scrambled to find $2.3 million last week at the last minute to accommodate for a substantial increase in the erroneous assessment line. While the line is not part of the town budget, the nearly 150 percent increase in that line is part of the calculation for the state’s property tax cap. In order for Southold to comply with the cap, it needed find money to reduce its own budget — news that was uncovered only hours before a public session held to discuss the 2015 budget.
By allocating approximately $606, 000 from its risk retention fund it was able to reduce its tax rate from a 1.87 percent increase to a .7 percent decrease. When combined with the increase of the erroneous assessment tax, the overall increase complied with New York State’s two percent cap.
At the meeting, which was attended by only two members of the public, Southold Town Supervisor Scott Russell said he received word that day about an issue with Suffolk County sending back “erroneous assessments” and correcting “errors,” something that happens each year — but this year, left the board needing to find a little over $2.3 million to get the budget under the two percent tax cap.
“Whenever a property owner successfully challenges his assessment and it is reduced, it usually takes place well after the tax bill gets paid. Some of these cases take years to settle and assessments get reduced retroactively to the year the petition was first filed. Suffolk County issues the refunds to the owner, then collects that money back on the tax bill each year,” the supervisor said, adding that the the number appears on the tax bill as a line that says “ART 7 RPTL”.
“This is not part of the town’s operating budget and has no bearing on our spending or our accounts. This is actually a county ‘tax’, however, it is included in the annual calculation for our tax cap compliance. Last year, Suffolk County had to collect back about $954,000 and this year it needs to collect back a little over $2.3 million. The increase is calculated along with my budget changes to determine if we comply with the two percent cap. This is an arcane component to the state’s calculation formula and it simply makes no sense why is would be included in the town’s calculation. Either way, we actually have to reduce the proposed tax rate for next year to come in under the cap.”
The town, he said, had two options. “The first was to simply factor it in, which would have meant that, for state purposes, we would not comply with the two percent legislation even though our proposed tax rate would still be 1.87 percent. This also would have meant that homeowners would not receive the New York State Family Tax Relief Credit next year.”
The second option, Russell said, was to find funds to reduce the tax rate enough to comply with the cap. At the meeting, Russell said he was reluctant to use funds from the unallocated fund balance since “that fund is essential to maintaining our good standing with Wall Street.”
The next day, Russell met with Town Comptroller John Cushman and the decision was made to use funds from the town’s risk retention fund, maintained for the town’s medical coverage; the town is self-insured.
Based on the new CSEA contract agreed to by the employees and the town board, the town will be “moving our medical coverage over to Empire next year and will no longer be self-insured,” he said. “The result of allocating part of this fund to our general operating budget results in a new tax rate that will actually decrease taxes next year by .7 percent.”
Russell said the board supported making the changes, and the town is now compliant with the tax cap.
“There are risks in using the retention fund, chief among them, if we were to have substantial claims on medical coverage through the end of the year. However, we believed that we needed to ensure that we were tax cap compliant,” Russell said.
