What is a Taxing District?

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Scott SittigNew York’s Attorney General, Andrew Cuomo, has made government restructuring a centerpiece of his campaign for Governor—a necessary and welcome platform! As his Plan for Action notes, we’d never have designed the current system. Rationalizing local government can improve the quality of public services and save tax payers money.

Along the way, populist sentiment at the local level has fueled grass roots efforts to “reduce layers of government”.  Journalists and politicians alike have cited New York State’s numerous special districts as the source of our problem.  I read in a newspaper article recently:

“There are 62 counties, 62 cities, 553 villages, 698 school districts and 932 towns. And then the whopper: 6,927 special districts that include local lighting, sewer, fire, water and drainage districts.”

The article goes on to say that these 10,092 districts (outside NYC) “can tax people”.  From my vantage point, however, the problem is largely not with the special districts, even though the number of special districts is the most eye-catching.  In reality, not all of these 10,092 districts have the independent power to tax people.  Municipalities and school districts have the power to levy taxes.  Of the 6,927 special districts, approximately 870 are fire districts that also have the power to levy taxes.  But most of the remaining 6,057 special districts (60% of all districts) are governed by municipalities.

To be fair, there are some exceptions (would NY be NY without them?). While a 1932 state law placed all new districts under the authority of towns, some of the pre-existing special districts remained under the authority of elected commissioners.  The commissioner model does throw fuel on the debate about reducing layers of government and frankly these should be reformed (see http://bit.ly/cOESgi for a discussion of commissioner-run districts in Nassau County).  But the exceptions often confuse the discussion for the majority of tax payers.

The majority of the districts do not have the power to levy taxes and were created by municipalities because people wanted specialized service and were willing to be charged extra for that service.  The “taxing district” is nothing more than a boundary around those residents who want a specialized service.  As the media and popular rhetoric fail to clearly state, there are not 10,092 governing bodies with authority to tax.

Call it a moot point because taxes are taxes.  It doesn’t really matter who administers the tax.  At one level I understand the sentiment.  NYS does not lack in taxes.  However, the instruments that are now in place to “reduce layers of government” often do just the opposite.  Eliminating a village, in most cases, results in more “districts” post village and yet, there are usually some cost savings and tax reductions.  The point is that taxing districts are usually not the problem.  It is the cost for services that drive the equation.  In fact, without the ability to be creative with taxing districts, many more costs would “shift” as a result of dissolution making the whole process even less palatable to all residents in a community.

We need to stop citing 6,297 special districts as a way to make the case that we are over-taxed.  We are overtaxed for many reasons, but not exclusively because of the districts.  We are over-taxed because many people cannot make tough decisions to cut spending.  Oh, it’s easy to point the finger at Albany, and justifiably so.  Their spending decisions often get pushed down to the local level in the form of unfunded mandates.  But, local elected officials are just as much to blame.  It is hard to cut services.  In some cases, it is even harder to merge and share them because people fundamentally don’t want to lose their control; and, in some cases, town boards are simply not doing a good job supervising the special districts under their control.

However, if we really want to point the finger, we need to look in the mirror.  We are the taxpayers that want the services that drive the taxes.  We are the residents in our communities that don’t like change and want to believe that costs can simply be eliminated without any compromise in the quality and/or quantity of service.  We are the voters who elect the leaders that make the decisions that form the budgets that drive the tax rates.

I have heard over and over that Towns are the most efficient level of government and that villages are the level of government that is closest to the people.  Taxing districts are the result of that efficiency and “local touch”.  Taxing districts often represent the most equitable way to provide services to those that truly want them.  The people that pay for those services don’t want them to change.  In a state of home rule with a history of local control, it is not much more than empty rhetoric to clamor about special taxing districts.  In most cases, they are not the source of our problem.

Scott Sittig, M.P.P. is a Senior Associate at the Center for Governmental Research (CGR) in Rochester, NY.

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