The New York Senate majority leadership said yesterday that it will pass a cap on school district taxes in a special session tomorrow.

Gov. David Paterson has pushed for the cap since introducing it as a program bill in June following the release of finding by a state commission on property taxes headed by Nassau County Executive Tom Suozzi. However, while the cap was embraced by the Republican-led Senate, the Democratic-led Assembly has so far been cool to the idea, making its potential of becoming law less likely.

The 2008 legislative session ended before any action was taken on the Democratic governor's bill. The bill would limit annual real property-tax growth to the lesser of 4% over the previous year's levy or 120% of the annual consumer price index increase.

The cap would apply to all school districts except those in New York City, Buffalo, Rochester, Yonkers, and Syracuse. Capital expenditures and debt service would be exempt from the cap. Districts could override the cap if 55% of the voters approved, in certain circumstances. If a district's increased property taxes by less than 4%, they would be able to save up to 1.5% of the unused tax levy growth for a later date.

School districts in New York sold $1.54 billion of bonds last year, according to Thomson Reuters data.

Speaking about property tax caps in general, Standard & Poor's managing director Colleen Woodell said they can be "troublesome."

"That really doesn't let you capture growth whether growth is going on or not," Woodell said. "To slap a limit on school district levy growth in New York state, it will be hard for people to work through."

The impact of a tax cap on a state varies depending on how the law is written, she said.

Last month Paterson recalled the Legislature to meet in a special session Aug. 19 to find cuts in the state budget and to consider the tax cap.

"Enacting a property tax cap is a good starting point, but it is only one piece of the puzzle," Senate Majority Leader Dean Skelos said in a press release. "The measures we will take up in our special session will provide much-needed relief to taxpayers and is the beginning of the process of reducing property taxes."

Dan Weiller, spokesman for Assembly Speaker Sheldon Silver, D-Manhattan, said that Silver "would support a property tax cap if there is a guarantee that resources will be in place that will ensure that all children in the state can get a quality education."

The bill has also garnered union opposition.

"A property tax cap would be a blunt instrument that would artificially impose spending limits on schools, take away voice of voters, and devastate educational programs," Carl Korn, spokesman for the New York State United Teachers union.

Tomorrow, the Senate also plans to pass a number of bills it said would help control costs for school districts. One bill would cap the annual growth of pension costs to school districts by making the state responsible for any increase greater than 4%. The Senate also seeks a ban on unfunded state mandates to school districts and a two-year moratorium on property tax reassessments.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.