Can there be meaningful property tax relief? New York should consider a constitutional convention

Acting on the recommendation of Commission on Property Tax Relief, governor Paterson proposed a bill that would cap a school district's tax levy at the lesser of 4% or 120% (Tax Cap) of the CPI annually, with exemptions for capital improvements or failure to meet the local expected contribution under the state aid formula. In addition, schools can "bank" unused increases for additional increases of up to 1.5% annually. The Tax Cap implicates Articles VIII (Local Finances), IX (Local Governments), XI (Education), and XVI (Taxation) of the NYS Constitution. Thus, any real property tax reform of school taxes must navigate these provisions. Attempts to control expenditures and consequently taxes - both at the state and local level -have required constitutional amendments for direct caps, or statutory enactments for indirect limits. Tax shifting moved the tax burden to commercial, industrial and vacant property, or to the state itself. For caps, New York has employed a constitutional convention or amendment. Constitutional amendments comport with two concepts: the "home rule" provisions of the NYS Constitution and legislative delegation. Home rule derives from the historical desire to protect local customs and management through local elective powers. See State of New York v. Metropolitan St. Railway Company, 174 N.Y. 417, 431-435 (1903). The incorporation of these provisions in the New York Constitution evidenced an intent to prevent centralization of power in the state and to continue, preserve and expand local self-government. This municipal or "home rule" power is preserved in Article IX of the New York Constitution. NY Const, Art IX, §2[b][2]. The state may enact a general law without implicating the home rule question. For a special law (applicable to one or more, but not all municipalities) requires a home rule message or must fit within a recognized exception. In Wambat Realty Corp. v. state of New York, Judge Cardozo set forth the prescription by which the state may freely legislate, without home rule implications, where state interests are involved "to a substantial degree, in depth or extent" notwithstanding the impact on local concerns. Historically, the administration of education has been a state responsibility, and thereby, somewhat exempt from home rule restrictions. NY Const, Art XI, §1; see also Bd. of Ed. of the City School Dist. Of the City of New York v. City of New York, 41 N.Y.2d 535, 542-543 (1977). However, tax levy impositions may violate the delegated authority of the legislature to a school board (an entity recognized under the home rule statutory provisions.) Limitations on school budgets is also subject to the education article (XI) of the NY Constitution. Thus, challenges to the financing of school budgets has been the subject of many constitutional challenges in this State. See, e.g. Campaign for Fiscal Equity, Inc. v. State, 8 N.Y.3d 14 (2006); Board of Ed. of Levittown Union Free School District v. Nyquist, 57 N.Y.2d 27 (1982). A sound and basic education of children is a state responsibility; any reform impacting this guarantee may be subject to constitutional attack. Id. Accordingly, should the Tax Cap have a negative impact on educational standards, it too could be susceptible to challenge. Regarding the delegation of taxing authority, it is clear that the power to tax lies solely with the legislature, however, it has delegated that authority to legislative bodies of municipalities and quasi-municipal corporations (such as school districts). City of New York v. State of New York, 94 N.Y.2d 577, 589 (2000). Once delegated, the power of taxation may be delegated only to entities or persons that are accountable to their constituent voters in order to protect against erroneous and oppressive taxation. See Greater Poughkeepsie Library District v. Town of Poughkeepsie, 81 N.Y.2d 574, 579-580 (1993). Legislation which undermines a municipality or bonafide taxing entities' (such as a school district) authorized power by delegating it to an unaccountable entity, violates the constitutional delegation of power to tax. Id. Thus, the legislature's delegation authority is implicated where a statutory provision delegates certain budget decisions affecting the tax levy to be solely within the province of a state agency. However, once a delegation is made, it cannot be altered, without further statutory action. Reform of New York's intricate and antiquated real property tax laws requires careful consideration of its implications. While the efforts to ease the pressure of property taxes on owners is applauded, it should be expanded to include all sectors of real property. To accomplish true property tax relief, New York should consider a constitutional convention that brings the NYS Constitution and its governmental structures into the 21st century. Mark Lansing is a partner and Jessica Norgrove is an associate at Hiscock & Barclay, Albany, N.Y.