Buffalo property owners have escaped a tax increase for four straight years, and Mayor Byron W. Brown says don’t expect an increase this coming year either.
And the following year? Will taxes go up then? Not likely.
So when will city taxes increase?
In two years, when Buffalo’s ongoing property revaluation is complete, Brown says.
“We have long had a comprehensive plan to make the city more attractive to residential and commercial investment, which involved cutting the tax rate and freezing taxes,” Brown said. “In 2018, with the revaluation process, we anticipate there will be a modest tax increase.”
That would be in the 2018-19 fiscal year, which is after the next mayoral election. Brown isn’t saying whether or not he’ll seek election to a fourth term.
But he did say the timing of the revaluation and anticipated tax hike are not tied to the election cycle.
“It’s purely coincidental,” the mayor said. “If we could have gotten the reval done next year, we would have.”
Nonetheless, as Brown said, any tax increases will likely be modest – regardless of who is mayor.
That’s because Buffalo, like all municipalities and school districts in New York, is subject to a state-imposed tax cap.
While Buffalo’s property tax levy remains virtually flat under the 2016-17 budget plan Brown introduced Friday, the city could have raised taxes by about $4 million – or 2.8 percent – under the tax cap, according to the city comptroller’s office.
There’s no way to predict what the increase could be in 2018-19, but given that the calculation is dependent on two years of inflation, and given that inflation appears to be slowing, all indications are that the allowable tax increase will likely drop below 2.8 percent by the time the city’s property tax freeze would likely be lifted.
What’s more, Brown says the city’s tax base is expanding, as more businesses and commercial projects come into the city, meaning there are more taxpayers to share the tax burden.
Demand for services
The property tax freeze, Brown said, is intended to be more than a tax break for residents – although it has been that. If Buffalo had increased taxes over the past five years to the full amount permitted under the state tax cap, city taxpayers would have paid an additional $119 million in property taxes, the city comptroller’s office calculates.
But beyond that, Brown said, when he came into office in 2006, he set out to develop a plan to attract more business and people to Buffalo. Part of the strategy was to cut taxes.
So Brown initially reduced or froze the city tax rate. Then, five years ago, he also froze property assessments.
Now, Brown says, Buffalo’s tax rate is among the lowest in upstate New York.
And beyond using the tax rate to give Buffalo a competitive advantage in attracting business and jobs, Brown said that keeping a lid on taxes would benefit the city’s low-income residents, since a tax freeze would be expected to limit rent increases as well as property taxes.
Brown says he believes the tax freeze has worked. But he says that as Buffalo attracts more businesses and residents, the demand for city services increases.
“With the growth in the city, there is an increased demand to deliver services,” Brown said. “Roads. Parks. Infrastructure. Public safety.”
So in 2018-19 – city fiscal years run from July 1 to June 30 – when the revaluation will provide a more accurate value of city properties, Buffalo will benefit from starting to slowly raise more tax revenue, he said.
“We need to be able to grow municipal revenue to continue the growth,” Brown said.
Relying on reserves
There’s another reason that it will be time to raise more tax revenue, some lawmakers say.
One of the reasons the Brown administration has been able to hold the line on taxes is because it has been using surplus reserve funds for years to help balance the budget. Some $15 million was used in the city’s current 2015-16 budget, and Brown proposes using $10.6 million more in next year’s budget.
Adoption of Brown’s 2016-17 budget plan would leave $37 million in the city’s reserve fund, the mayor said. The city also has a “rainy day fund,” with another $37 million that hasn’t been touched.
“There’s only so many times you can go to savings,” said Council President Darius G. Pridgen.
City Comptroller Mark J. F. Schroeder has brought up the issue in his reviews of Brown’s past budgets.
“He has been talking about the need to rely less on the fund balances,” said Schroeder’s executive assistant, Patrick J. Curry.
But the Brown administration has succeeded in replenishing a sizeable chunk of its reserve funds over the years, whether from its conservative budgeting or an infusion of cash from the Seneca Buffalo Creek Casino.
And Brown says his strategy has always been to use a decreasing amount of fund balance each year during the tax freeze, by continuing to find ways to reduce government costs through such things as self-insurance and rebidding contracts.
The mayor said he anticipates using less fund balances in 2017-18 and would use even less in 2018-19, the year he anticipates the tax freeze would be lifted.
Rising property values
The property values to be used in the year of the tax increase will be based on the revaluation that began last May and will be completed in 2018. It’s the first time Buffalo properties have been reassessed since 2010.
“We want to get the true values of what the properties are worth,” Brown said.
Brown said preliminary numbers indicate property values throughout the city are increasing by 15 to 50 percent.
That doesn’t mean, however, that property taxes will increase to that extent. The city tax rate will drop when the higher assessments go online.
What’s more, in addition to any tax increase being limited by the state tax cap, Buffalo has separate tax rates for residential and commercial property owners. The city can adjust the formula to put more or less of the burden on residential or commercial taxpayers, to ensure neither is unduly burdened, Brown said. The rates are currently $17.88 per $1,000 of assessed valuation for residential properties and $26.99 per $1,000 of assessed valuation for commercial ones.
Brown added that the city’s strategy of using its tax rate for comparative advantage wouldn’t change when the tax freeze is lifted. The mayor said he still wants to keep city taxes low.
“What we hope to do going forward is have more property owners to spread the tax burden,” he said.
Brown, however, may or may not be mayor when the 2018-2019 budget proposal is due May 1, 2018, nor when the budget takes effect that July 1. The mayor’s current term ends Dec. 31, 2017.
When asked if his talk of anticipating a tax increase in 2018-2019 means he’ll be seeking re-election, Brown responded that it doesn’t mean he plans to run; nor does it mean he does not plan to run. He has no announcement on that topic, he said.