About 25 percent of property values in New York are exempt from paying taxes, putting added strain on municipalities, particularly small ones in upstate, a report today from Comptroller Thomas DiNapoli found.
The report comes as Moody’s Investment Services this week warned about additional credit downgrades for struggling local governments in New York.
DiNapoli said the tax-exempt property in New York, including colleges, prisons and Native American reservations, has a value of as much as $680 billion and increases to $826 billion when the estimate includes properties exempt from multiple taxes.
“In an era of limited resources, the impact of property-tax exemptions complicates the financial picture of our local governments,” said DiNapoli said in a statement.
The percentage of exempt property value can be as much as 65 percent in some communities. In Rensselaer, near Albany, 65 percent of its property is tax exempt; it’s 62 percent in Ithaca, ranking as the fourth highest in the state among cities.
Ithaca is home to two major colleges, Cornell University and Ithaca College. The schools have a voluntary payment plan to local governments, but DiNapoli warned about the uncertainty of such deals.
“The experience of the few local governments that did so in New York State underscores the difficulty with voluntary contributions,” DiNapoli’s report said. “On the City of Ithaca, Cornell’s payment is based on what the university thinks it can afford, rather than on any assessment.”
The report also noted that other cities had a high percentage of exempt property, which includes non-profit organizations. Albany, home to the state Capitol and state government buildings, had 59 percent of its property exempt. It was 51 percent in Syracuse, 37 percent in Buffalo and 36 percent in Yonkers.
Among counties, the highest percentage of exempt property value is in Tompkins County, home to Ithaca, at 40 percent. It was followed by Seneca County at 38 percent; St. Lawrence at 38 percent and Lewis at 37 percent.
In a separate report this week, Moody’s warned that credit downgrades are likely to outpace upgrades for local governments in the near future. A downgrade hurts a municipality’s ability to borrow money, leading to higher interest rates and thus higher bonding costs for capital projects.
Eight New York local governments have experienced downgrades of three notches or more since 2008, Moody’s said. They included Fishkill and Poughkeepsie in Dutchess County; Rockland County; and the East Ramapo school district in Rockland.
Still, Moody’s praised the fiscal management by local governments and the state, saying they have adequately handled the national recession and a property-tax cap implemented in 2011 that limits revenue.
“New York local governments have a demonstrated history of strong fiscal and debt management,” said Robert Weber, a Moody’s analyst, in a statement.