Property Rights Foundation of America®

Real Issues: Land, Tax Base & Access
Panel Discussion
At The Fourteenth Annual National Conference on Private Property Rights
October 23, 2010

Tax Base in the Adirondack Park
by Peter J. La Grasse, BS, BA,

Chairman, Board of Assessors, Town of Stony Creek, N.Y.

 

I am honored to address you again for the second year. Last year I spoke to you on a subject that I have found to be a subliminal force to annihilate the people of the Adirondacks, that subject was the Biosphere Reserve concept and its implicit adoption by the State DEC and the APA contrary to the statutory concept that the Adirondack Park was to be a mix of public and private property. This year I am speaking on a more ominous subject, the tax base in the Adirondack Park.

The tax base is the assessed value of a set of assets that is subject to taxation for the purposes of running the government. This talk addresses tax base in the broader sense to include various revenue streams that towns receive that reduce the tax levy and in essence contribute significantly to the tax base.

The Adirondack Park Regional Assessment Project that came out in 2009 is a study of the culture of the area within the Blue Line, the boundary of the Adirondack Park. The study was prepared for the Adirondack North Country Association and the Adirondack Association of Towns and Villages, the Towns of Chester and of Arietta. This study's will be referred to, in conjunction with several other sources of information, to examine the tenuous tax base of towns within the Adirondacks.

Real Property Tax Trends

The Adirondack Park Regional Assessment Project has made an elaborate study of the tax base of towns wholly within the Adirondack Blue Line, as well as those towns that straddle the boundary of the Blue Line and of rural towns entirely outside the Adirondack Blue Line. Looking at the towns entirely within Blue Line, the study found that the Real Property Tax portion of the tax base constituted 42.9% of the local government revenue in 2006, a slight drop form the 1980 figure of 45.3%. (P 15). The percent of Real Property Tax went down 2.4%, but the tax levy greatly increased.

The data in this study shows that there is a 58% increase in Real Property Tax levies for towns entirely within the Blue Line in the last 26 years. This increase is 5.5% higher than increases for the same period in rural towns entirely outside the Blue Line. The total expenditures of local government inside the Blue Line has increased 66.6% since 1980, and only 53% for towns outside the Blue Line. The most revealing statistic is that "when adjusted for inflation, total outstanding debt for local governments wholly within the park has increased by 180 percent from 1980 to 2006, while total debt for ALL park local governments (that includes towns partially within the Blue Line) has increased by 135 percent. Local governments in non-MSA counties" (that is non Metropolitan Statistical Areas) "outside the park have experienced a debt increase of 20 percent." (Adirondack Park Regional Assessment Project, May 2009, p. 14 and ix.) This statistic demonstrates that it is far more expensive to run a town within the Adirondack Park compared to a rural town outside the Blue Line, for reasons that the report does not make clear.

The Volatile Nature of Components of the Tax Base

The tax base consists of revenue streams from many sources. When we consider the tax base, we have to consider how much of the tax base is volatile, subject to change in the economic activity, or state or federal policies. Commercial real property is especially sensitive to economic activities because their assessments may be based on a measure of their income stream. To quote Michael Swan, Director of Real Property Tax Services in Warren County, in the September 25th, 2010 Post Star article, Owners Achieve Lower Tax Rates: "property owners are filing the lawsuits because of a decline in property values related to the recession."

Another form of tax base is sales tax. Sales tax for towns within the Blue Line, in 2006, comprised 8.6% of the tax base, but sales tax in towns straddling the Blue Line receive a much higher amount of sales tax, in 2006 on average, 24.7%. Queensbury receives 27.4% of their town budget from sales tax, and the Town of Lake George, 24.7%. Sales tax has increased in the last 26 years, but sales tax is yearly subject to change depending on the economic climate, and primarily benefit towns with wealthy development and valuable commercial property because the sales tax is proportioned among the towns in any county based on the total full value of each town. The poorer towns in more need of revenue benefit less from sales tax.

State Aid is another form of tax base for government. In 2006 for towns entirely within the Blue Line, State Aid was 10.8% of the tax base.

Federal Aid in 2006 was 5.5% of the tax base, a drop from 9.3% in 1980. The dollar amount of Federal Aid, adjusted for inflation from 1980 to 2006, is nearly the same. Unlike the Real Property Tax levy, these other components of the tax base may not predictably increase with increased demands from local governments. State and federal government policies toward local aid can change; they can go down while mandates forcing increased expenditures can go up, and this would leave the homeowner and private landowner literally holding the bag; the Real Property Tax levy has to make up the deficit.

Components of the Real Property Tax Base

The typical tax roll consists of Taxable, State Owned Land, Utilities and Rail Road, and Wholly Exempt.

The State Land portion of the tax base is not entirely secure. Let's look at it more closely. In the Adirondacks, State Owned Land can be a significant portion of the tax base. In Stony Creek, for example, where the state owns 53% of the land, the State Owned Land amounts to 50.15% of the tax base.

The fact that the state pays taxes on State Owned Land within the Adirondack Park was challenged in the 2003 case, Dillenburg v. State. In this case, the town of Arkwright, has State Owned Land but is entirely outside the Blue Line, and its State Owned land is wholly exempt from taxes. The supervisor of Arkwright sued the state on the basis that the state land in his town was virtually the same as state land within the Adirondack Park and the state not paying taxes in Arkwright was a violation of the equal protection clause of the constitution. Additionally the plaintiff cited a history of "hodge-podge" laws "devoid of any consistent rationale for taxation". He cited the 1996 study by NYS Office of Real Property Services, Compensating Local Governments for Loss of Tax Base Due to State Ownership of Land where again there was a conclusion that similar lands were treated unequally in so far as taxation goes. The Supreme Court in this case sided with the plaintiff and ordered the state not to pay taxes on State Owned Land within the Blue Line. Fortunately for the entire Adirondacks, the Appellate Division reversed on an obscure principle of law, that the plaintiff "failed to allege the requisite injury-in-fact that has not been suffered by the citizenry at large as a result of the allegedly inequitable tax consequences of the statutory scheme". (788 N.Y.S.2d 872, 15 A.D. 3d 9067, 2005 N.Y. App. Div. LEXIS 1081).

I would have rather the Appellate Division had cited a principle that was presented way back in 1885 when the Adirondack Forest Preserve was first conceived, which states: "Upon this general plan, the State lands in the Adirondacks are to be hereafter held and acquired, not for the special benefit of the counties in which they lie, but in a much greater degree for the benefit of the whole State… It is only after the most careful and prolonged consideration that the commissioners have concluded to recommend that the State hereafter bear taxes upon its lands in the Adirondack region." This quote is from the Sargent Report, 1885 Assembly Document 36, page 23 and 24. This report lays the foundation for the Adirondack Preserve: the purpose of the Forest Preserve was to restore the watershed to provide for adequate water flow to the Hudson River and the Erie Canal for the purposes of commerce, and to restore the forests of the Adirondacks for necessary timber resources again for the commercial needs of the state. The Preserve was seen as a stopgap measure, and only afterwards in 1894 was the uncut wild Forest Preserve concept developed and given constitutional protection. (See also The Constitutional History of New York, Charles Z. Lincoln, Vol III, p. 416-417 and Dillenburg v. State of New York, Threat to Adirondack Tax Base, by Peter La Grasse. March 3, 2008.and Adirondack Park Regional Assessment Project, p. iii)

An additional threat to the taxes on state land occurred when in 2009 Governor Paterson proposed capping taxes on State Owned Land, which would have saved $9 million if his plan went through. This proposal would have greatly affected towns within the Blue Line, immediately and in future years. Senator Betty Little's remarks illustrate the tenuous support the North Country has in Albany: "Eliminating this unfair tax scheme should have been an early victory, but its continued inclusion in the budget is probably indicative of the challenge we face this year." (Hamilton County Express, 1/28/2009) New York State Association of Counties Executive Director, Stephen Acquario said, "the counties in the Adirondacks and Catskills were already suffering high unemployment rates and reduced sales tax revenues, and without a reduction of state-mandated services, the tax cap would bloat the tax burden. While industry and land development are severely restricted, municipalities of the two regions are dependent on the state land tax payments to provide basic services." William Farber, chairman of the Board of Supervisors of Hamilton County, noted how "his county is at the mercy of the state, with half of its acreage under state prohibition banning development or logging, two primary sources of revenue. In the town of Arietta, Farber cited as an example, the state owns 90 percent of the land, and pays ¾ of the property taxes-the main source of income for local government services that the state mandates."

I could go on with similar comments by Essex County Manager Dan Palmer and Linda Kemper, Chair of the Intercounty Legislative Committee of the Adirondacks addressing the effect the cap would have in Fulton County, and Warren County Board of Supervisors Chairman Fred Monroe, who said "this proposed tax cap is discriminatory, noting that taxpayers of rural municipalities were alone shouldering the burden to make up for the state budget shortfall", and very importantly, Fred Monroe said "The state should stop purchasing land if it couldn't pay a reasonable tax rate to local governments to maintain and service it."(Adirondack Journal, Feb. 7, 2009 p. 14)

This last remark hit sensitive nerves within the preservationist's camp. "Green groups also want state land purchases in the pipeline to go forward, but they concede that Paterson's plan makes such deals increasingly controversial inside the Blue Line. 'I think that any cap on state payments for Forest Preserve taxes would have a devastating effect on future land acquisitions' said ADK's Woodworth." (Adirondack Explorer, March/April 2009, p. 21) The proposed cap was finally dropped, probably more because of the Green lobby and the timely comments of Fred Monroe, than the protests of our North Country representatives,

State Owned Land itself consists of three parts, actual assessed valuation, Transitional Assessments and Adirondack Aggregate Assessments. In Stony Creek these three components are roughly equal, each 1/3 of the State Owned Land component of the tax base, which is about 50 % of the entire tax base. Without getting into the details of these components, for which I would need another hour or two, suffice it to say that transitional assessments have been threatened in the past.

In 1989 Governor Mario Cuomo proposed in his budget to eliminate Transitional Assessments and to cap taxes on State Owned land to last year's figures. I wrote our legislators, Senator Ronald B. Stafford and Assemblyman Glenn Harris with the details of tax increase that would occur if this scheme went through. The result of my calculations showed a potential doubling of taxes in one year across the board. Strong support from our representatives saved the day. What will be the policies of Andrew Cuomo, the front-runner for governor this year?

In this talk I have shown that many components of the tax base and revenue stream are insecure and volatile. Continued state tax payment on State Owned Land has been threatened in the past. Last year I showed that the application for the Biosphere Reserve included plans to designate State Owned Land as "core," where there is "no evidence of the hand of man." Between 1973 and 1989 the State bought an additional 180,462 acres in fee, (The Adirondack Park in the Twenty-First Century, Technical Reports Vol One, 1990, p. 168-170.) and between 1989 and 2008, 207,800 acres in fee. Additionally, 723,200 acres have been acquired or planned in conservation easements. (Major Land Acquisitions for Adirondack Forest Preserve Over the Last Two Decades, Property Rights Foundation of America, Inc., prepared from data complied by Adirondack Park Agency Reporter, Susan Allen, Pub, 2009). All told, since 1973 the State has shifted 18.5% of the total Adirondacks to State Owned Land and Conservation Easements where no development can occur. Last year, even while proposing to cap State Owned Land taxes to save $9 million, Governor Paterson proposed $58 million for new land acquisitions mainly in the Adirondacks. I am suggesting that there is a systematic process of land acquisition which furthers the objectives of a Biosphere Reserve and which threatens communities in the Adirondacks. Increased operating expenses, increased debt, increased state holdings and now, potentially, reduced state sources of tax could well be the death knell for many portions of the Adirondacks. John Marshall, Chief Justice of the U.S. Supreme Court from 1801 to 1835, prophetically said: "The power to tax is the power to destroy." It could well be that the diminished tax base will be the coup d'etat in this preservationists scheme to turn the Adirondacks into a full-fledged Biosphere Reserve. This is why more state land acquisition generates still more thirst for state land acquisition. And this is why the people and the leaders of the Adirondacks must oppose the effort to accomplish the objectives of a Biosphere Reserve.

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