How Low Will City Go: 3% Tax Increase Or Less in 2012?

The City Council is wrestling with several unattractive options in settling on a budget for 2012. The City Manager’s final proposed budget is a bare bones one: no money for capital expenses, no money for union contract arbitrator’s judgments, and no extra money for the library to remain open six days a week.

And yet, with all of these cuts, the proposed tax rate increase is still close to 3%. Several factors are driving the increase. First, the assessed value of Rye property has fallen for the third year in row. Just to make up for that shortfall requires a .7% tax rate increase. Second, pension costs will increase by approximately 20% in 2012; and finally, health care costs for City workers will rise by about 15%.

Oddly enough, a 3% tax rate increase stays below the state mandated tax cap of 2% on tax levies, the money the City actually raises. The calculation is extremely complex, involving previous years’ capital spending, and other factors, that equate to this result: if the Council voted for a 3% increase, the actual levy would be below the 2% tax cap.

The new majority on the Council, led by Mayor Doug French, promised to keep tax increases no greater than inflation. He suggested, at the December 7 Council meeting, raising the estimates for sales tax, mortgage tax, and fees; while cutting some supplies, to reach a tax rate increase of approximately 2.5%. Councilwoman Suzanna Keith asked what it would take to keep the tax rate increase to just .9%.

Both City Manager Scott Pickup and Comptroller Jean Gribbins warned that it would be irresponsible to raise revenue estimates. They fear that if there is a shortfall in revenue, the City has no realistic fund balance to draw on. Pickup and Gribbins both raised the issue of the City losing its AAA bond rating if it strips the budget too closely.

All will be known at the December 21 meeting, when the Council must pass next year’s budget.

— Robin Jovanovich and Jim Byrne

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