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Why Are Our Taxes So #%*! High?
Westchester Magazine, June 2010
Paid enough taxes lately? Ask anyone who lives in Westchester, and the answer is obvious. With a mix of outrage, awe, and even a hint of perverse pride, they’ll tell you our taxes are the highest in the whole U.S. of A.! Why does Westchester pay more for schools, police protection, garbage collection, and other services financed by our tax dollars? The answers may infuriate you—even more.
By Dave Donelson
Peter Goodman, an attorney who lives in Rye Brook, is mad as hell. “My property taxes have doubled in the last ten years,” he protests. “Why, in the midst of the biggest recession since the Great Depression, do they raise taxes? It’s outrageous!”
Adelaide DiGiorgi, a 73-year-old retired realtor in Tuckahoe and President of the Westchester League of Women Voters, isn’t pleased either. “I took early retirement in the mid-‘90s, and since then our taxes have tripled. All I can say is, we can’t take it anymore.”
Can’t take what? The highest taxes in the nation, that’s what. “High” is a relative term, of course, but if the national average tax bill were as tall as a center hall colonial in Scarsdale, Westchester’s would be the height of the Ritz Carlton Tower. Even Realtor Charlene Tobin, who sells many multi-million-dollar homes in Purchase, was taken aback by one that came on the market recently with a $117,989 tax bill. As she pointed out, “You have to earn at least $235,000 a year just to pay the taxes on the house!”
According to the Tax Foundation, a Washington-based research group, we Westchester taxpayers who live in our own homes do indeed write the largest property tax check in the country, yes the country--$8,404, or nearly five(!) times the national average of $1,854. Part of that is due to the value of our homes, but they are only three times the national average. It’s the tax rates that are killing us.
Taxes are driving us away, too. “It’s ridiculous!” exclaims 64-year-old Rick Klett, who moved to Massachusetts in 2008. “If I had stayed in New Rochelle, almost my entire pension would have been eaten up by my real estate taxes!” Klett retired from a job with the Irvington School District and didn’t want to leave. “My wife was born and raised in New Rochelle, but we were being taxed out of existence.” In 1997, the couple bought a home on Interlaken Avenue in New Rochelle. The taxes were about $7,000 at the time. By the time they sold it 11 years later, the tax bill was $16,000. Today, they own a larger home (1,860 sq. ft. vs. 1,730 sq. ft.) on a much larger lot (one acre-plus as opposed to 60 X 110 feet)—a waterfront lot, no less—about 12 miles south of Boston—and pay $5,100 in taxes.
Of course, there are those who say our cost of living—not to mention our quality of life—is substantially higher than the rest of the nation. But even among comparable places, particularly those in the New York metropolitan area, we still have the dubious distinction of topping the tax charts. Nassau County is close at $8,306, Rockland is $7,798, Putnam is $6,719, and Suffolk is $6,842. Bergen County, New Jersey—just across the river--is $7,997 while Fairfield, Connecticut, is $6,051. Tax-wise, it’s cheaper to live in Greenwich than in Mamaroneck.
Westchester tax bills become even more ludicrous when we compare them to other counties in the U.S. Places that are similar to us in population, cost of living, proximity to major cities, housing values, and so forth. Like Middlesex County, Massachusetts, part of the Boston metro that’s somewhat more populous and a little less prosperous, but where county government was abolished in 1997. The average property tax bill there is about half of ours: $4,271. Or San Mateo County, California (next to San Francisco) where the cost of living is among the highest in the nation yet the average property tax paid by a homeowner is just $4,208. Or Fairfax County, Virginia, which is very similar to Westchester except it spends a billion dollars less than we do on its schools and the average property tax bill is $4,616.
High taxes are undermining the Westchester economy, according to Al DelBello, former New York Lieutenant Governor, Westchester County Executive, and Mayor of Yonkers. “It’s devastating to business. It’s not that they can’t pay the property tax, it’s that they can’t afford to hire people who live in the county. The worst effect is that we aren’t on the radar screen of companies looking to relocate or expand.” DelBello adds, “If you were a company trying to find a location for a new office or distribution center, why would you come to the highest taxed county in the United States?”
Why, exactly, do we have that honor?
As DiGiorgi says, “We want what we want.” Which means? “For many, many years, people wanted all those extra special kinds of benefits that the government took care of.” That’s the heart of the debate over Westchester taxes. We hate them, but we can’t seem to stop the spending that drives them up. Our property taxes, you see, are determined by a not-very-complex formula based on how much money our schools, village, town, county, and special taxing district(s) spend. According to the New York State Office of Real Property Services, the formula is pretty simple: the taxing body (schools, town, etc.) estimates its expenses, subtracts income like state and federal aid, sales taxes, and fees, and divides the remaining expenses over the property tax base.
Shortly thereafter, our tax bill arrives and the screaming begins.
Something to keep in mind is that a couple of things other than expenses by our schools and town government affect our tax bills. While the property tax represents the largest single source of their funding, it’s only slightly more than half. If there is a cut back in state aid (highly likely these days) or sales tax receipts fall off (you heard about the recession, right?), the shortfall is made up on our property tax bill.
What’s more, if someone else in our community gets their taxes reduced through the appeal process known as tax certiorari, we have to make up the difference. Harrison School Superintendent Louis Wool reports, for example, that they are facing $23 million in tax assessment challenges, mostly from commercial property owners, and he expects about one-third of them to go into effect. One was filed by Westchester Country Club, which recently was awarded a $2.6 million reduction. Since I live in Harrison, I’ll have to pay my share of that unless the town and school district cut expenses to offset it. I’m not holding my breath.
My town and school district, like most, have been nibbling around the edges of their spending. But the biggest portion of our tax dollars go to pay for the people who clean our streets, put out our fires, and educate our children—and the layers of management we think they need. As Greenburgh Town Supervisor Paul Feiner says, “Local government is a service provider just like a plumber or electrician and people have to decide whether they want to pay for particular services. But people want to have their cake, eat it, and not pay for it.”
There are an awful lot of people supplying services to—and paid by—the taxpayers of Westchester. Schools receive the lion’s share of our property taxes, about 60% of the total, depending on where you live. The county government splits the remainder more or less equally with the towns, villages, and municipalities, according to the NY State Controller. The Bureau of Labor Statistics says our local governments employ nearly 19,000 people, while our schools have nearly 24,000 people on staff. We can rant about the cost of fuel to operate our school buses and rave about saving two dollars a ton on rock salt for our roads, but the greatest share—about 70%--of our tax dollar goes for employee salaries and benefits.
Are we happy with the services they provide in return for that big check we write? Even the most adamant tax opponent like Tea Party participant Howard Hellwinkel, a 58-year-old small business owner in North Salem, hesitates when asked whether he’s satisfied with the value he gets for his tax dollar. “As far as our town goes, I’m satisfied,” he says. “We have garbage service, our roads are maintained very well, and we have an excellent, excellent school district. Whether we pay more than we should has to do with costs and how they’re managed.”
We must worship our kids. In the 2008 fiscal year, the average Westchester school district spent $24,000 per pupil, or way more than double the national average of about $10,000 as reported by the Census Bureau. There’s no question that our schools are good, but are they twice as good as everyone else’s?
Westchester apparently knows no bounds when it comes to spending on our schools. Last spring, about six months after the U.S. economy barely avoided falling into the abyss, voters in Westchester approved every single school budget, 37 of which included a tax increase. This year’s results weren’t known at press time, but we can be pretty sure that most of them passed again.
We don’t seem to care much about the details. The formula “good schools equal high home prices” might as well be tattooed on the forehead of every realtor in the county. Good schools cost a lot, we believe, and so we pay the bill. The question lingers, though, what exactly are we paying for?
Mostly, we’re paying for people. Teachers (about 13,000 of them), plus administrators, nurses, janitors, school bus drivers, band directors, guidance counselors, psychologists, secretaries, business managers, basketball coaches, and more—many, many more. All told, we spend about $3.5 billion on our schools according to the New York State Controller, and more than two-thirds of that goes for salaries and benefits. The U.S. Bureau of Labor Statistics says we paid school employees more than $2 billion in 2008. Benefits added another $680 million to the bill.
There are other major expenses, too, of course. Debt service in 2008 was $192 million and bussing cost $163 million, and plenty was spent on computers, football helmets, and big red pencils, but the overriding cost of getting our kids into an Ivy League college lies in the people we hire to do it.
Good schools don’t have to cost a lot, though. Residents of Fairfax County, Virginia, send their kids to schools that were operated for $2.2 billion in 2008. The same year, we spent $1.3 billion more—to educate fewer kids. Oh, as I mentioned earlier, their average property tax bill is $4,600, or about half of ours. Other than that, the two counties are remarkably similar in many ways. Fairfax is a suburb of a major city (Washington, DC), has 1,010,000 people versus our 950,000, median household income of $126,000 against our $111,000, and an average home value of $556,000 whereas ours is $582,000. The cost of living is comparable, too. Their schools had 165,000 pupils in 2008; we had 145,000. Excluding debt service, we spent $24,000 to educate each of ours—Fairfax spent $13,000.
Yes, but Westchester schools are nationally known. They have stellar reputations. What college admissions officer never heard of Scarsdale High? Or Horace Greeley? Or Edgemont High? But… hold on…so is Fairfax County. By most standards, their academic achievements were just as good as ours, if not better. Fairfax students in the class of 2008 had an average combined SAT score of 1654. This year, the average high school in Westchester scored 1598. The four-year graduation rate was the same for both counties: 91 percent, and about the same percentage of students went on to college: 93 percent for Fairfax, 94 percent for Westchester. On the June 2009, Newsweek Magazine list of America’s Top High Schools, Fairfax had 11 schools in the top 200, while Westchester had eight: Rye (ranked 64), Bronxville (65), Harrison (74), Chappaqua (104), Pleasantville (118), Dobbs Ferry (130), Yonkers High (138), and Edgemont (162). So what accounts for the difference in the cost of the schools?
For one thing, Westchester’s 13,000 teachers belong to NYS United Teachers while non-teaching support personnel are members of Local 1000 of the Civil Service Employees Association. Virginia is a right-to-work state where unions aren’t a big factor. The pay scales reflect it, too. In Katonah, for example, beginning teachers earn $52,000 whereas those at the top of the scale make $138,000. In Fairfax, it’s $47,000 to $99,000. When you multiply it times the number of teachers in Westchester, the difference hits your tax bill like a Big Mac hits your waistline.
Salaries vary widely depending on the district, the teacher’s experience, and many other factors, but the average teacher here earns about $89,000. The national average teacher salary was $51,000 in 2006, the latest figure available from the American Federation of Teachers. The range is tremendous between beginning teachers and those with more experience and education. Taking the average, though, we’re paying our teachers well over a billion dollars a year.
“It sounds like a lot, but have you looked at the cost of living in Westchester?” says NYSUT spokesman Carl Korn. “Try buying a home on a teacher’s salary!” When you look strictly at average salaries, Korn is close to correct. According to City-Data.com, Westchester’s cost of living index is 157 (the US average is 100). Calculated the same way, our teacher’s salary index is 175 vs. the US average.
It’s not just salaries, though. The two costliest benefits are health insurance and retirement. Like in every other sector of our economy, health insurance takes an every-increasing bite out of school budgets. Overall, it represented $335 million in 2008. Taxpayers bear almost the entire burden of health insurance for school employees. Statewide, teachers pay 10 percent to 13 percent of their insurance premium. Katonah’s contract with the union calls for an 11 percent employee contribution. Non-teaching personnel pay a comparable share.
Funding pension plans is a major expense—and a ticking time bomb. “The pension system is structurally broken and not sustainable,” says Harrison School Superintendent Louis Wool. “In a bad year that line can blow a budget to smithereens. In a good year, you’re still required to make a contribution, so you don’t get time off in the good years, and you get murdered in the bad years.” For the 2010-11 budget year, Harrison’s pension costs increased by a million and a half dollars, a 45 percent increase. “That’s well over a full percent on our tax rate and there’s no way for me to mitigate that impact no matter how well I plan.” For county schools as a whole, pension funding was $158 million in 2008.
The problem is that the state-mandated pension plans for school district employees are defined benefit plans, which means the amount of future benefits is guaranteed and has to be funded by the taxpayers and/or investment income. When stocks and bonds take a big dip (remember 2008?), the state pension plan does, too, and school districts, towns and villages, and other participants get a larger-than-normal bill. Retirees are also living longer, so their guaranteed benefits are paid for more years, which means the fund has to be replenished more generously. “Schools have zero leeway when it comes to pension plans,” Lisa Davis, Executive Director of the Westchester-Putnam School Boards Association, explains. “The terms are entirely mandated by the state.”
Teachers are covered by the Teachers Retirement System and others participate in the Employee Retirement System. Current employees contribute an insignificant amount, although a recent change in state law created a new level (Tier V) that requires a 4.85 percent annual contribution by teachers who start in 2010 and raises the minimum retirement age to 57 with 30 years of service. As Wool says, however, “Tier V won’t have an impact on school districts until my children have children.”
Another major difference between Fairfax County and Westchester schools is administrative costs. Fairfax County has one school district. Period. Westchester has 40. They pay one superintendent of schools, we pay 40 of them. As well as at least 40 assistant superintendents, system-wide technology directors, purchasing agents, transportation directors, and other central office staffers with the attendant overhead.
All that over head is costly. The superintendent of schools in Fairfax County earns $292,469 annually to manage about 200 schools with 165,000 students. Three of our superintendents (Scarsdale, Rye City, and Tuckahoe) make more than he does. The largest of those three districts, Scarsdale, has seven schools with 4,800 kids. Tuckahoe has two schools with about 1,000 students. Taken together, our 40 superintendents made over $10 million in 2009. Efficient we’re not.
The answer would be consolidation, but we’re not very logical when it comes to our schools. Davis says consolidation of districts may not be politically feasible (or even desirable). “Even if Westchester had just one large school district, you’re not going to dramatically change your biggest cost unless you enlarge class size. Education is very people intensive and that’s why it’s very expensive.” Class sizes in Fairfax, though, are equivalent to ours, according to Sperling’s Best Places to Live, while National Center for Education Statistics data for 2007-‘08 shows Westchester with 1,900 district-wide administrators and staffers. Fairfax had 1,200.
“A big part of our cost savings is economy of scale,” explains Fairfax County Public Schools spokesman Paul Reigner, who also happened to have worked for the NYS Department of Education a few years ago. “You’ve got all these different school systems while we have one big one. We have one superintendent, one school board, one leadership team with all the assistant superintendents operating one very large school system. In New York, each school system not only has its own superintendent, but its own finance person, its own HR person, etc., etc., etc.”
State regulations and mandated services drive up other costs for Westchester’s schools, too. Davis says transportation is one example. “It used to be ninety percent funded by the state,” she says. “It’s next to nothing now. In a place like northern Westchester, the state may say a kid can walk two miles to school, but not up there where there are no sidewalks—like in a lot of Westchester.” The state mandates that the farthest distance a student can walk is two miles for K-8 and three miles for 9-12. Some districts, like Lakeland, prohibit students walking to school at all because they deem it too unsafe. The cost to the district? Nearly $9 million or about $1,200 per pupil. Keep in mind the district covers 42 square miles.
Then there is special education. “New York state far exceeds the federal regulations, so the provision of services is much more expensive than in other places—and our results are no better,” Davis says. “The NYS Council of School Superintendents did a study that showed that we don’t get better results for our money despite the fact that we spend more.”
Like so much of the story of Westchester schools, the results are great, but so is the cost. Between state and federal mandates, compulsory pension contributions, and the legacy of hefty union contracts, not to mention an inefficient patchwork of entrenched hyper-local school districts, our tax bills aren’t likely to shrink any time soon.
The other 40 percent of our tax bills are bloated in much the same way. According to the New York Attorney General, Westchester has 340 taxing entities—not counting school districts. We pay taxes to support one county government, six cities, 19 towns, 23 villages, 28 fire districts, 16 drainage districts, 21 lighting districts, 15 park districts, 5 garbage districts, 54 water districts, 141 sewer districts, and 21 districts that defy definition. Gee, do you think there might be some overlap?
“It’s self-evident,” says DelBello. “The local government structure of villages, towns, cities, and counties, plus special taxing authorities, has created innumerable duplications. The multiplicity of services is horrendous. Forty-eight police forces? Forty school districts? It defies logic.”
As one example, DelBello points out that huge nationwide institutions like banks service millions of loans through centralized computer systems, yet we need a separate tax assessor, tax collector, and various clerks and support staff for every town.
“You won’t find a single person who will disagree that there are too many layers of government,” adds Richard Olver, a former trustee for the village of Croton. “But no one will agree with any proposal for change. Any particular plan will result in somebody’s ox getting gored.”
Westchester voters bend over backward to make sure their bureaucracy is as local as local gets, to paraphrase News12’s catchy slogan. Dobbs Ferry, for example, could save more than $2.5 million per year (about 16 percent of the total village budget) by combining police force with the Town of Greenburgh’s as recommended in a recent study. The town fathers didn’t go that far, but they did suggest combining dispatchers. They were roundly defeated in the November election. The village had tried earlier to share some police services with both Ardsley and Irvington, but was shot down both times.
If ever there were a poster child for questionable government structure, Greenburgh would be it. There are six villages with a total population of 45,000 within the town, which itself provides services to a large unincorporated area with about 42,000 more residents. The town budget was $105 million in 2008, the villages’ $108 million. The town has a supervisor (earning $128,000), police chief ($140,000), and town clerk ($82,000)—as does each village. The salaries of those three positions at the town level are $350,000. The combined salaries for the same three positions in the six villages? It’s $2.2 million. Oh, and don’t forget the mayors and village trustees when you’re looking for oxen to gore.
“The average person likes that they know the mayor and can call him if their garbage isn’t picked up,” Greenburgh Supervisor Feiner says. “Or if there is a crime spree, you feel safer if you know the police chief. In a lot of smaller towns, years ago, if you got a traffic ticket, you called somebody and it disappeared. That’s not the way it is now, but people still like to think so. A lot of people are willing to pay a premium for inefficient government they feel is more responsive.”
Even in the face of that attitude, Feiner is convinced there are savings to be achieved by consolidating some functions. The town recently commissioned a study of possibly combining three fire districts that serve 70 percent of the unincorporated portion of Greenburgh. “The police department that covers the entire unincorporated part of the town costs us $23 million,” he says. “The three fire districts cost $28 million.”
While attempting to centralize some functions at the town level, Feiner advocates eliminating the county government. His reason? Because nobody identifies with it so it would be the easiest to do away with politically. “If the state would allow us, it would be possible.” He cites Connecticut, Rhode Island, and Massachusetts where county governments were eliminated. “The county government is patronage heavy,” he says. “A lot of the services could be handled by the local governments or the state.” Without a major revision in state law, however, it’s not going to happen.
The other big driver of local government taxes is the same as schools: union contracts. “There is no question that the municipal unions just browbeat our legislators and they cave into it,” DelBello says.
Feiner adds, “Local government doesn’t really have control over the entire salary structure.” If local administrations and employee unions can’t come to agreement on contract terms, he notes, they are required by law to go to arbitration. “All the arbitration panels are awarding about four percent increases to all the police and fire departments before you add on longevity and other costs. In real dollars, many of the police and fire salaries are increasing in the range of five to six percent per year.” And how much, ahem, did your salary go up this year?
By state law, public employees can’t strike. On the other hand, the law also says they continue to receive all benefits and annual step increases to salaries while they negotiate a new contract, so there’s no big incentive to settle.
Westchester County Association Advocacy Director Amy Allen points out that the average public sector salary in the Mid-Hudson region that includes Westchester was $53,445 last year, about 6 percent above the average salary in the private sector. What’s more, state and local employees received $1.17 in new benefits for every dollar per hour pay increase from 2002 to 2008, compared to 58 cents for private sector workers. Is it any wonder the WCA is pushing for changes in tax policies at the state and local level? Their campaign slogan: “Call to Action.”
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