New York's property tax levy cap will be below 1% in 2017, and that is a credit negative for local governments throughout the state that are hampered by an ability to raise revenue, according to Moody's Investors Service.
State Comptroller Thomas DiNapoli announced on July 18 that property tax levy growth for New York municipalities with a Dec. 31 fiscal year-end calendar will be capped at 0.68% as a reflection of low inflation. Non-school district localities can override the tax levy cap with a 60% vote of the local legislative body, with 26% opting for this route last year, according to Moody's. Property taxes accounted for 26% of average revenues for Moody's-rated counties in 2014.
"An inability to raise revenues at a rate that will match rising expenditures may force local governments to dip into reserves if they are not willing to pierce the tax levy cap," said Moody's analysts Pisei Chea, Valentina Gomez and Cristin Jacoby in Moody's weekly credit outlook report, released Monday. "The ability to reduce expenditures is low, given the presence of strong unions and significant state-mandated services."
The Moody's analysts also noted that New York local governments have also been challenged by largely stagnant sales tax revenue growth in the first half of 2016. The local share of sales taxes in New York grew by 1.70% in the first half of 2016 from the first half of 2015 with 23 of New York's 57 counties collecting less revenue than a year ago. This negative trend especially hurts counties that rely on growth in sales and property taxes for operations, according to Moody's.
"A lack of growth in sales and property taxes is a particular risk for local governments facing growing fixed costs for personnel and health insurance," said Chea, Gomez and Jacoby in their report.
