Seventh in a series on the 2011 budget.

Often the first step to solving a problem is understanding its source. Conversely, false impressions of a problem’s source can confuse debates and impede constructive solutions.

In my prior posts on the 2011 budget, I described the various factors that most significantly shape the City’s finances and drive our current fiscal challenges. Today, I confront some of the persistent myths that surround New Rochelle’s municipal finances.

Myth: New Rochelle has higher property taxes than other cities in our region.

Fact: Among Westchester’s cities, New Rochelle has the lowest municipal tax rate.

Now don’t get me wrong. Taxes in New Rochelle are high, too high. But this is a regional phenomenon, not a local one. And, in fact, as the chart below indicates, New Rochelle’s City property tax rate is significantly lower than that of the other urban centers of Westchester. Measured against the market value of property, White Plains’ tax rate is about 17% higher than ours, Peekskill’s about 63% higher, and Mount Vernon’s about 100% higher!

Comparative Tax Rates (2010)

Myth: New Rochelle’s finances are mismanaged.

Fact: New Rochelle’s financial oversight has been repeatedly applauded for its professionalism.

The Government Finance Officers Association has consistently recognized New Rochelle for its excellence in financial reporting, a testament to the professionalism of our finance staff and their conservative approach to budgeting. The City is independently audited every year (you can download the latest audit here), generally receives high marks for the oversight of its finances, and moves quickly to correct any opportunities for improvement. Furthermore, as noted in my last post, New Rochelle’s government is quite lean, measured both in terms of municipal employment and in terms of municipal expenditures.

Myth: Our budget problems result from tax giveaways to developers.

Fact: Recent development has added to our tax base and greatly benefited taxpayers.

This is the biggest of the myths and the most frequently repeated. It is a subject of conversation during every budget cycle, the dominant theme on radio call-in shows, a preoccupation for many who follow local government, and a predictable talking point in every election. In fact, I often feel that we spend more time re-debating old arguments about fifteen-year-old development agreements than we do discussing options for the future. That’s not good.

First, contrary to rumor, the majority of New Rochelle’s recent projects are now paying full taxes. Here is a complete break-down:

Full Taxes (No Abatement Ever Received)

  • Weyman Avenue Retail (excluding Home Depot & Costco — see below)
  • New Roc City — Lofts at New Roc
  • Trump Plaza Apartments
  • Palmer Center
  • Palmer Square
  • Davenport Lofts on Main
  • 543 Main Street Apartments
  • Shoprite (formerly Home Depot Expo)
  • Avalon — Retail

Full Taxes (Temporary Abatement Expired)

  • Weyman Avenue — Home Depot & Costco
  • New Roc City — Marriott Residence Inn

Minimal Abatement

  • Trump Plaza Retail (payments in lieu of taxes set at full tax equivalent, increasing annually at inflation rate)

Expiring Abatement

  • New Roc City — Entertainment & Retail (partial abatement phasing out, will fully expire in 2014)

Significant Abatement

  • Avalon — Residential (pays percentage of net operating income in lieu of taxes)

If you look closely at this list, you will see that nearly all the major developments are either paying full taxes or well on their way to doing so. The notable exception is the residential component of Avalon, which received a large incentive package from the City to become the luxury housing “pioneer” in downtown New Rochelle.

Taken together, these developments have a significant positive impact on municipal and school budgets:

  • For the City, the various major projects completed in the past fifteen years generate net income of about $4.7 million every year. Without those projects, the City would have to raise taxes by more than 10% to bring in the same net income.
  • For the School District, these projects provide annual net income of almost $1.3 million. That’s after accounting for the cost of educating public school students who live in newly-developed apartments.
  • The County, by the way, nets about $1.5 million per year from these same developments, making the total benefit for property taxpayers roughly $7.5 million per year.

Net Annual Taxpayer Benefit: $7.5 Million

If you’re interested in the specific numbers on which this summary is based, look here.

Critics ignore these positive figures. Instead, they calculate the gap between actual abated tax levels and theoretical full tax levels, and then call it a loss. But their assumption is that, in each case where incentives were used, an identical project at full taxes was a real option. New Rochelle’s history suggests otherwise — if the City hadn’t intervened, our downtown’s dominant features would still be rubble-strewn empty lots and an abandoned mall.

Why Myths Matter

If we base our decision-making on a false narrative that mischaracterizes New Rochelle’s history, misstates the real choices available to us, or misreads the impacts of those choices on our budget, it will be far harder for all of us to build a better future.

So the next time you hear any of the myths above, please respond with the facts. New Rochelle’s financial management, conservative budgeting, and successful (but still unfinished) economic development strategy have helped give our community the lowest property tax rate among Westchester’s cities.

My next and last post in this series will take a look at the City’s final adopted budget.