With different tax structures in the town and village, one of the biggest merger-related questions facing elected officials remains how to achieve a single tax rate in a palatable way — especially for those outside the village who will pay more under one community.
On Monday night, finance director Sarah Macy provided the elected boards their first look at how such an alignment would play out across the two communities, explaining that decisions over timing will impact how much residents pay — or save — upfront.
“I do not have a magic wand,” Macy said. “And I do not have an earth shattering new idea that nobody has thought of before in order to get from here to there, without employing the basic mathematical mechanisms that are required when we take one piece that is higher, and one piece that is lower, and we come together at a point of convergence that is somewhere in between the two.”
Boiled down, the longer the transition, the less the increase will be per year, Macy said, with a 12-year plan showing more incremental increases than, say, a 3-year plan, even though the final dollar amounts are the same either way.
To achieve a single rate, the boards will need to eliminate taxes that only impact one of the two existing communities. That puts the village general tax, the village one-cent economic development tax and the town-outside-the-village “highway tax” on the chopping block.
To isolate the fiscal impacts of a merger, Macy eliminated the economic development and highway taxes, which represent roughly similar dollar amounts, leaving only the village general tax. She then took the current fiscal year budget and calculated a “zero growth model,” in which the grand list and general fund budget remain stagnant. This, of course, is unlikely to occur in real life, given that the town budget alone has typically jumped a few percentage points each of the last few years, a fact Macy acknowledged. But she said using a baseline model like this provides a useful foundation that shows “the effects of putting these two existing budgets together over time.”
Spreading village taxes across a merged community would require a town-wide tax rate to absorb $3.24 million (a number less than the village tax total, because the municipality’s debt would remain with village taxpayers under a merged community, Macy said).
Since village residents pay general fund taxes in two municipalities, this move would inevitably yield savings. Meantime, town-outside-the-village residents will likely be asked to make up the difference by paying more.
Based on the current budgets, a homeowner with $280,000 of property value, would result see a $329 increase in the town-outside-the-village and a $487 savings inside the village, Macy said.
Those numbers are purely a baseline, she noted, since a few key variables will inevitably change the final tallies. “There are things that we just can’t know,” she said.
That includes the yearly growth of the grand list, which dictates tax raises, and the annual municipal budgets, through which the governing boards make spending decisions on a yearly basis.
On the other hand, the boards have a few levers at their disposal — namely, non-property tax revenues — that could lessen the impacts.
One main source that’s come up in recent discussions is a local option tax.
The village capital committee says the town and village are leaving around $1.4 million on the table without a LOT in place. Macy said that money could replace capital transfers from the general fund — $760k in the village and $394k in the town — and allow a merged community to rely less on property taxes, easing the transition. Macy stressed staff does not recommend pursuing a LOT because of the merger plan, but rather hopes the boards will consider it as a separate initiative.
The boards entertained little discussion over the tax plan Monday night, expecting to digest the material before a more in-depth examination over the coming months. Atop that to-do list: deciding what transition period makes the most financial sense while alienating the least amount of people.
“There’s an amount of pain, and there’s a tolerance to pain,” summarized municipal manager Evan Teich. “People may want merger, but how badly? Or how quickly?”