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Compensating Local Governments for Loss of Tax Base Due to State Ownership of Land

September 1996

III. EQUITY OF CURRENT COMPENSATION PROGRAMS

The non-uniformity of New York's existing tax and PILOT programs was explained in Part II of this report. Piecemeal addition of new tax and PILOT payments for certain properties over a period of 110 years, with no evidence that a guiding policy or principle was followed in the majority of cases, virtually assured this non-uniform outcome. The present section will discuss the pattern of payments that has resulted under the current programs and will attempt to measure the extent of "inequity" they produce.

According to Table 6, New York State owns 13.2 percent of the land within its borders. That is a total of just over four million acres (transportation property, public utility property, and smaller improved parcels used for state facilities have been excluded). Tax payments are currently made to local governments on 89 percent of this acreage. In addition, PILOTs are paid on certain state properties, with the majority of PILOT revenue traditionally going to local governments in Adirondack and Catskill counties and, more recently, to those in Putnam County.

The majority of state acreage is in the forest preserve counties, with four counties having at least one-third of their land area owned by the state: Hamilton (71.1 percent); Essex (45.6 percent); Herkimer (40.1 percent); and Warren (34.3 percent). Only one percent or less of the state land in these and other Adirondack and Catskill counties is exempt, the remainder generally being taxable for all purposes by virtue of its status as forest preserve. Putnam county leads the state in terms of the percentage of its land area occupied by exempt state land (8.4 percent), and only two other counties exceed five percent: Suffolk (5.6 percent), and Onondaga (5.4 percent).

Table 7 shows the top twenty towns as ranked by percentage of land area owned by the state. In all of these municipalities, at least 40 percent of the land area is owned by the state, and in three the state's share is more than 90 percent of the municipality. It is thus apparent that state land is very unevenly distributed, with some municipalities dramatically affected by state ownership. It is also instructive to note that the state, despite its patchwork compensation programs, appears to have recognized the special situations of these twenty municipalities: virtually all acreage within their borders is currently taxable.

Taxable Programs

The differential treatment of taxable state land among the several types of local taxing units (counties, cities/towns. villages, and school districts) is shown in Table 8. It is apparent from the data that some counties (such as Hamilton and Essex) are advantaged insofar as most or all of their acreage is taxable for all purposes, while others (such as Chautauqua, Dutchess, or Erie) are disadvantaged through the state's policy of making their acreage taxable for some purposes but not for others. Of the 57 counties, plus New York City, having eligible state land, only 25 have any acreage that is taxable for all local taxing purposes. Six counties have acreage that is taxable for school purposes only. And seven counties, plus New York City, have land which is not taxable for any local taxing purpose.

Table 6.
Incidence of State-Owned Land by County*
(Based on 1993 Assessment Rolls)
County Total County
Area (Acres)
Taxable
State Land
(Acres)
Percent of
County Area
Exempt
State Land
(Acres)
Percent of
County Area
Albany 335,232 3,252 1.0 8,814 2.6
Allegany 659,392 43,379 6.6 9,819 1.5
Broome 452,416 7,291 1.6 2,567 0.6
Cattaraugus 838,336 90,894 10.8 9,939 1.2
Cayuga 443,712 7,976 1.8 5,257 1.2
Chautauqua 679,808 15,191 2.2 6,109 0.9
Chemung 216,248 518 0.2 1,550 0.6
Chenango 572,416 75,369 13.2 4,184 0.7
Clinton 665,216 58,865 8.8 8,874 1.3
Columbia 406,912 625 0.2 7,810 1.9
Cortland 319,808 25,797 8.1 13,444 4.2
Delaware 925,696 55,109 6.0 9,822 1.1
Dutchess 513,088 6,879 1.3 6,806 1.3
Erie 668,608 364 0.1 1,389 0.2
Essex 1,150,080 514,753 44.8 9,748 0.8
Franklin 1,044,224 262,353 25.1 3,431 0.3
Fulton 317,568 97,057 30.6 5,242 1.7
Genesee 316,224 0 0.0 7,192 2.3
Greene 414,656 81,424 19.6 874 0.2
Hamilton 1,101,248 774,575 70.3 8,465 0.8
Herkimer 903,616 361,599 40.0 895 0.1
Jefferson 814,272 19,559 2.4 21,776 2.7
Lewis 816,384 135,420 16.6 14,124 1.7
Livingston 404,608 4,609 1.1 13,582 3.4
Madison 419,776 20,683 4.9 7,049 1.7
Monroe 421,952 1,128 0.3 3,762 0.9
Montgomery 259,072 6,689 2.6 1,510 0.6
Nassau 183,552 0 0.0 1,234 0.7
Niagara 334,720 0 0.0 6,333 1.9
Oneida 776,192 51,550 6.6 8,997 1.2
Onondaga 499,392 2,199 0.4 26,731 5.4
Ontario 412,416 0 0.0 3,661 0.9
Orange 522,496 26,245 5.0 6,764 1.3
Orleans 250,496 208 0.1 1,040 0.4
Oswego 610,112 25,493 4.2 17,533 2.9
Otsego 641,856 16,384 2.6 6,512 1.0
Putnam 148,160 0 0.0 12,442 8.4
Rensselaer 418,560 7,155 1.7 4,446 1.1
Rockland 111,488 33,038 29.6 0 0.0
St. Lawrence 1,718,848 210,609 12.3 27,913 1.6
Saratoga 519,616 25,370 4.9 7,104 1.4
Schenectady 131,904 0 0.0 1,252 0.9
Schoharie 397,592 31,221 7.8 2,226 0.6
Schuyler 210,368 16,270 7.7 6,343 3.0
Seneca 207,936 700 0.3 3,574 1.7
Steuben 891,328 18,850 2.1 9,947 1.1
Suffolk 583,168 4,628 0.8 32,665 5.6
Sullivan 620,672 19,263 3.1 15,912 2.6
Tioga 331,968 9,322 2.8 1,334 0.4
Tompkins 304,704 18,411 6.0 10,001 3.3
Ulster 721,024 165,711 23.0 1,389 0.2
Warren 556,608 184,783 33.2 5,967 1.1
Washington 534,720 23,599 4.4 2,396 0.4
Wayne 386,688 0 0.0 6,058 1.6
Westchester 277,056 94 0.0 3,820 1.4
Wyoming 379,520 1,652 0.4 7,902 2.1
Yates 216,512 6,241 2.9 1,785 0.8
New York City 197,696 0 0.0 234 0.1
           
Statewide 30,223,296 3,570,354 11.8 437,186 1.4

* State acreage excludes land used for transportation and utility transmission purposes and smaller improved parcels used for administrative purposes.

Table 7.
Towns with Highest Concentration of State-Owned Land
(1993 Assessment Rolls)
Town County Municipal
Area (Acres)
State-Owned Acreage
Exempt Taxable Total Percent of
Municipal
Area
Red House Cattaraugus 35,648 0 34,461 34,461 96.7
Inlet Hamilton 39,872 956 37,102 38,058 95.5
Arietta Hamilton 203,392 416 191,082 191,498 94.2
Benson Hamilton 52,928 0 47,212 47,212 89.2
Wells Hamilton 113,600 8 91,209 91,215 80.3
St. Armand Essex 36,224 123 28,027 28,150 77.7
North Elba Essex 97,216 1,524 71,988 73,511 75.6
Morehouse Hamilton 122,304 10 92,482 92,492 75.6
Harrietstown Franklin 125,952 450 94,098 94,548 75.1
Lake Pleasant Hamilton 120,384 1,556 88,027 89,583 74.4
Northampton Fulton 13,504 0 9,915 9,915 73.4
Webb Herkimer 288,768 0 211,631 211,631 73.3
Shandaken Ulster 76,672 321 53,487 53,808 70.2
Keene Essex 101,952 157 69,353 69,510 68.2
Minerva Essex 99,392 0 67,249 67,249 67.7
Caroga Fulton 32,576 0 21,649 21,649 66.5
Schroon Essex 86,016 332 56,614 56,946 66.2
Indian Lake Hamilton 161,600 1,537 103,292 104,828 64.9
Denning Ulster 67,328 0 42,574 42,574 63.2
Stony Point Rockland 17,792 0 11,170 11,170 62.8
Duane Franklin 48,064 26 29,780 29,805 62.0
Wilmington Essex 41,728 194 25,458 25,652 61.5
Stratford Fulton 48,128 9 29,399 29,407 61.1
Haverstraw Rockland 14,336 0 8,738 8,738 61.0
Hope Hamilton 26,048 93 15,505 15,598 59.9

Table 8.
Differential Tax Treatment of State Land According to Local Taxing Purpose
(1993 Assessment Rolls)
County Total State-
Owned Acreage
(Taxable & Exempt)
Acres Taxable by: (law section) Exempt
Acres
Co., Minic., Schools
(RPTL 532 or
ENCON 15-2115)
Munic., Schools only
(RPTL 534)
School only
(RPTL 536)
Albany 12,066 0 3,252 0 8,814
Allegany 53,198 0 43,379 0 9,819
Broome 9,858 0 7,270 21 2,567
Cattaraugus 100,833 62,601 27,700 593 9,939
Cayuga 13,233 0 7,976 0 5,257
Chautauqua 21,300 0 15,191 0 6,109
Chemung 2,068 0 518 0 1,550
Chenango 79,553 19,424 55,945 0 4,184
Clinton 67,739 48,416 9,405 1,044 8,874
Columbia 8,435 0 625 0 7,810
Cortland 39,241 0 25,797 0 13,444
Delaware 64,931 41,709 13,400 0 9,822
Dutchess 13,685 0 0 6879 6,806
Erie 1,753 0 0 364 1,389
Essex 524,501 514,753 0 0 9,748
Franklin 265,784 242,772 19,581 0 3,431
Fulton 102,299 95,951 1,450 0 5,242
Genesee 7,192 0 0 0 7,192
Greene 82,297 78,232 2,308 884 874
Hamilton 783,040 774,575 0 0 8,465
Herkimer 362,494 356,124 3,086 2,389 895
Jefferson 41,334 14,362 5,197 0 21,776
Lewis 149,544 58,340 77,080 0 14,124
Livingston 18,191 0 2,591 2,018 13,582
Madison 27,733 0 20,553 130 7,049
Monroe 4,890 0 0 1,128 3,762
Montgomery 8,199 0 6,689 0 1,510
Nassau 1,234 0 0 0 1,234
Niagara 6,333 0 0 0 6,333
Oneida 60,547 9,209 35,655 6,686 8,997
Onondaga 28,930 0 2,199 0 26,731
Ontario 3,661 0 0 0 3,661
Orange 33,008 25,564 0 884 6,764
Orleans 1,248 0 0 208 1,040
Oswego 43,026 11,192 14,300 0 17,533
Otsego 22,536 729 15,654 0 6,512
Putnam 12,442 0 0 0 12,442
Rensselaer 11,601 5,019 2,136 0 4,446
Rockland 33,039 33,865 0 16 0
St. Lawrence 238,522 156,943 53,667 0 27,913
Saratoga 32,474 23,578 574 1,218 7,104
Schenectady 1,252 0 0 0 1,252
Schoharie 33,447 0 31,221 0 2,226
Schuyler 22,613 0 16,270 0 6,343
Seneca 4,275 0 0 700 3,574
Steuben 28,796 0 18,850 0 9,947
Suffolk 37,293 0 0 4,628 32,665
Sullivan 35,175 18,415 0 847 15,912
Tioga 10,656 0 9,322 0 1,334
Tompkins 28,412 0 18,411 0 10,001
Ulster 167,100 164,205 0 1,506 1,389
Warren 190,750 184,783 0 0 5,967
Washington 25,995 20,503 1,262 1,833 2,396
Wayne 6,058 0 0 0 6,058
Westchester 3,914 0 0 94 3,820
Wyoming 9,555 0 0 1,652 7,902
Yates 8,026 5,570 670 0 1,785
New York City 234 0 0 0 234
STATEWIDE 4,007,774 2,966,836 569,184 35,723 437,420

Like the geographic distribution of state lands and their variable taxable status, the distribution of state tax payments to localities is similarly lumpy. Table 9 shows that the local governments in some counties receive millions of dollars in taxes, while those in others receive little or no taxes. In some cases, the relatively high payments can be explained by the presence of vast state-owned acreage, such as in the Adirondack and Catskill counties. However, the two counties receiving the largest annual payments (Rockland, $10.6 million; Suffolk, $8. 1 million) do not have forest preserve or even relatively high acreage of taxable state-owned land. The explanation for their large payments lies in the fact that they have high-priced land. The high land values in question can sustain high taxes per-acre: $322 in Rockland County (taxable for all purposes) and $1,751 in Suffolk County (taxable for school purposes only). In contrast, the average statewide tax payment per acre was $16.36, and the average in fifteen of the counties was less than $10.00 per acre.

PILOT Programs

PILOT-type payments also show a very uneven distribution (Table 9). The largest ones, amounting to approximately $17 million, went to local governments in seven Adirondack-area counties, in the form of payments on transition assessments, aggregate additional assessments, and river regulating district assessments (see Part 11). In virtually all of these cases. the payments were made to mitigate or eliminate any potential reduction in the state's tax liability as a result of local reassessment projects.

Particularly large payments (over $1 million total) were made to two Westchester County municipalities, the Town of Cortlandt and the Village of Buchanan. These payments were the result of transition assessments invoked by the takeover of a portion of the Indian Point nuclear facility by the State Power Authority. Other major payments include the special PILOT of $400,000 approved for Putnam County in 1994 and the payment of more than $240,000 to Cattaraugus County local governments, primarily as compensation for the West Valley Nuclear Waste Facility in the Town of Ashford. Major PILOT payments were also made in a few Catskill-area counties, again related to transition assessments associated with state-owned parklands. Statewide, combined tax and PILOT payments amounted to $19.73 per acre of land (taxable plus exempt) owned by the state, with tax payments representing approximately three-quarters of this total and PILOTs representing about one-quarter.

Equity Concepts

While many different concepts of equity in the distribution of tax and/or PILOT payments could be envisioned, perhaps the simplest of all would be the idea that communities would receive payments in direct proportion to their shares of the total acreage owned by the state. Under such a plan, a community containing ten percent of New York's State's land would receive ten percent of any payments the state made that were not tied to specific local government service charges (service charge payments would be a function of the services supplied to specific state properties and would thus vary from community to community). The huge differences observed in per-acre payments under existing programs (Table 9) suggest that the current reality differs substantially from this simple model, however.

Table 9
Tax and PILOT Payments on State-Owned Land (1994 Fiscal Year)
County Total Taxable and Exempt Acreage Total Taxable Acreage Total Taxes Paid* Total PILOTs Paid Total Taxes and PILOTs Paid Per Acre
Albany 12,066 3,252 $31,785 $97,011 $10.67
Allegany 53,198 43,379 433,741 15,465 8.44
Broome 9,858 7,291 129,522 12,769 14.43
Cattaraugus 100,833 90,894 1,067,542 240,642 12.97
Cayuga 13,233 7,976 40,416 4,211 3.37
Chautauqua 21,300 15,191 108,625 4,959 5.33
Chemung 2,068 518 3,682 96 1.83
Chenango 79,553 75,369 1,228,693 23,580 15.74
Clinton 67,739 58,865 811,625 38,869 12.56
Columbia 8,435 625 19,695 624 2.41
Cortland 39,241 25,797 284,980 18,415 7.73
Delaware 64,931 55,109 606,946 4,972 9.42
Dutchess 13,685 6,879 693,877 2,680 50.98
Erie 1,753 364 0 4,276 2.44
Essex 524,501 514,753 3,441,571 6,251,444 18.48
Franklin 265,784 262,353 2,953,907 1,358,184 16.22
Fulton 102,299 97,057 1,557,913 540,672 20.51
Genesee 7,192 0 0 0 0
Greene 82,297 81,424 957,711 83,205 12.65
Hamilton 783,040 774,575 5,397,106 3,877,088 11.84
Herkimer 362,494 361,599 2,050,109 2,618,126 12.88
Jefferson 41,334 19,559 99,892 3,561 2.50
Lewis 149,544 135,420 912,824 7,304 6.15
Livingston 18,191 4,609 110,044 16,952 6.98
Madison 27,733 20,683 243,367 21,751 9.56
Monroe 4,890 1,128 26,918 178 5.54
Montgomery 8,199 6,689 76,058 117 9.29
Nassau 1,234 0 0 0 0
Niagara 6,333 0 0 0 0
Oneida 60,547 51,550 746,868 262,005 16.66
Onondaga 28,930 2,199 36,752 10,606 1.64
Ontario 3,661 --** 52,881 4,904 --**
Orange 33,008 26,245 1,954,420 69,920 61.33
Orleans 1,248 208 4,774 0 3.83
Oswego 43,026 25,493 201,720 10,575 4.93
Otsego 22,536 16,384 152,311 14,053 7.38
Putnam 12,442 0 0 401,518 32.27
Rensselaer 11,601 7,155 132,112 46,081 15.36
Rockland 33,039 33,038 11,674,667 760,141 376.38
St. Lawrence 238,522 210,609 2,278,902 38,116 9.71
Saratoga 32,474 25,370 338,817 456,428 24.29
Schenectady 1,252 --** --** --** --**
Schoharie 33,447 31,221 486,020 32,234 15.49
Schuyler 22,613 16,270 126,620 1,602 5.67
Seneca 4,275 700 15,225 17 3.57
Steuben 28,796 18,850 257,012 16,627 9.50
Suffolk 37,293 4,628 8,106,287 9,902 217.63
Sullivan 35,175 19,263 1,388,861 124,485 43.02
Tioga 10,656 9,322 164,114 20,193 17.30
Tompkins 28,412 18,411 180,882 4,899 6.54
Ulster 167,100 165,711 3,209,335 168,106 20.21
Warren 190,750 184,783 2,479,373 1,864,015 22.77
Washington 25,995 23,599 1,198,643 312,270 58.12
Wayne 6,058 0 0 0 0
Westchester 3,914 94 106,794 541,497 165.63
Wyoming 9,555 1,652 20,395 591 2.20
Yates 8,026 6,241 63,515 5,006 8.54
New York City 234 0 0 0 0
Total 4,007,540 3,570,354 $58,665,845 $20,423,942 --
Statewide Avg. -- -- -- -- 19.73
Municipal Median *** -- -- -- -- 4.33

* Excludes payments on assessments referred to as "transition assessments" and "minimum aggregate assessments." These payments are included in the PILOTs column.

** School district taxable acreage is in adjoining county with shared school districts.

***Calculated median based on all municipalities with state land, including 321 where total payments equal zero. Among those with payments greater than zero, median payment per acre is $9.71.

Figure 1 portrays this distributional "inequity" using the technique of Lorenz curve analysis. The diagonal line in the diagram represents a distribution of tax and PILOT payments that would result from a fixed number of dollars per acre of eligible state land paid to each municipality, regardless of whether the land is currently taxable or exempt. In other words, each local government would receive payments exactly in proportion to the acreage of state land within its boundaries: if a municipality had 20 percent of the state's land holdings, it would receive 20 percent of the compensation payments. Because the actual Lorenz curve in Figure 1 departs significantly from the diagonal, it is clear that the existing distribution of payments in New York is not proportional to the state-owned acreage in each community. In fact, those communities whose shares of the total state payments comprise the lowest 40 percent have fully 60 percent of the state's total acreage. And, those communities whose shares of the total compensation together constitute 70 percent of total payments have about 90 percent of the state's land. This pattern is a direct result of the uneven payments distribution shown in Table 9, with per-acre payments in some areas very low, and per-acre payments in others very high.

Lorenz Curve of State Compensation to Local Governments for State Land (tax and PILOT payments, 1994 fiscal year)

Whether this observed distribution of payments is thought "equitable" or not depends on the observer's viewpoint. If strict equity means that all communities should receive the same payment per acre, then the existing arrangement is obviously not equitable. If equity means that no local government should be denied compensation for eligible land, the current system fails insofar as some properties are not taxable for all purposes, and some communities have exempt land that would be taxable were it located elsewhere.

Another concept of distributional equity might be payments equaling or in proportion to the taxes "avoided" by the state if its properties were exempt. Under this concept, some of the most extreme differences in per-acre compensation can be explained and 'justified." Certain communities where land is very valuable, with some in the metropolitan New York City area providing the most extreme examples, are clearly receiving the highest per-acre compensation levels under the current programs (sometimes hundreds of dollars per acre), although other local governments in the same region receive no payments if their state properties are not included under one of the tax or PILOT programs. Examples of local government units in the latter category are those Nassau County and Suffolk County municipalities containing the large and tax-exempt Jones Beach and Robert Moses State Park properties. The state's most rural areas -- where both land values and local tax rates tend to be low -- are receiving only a few dollars per acre on average because the 'avoided taxes" are thus similarly low (Table 9).

Yet another concept of equity might require payments based on "need" criteria, such as local income levels, wealth, population, or other such measures. Several state aid programs use such measures of local need as distribution criteria, e.g., education aid, revenue sharing, and emergency financial aid to certain cities. However, it is unclear which, if any, need measures would be relevant in the current context, as the orientation of all the existing programs appears to be "compensation" rather than "assistance." Therefore, no measures of local need are included in the recommendations discussed in Part IV of this report or the fiscal estimates contained in Part V, other than to note that if the state wishes to limit expenditures, one obvious way of doing so would be to set a payment threshold based on acreage of state land or the percentage it represents of the local government's jurisdictional area.

Compensation could also be paid in proportion to the amount of local services provided to state property. As indicated in Part 11, there is precedent for this concept both in New York's existing programs and in the compensation practices used in other states. However, for most state property such as forest lands and parks, the "benefits received" concept can not be investigated due to the lack of a measurable relationship between various local services and these state parcels. While it is known that relatively few local government services benefit most of the parcels in question directly (e.g., the millions of forest preserve acres), no comprehensive local government expenditure data are available to document this. However, data are available on the service charges currently levied on those state properties for which a benefit relationship has been established under existing statutes. These payments are discussed below.

Service Charge Programs

As shown in Table 10, seventeen local governments received payments for benefit assessments under Section 19 of the Public Lands Law in fiscal 1994. These payments represent capital charges associated with installing such facilities as water and sewer systems that benefit the state properties in question. The payments totaled approximately $2.75 million, or an average of about $160,000 per municipality. Nearly all the municipalities receiving payments were towns, with only one village and no cities represented (the City of Cortland did however receive payments in the prior year). The relatively large payments received by only four municipalities accounted for virtually the entire $2.75 million paid. These included the Town of New Windsor (Stewart Airport; $1.1 million), the Town of Amherst (SUNY; $0.7 million), the Town of Marcy (SUNY, prison, psychiatric center; $0.66 million), and the Town of Babylon (SUNY; $0.3 million).

Table 10
Payment of Benefit Assessments on State Property
(Public Lands Law, Section 19)
Municipality Total Payments
(FY 1994)
Towns
      Amherst $654,190
      Babylon 291,725
      Clarence 31
      Colonie 4,970
      Cortlandville 425
      Dryden 26,442
      East Greenbush 2,497
      Hamburg 332
      Ithaca 1,756
      Marcy 660,479
      New Paltz 3,810
      New Windsor 1,095,485
      North Elba 1,228
      Tusten 200
      Verona 1,062
      Waterford 7,900
Village
      Hamburg 850
   $2,753,828
Source: NYS Comptroller

The most remarkable aspect of the data in Table 10 is that so relatively few municipalities appear to be taking advantage of the opportunity they have to bill the state through the benefit assessment mechanism. The most likely explanation for this is that most municipalities levy user charges instead of benefit assessments. Charges of this latter type are billed directly to the various state facilities and administrative offices receiving water or sewer service. No figures are available for the total amount of user charges paid however, as these fees are not separately budgeted at the state level but are instead included in the budgets of the individual facilities and agencies.

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