New York’s Local Revenue Sharing Aid Program is Broken:  How to Fix It

Most New Yorkers are aware that the state has a cap on local property taxes that has effectively slowed their growth.  But few know that residents of a few large cities benefit from a multi-million-dollar infusion of state dollars that limits property taxes, while residents of smaller cities, towns and villages get far less help.  Because of this, residents of smaller cities pay a substantial property tax penalty compared with their suburban neighbors, one that residents of Buffalo, Rochester and Syracuse do not pay.

Among New York’s 25 most highly taxed municipalities, the State’s $714 million AIM revenue sharing program has a highly variable impact on property tax burdens. Without AIM aid, the property tax on a $150,000 home would be $4,500 in Buffalo and $4,827 in Binghamton.  With AIM aid, the Binghamton homeowner would save about a thousand dollars while savings to the owner of a similarly valued home in Buffalo are nearly three times that. Within the Rochester MSA, AIM saved owners of a $150,000 Rochester home $2,043 while Genevans with a comparable home—and a higher tax rate than Rochester without AIM—save only $735. Why should the tax break vary so much?

Residents of villages with high tax burdens fared even worse.  In Ellenville, the tax on a $150,000 home would have been $4,155.19, but AIM only provided a benefit of $38, bringing the property tax bill down to $4,118.

Note the data in this report is from the New York State Comptroller’s Office, Financial Data for Local Governments, 2017.

City taxes, except for Rochester, Syracuse and Buffalo are typically far higher than in surrounding suburbs.  In the Albany metropolitan area, for example, residents of the City of Albany owning a house valued at the metropolitan area median price would pay $1,788 more than in the neighboring town of Colonie.  Schenectady residents pay $2,624 more than in the neighboring Town of Niskayuna.  Residents of Utica pay $1,786 more than New Hartford homeowners.  In effect, the state’s property tax structure imposes a substantial penalty on people who chose to live in most of its cities.

The AIM program provides enough aid to even out disparities in property tax burdens between large cities like Buffalo, Rochester and Syracuse and their surrounding suburbs, but falls far short of providing enough help for smaller cities like Albany, Troy and Geneva.    The gap in property tax rates between Rochester, Syracuse and Buffalo and their suburbs is about $2 or less.  For most cities, AIM does relatively little to reduce the gap between cities with high tax rates and lower tax rates in towns and villages surrounding them. For most cities the gap is $10 or more – $1,500 on a $150,000 home.  The gap between Buffalo’s property tax rate and neighboring towns was $1.22.  For neighboring Niagara Falls, the gap was $14.63 per thousand of full value.  The gap between Syracuse’s property tax rate and neighboring towns was fifteen cents.  For nearby Utica, the gap was $13.48.

In a recent post “AIM Aid Needs an Overhaul” in the Beacon, Kent Gardner argues that “We would think that AIM aid would be driven by a formula based on community need. If that’s the case, the formula seems to work poorly.” The existing AIM program reflects a series of past legislative bargains, responding to perceived needs that were identified many years ago that may no longer exist.  The practice of allocating aid based on a combination of prior program funding and additional criteria results in a jumbled funding pattern.

AIM As a Source of Municipal Revenues

AIM is an important source of revenue for cities.  In a few places, particularly large cities like Rochester, Buffalo and Syracuse, state revenue sharing through AIM generates far more revenue than property taxes — in the case of Buffalo and Syracuse, about twice as much.  For many others, AIM aid is important, but is a smaller contribution than are local property taxes.  In Albany, AIM provides revenues equal to 22% of what local property taxes generate.  In Binghamton, AIM generates 25% of what local property taxes provide.

For towns and villages, AIM aid is less significant, averaging less than 3% of local property tax revenues.

Differences in Local Tax Burdens

Municipal taxes vary substantially in New York State. Homeowners in the first quartile paid about $550 in municipal taxes in 2017 (not including school or county taxes).  Those in the highest quartile paid about $4,100.  AIM revenue sharing aid did reduce taxes in high tax municipalities more than in low tax locations, but the assistance was not large enough to substantially reduce the difference in taxes.

Much of the difference in property tax rates between communities reflects regional differences in property values.  Home values in the Albany-Schenectady-Troy metropolitan area are about 50% higher than those in other metropolitan areas.  Values in Nassau and Westchester Counties are about double those in Albany-Schenectady-Troy and triple those in other upstate metros.

Because of the large differences in regional housing prices, tax equity between municipalities should be addressed regionally – within counties, rather than statewide.  Statewide comparisons overwhelm differences in tax rates within housing markets, distorting our understanding of tax impacts within them.  It should be noted that housing prices vary significantly even within counties.  City housing prices in most cases are lower than in suburban areas.
Property taxes are based on wealth derived from property ownership.  But, residents typically pay taxes from their incomes.  Median household incomes vary across the state, but not as much as housing prices.  Incomes in Albany-Schenectady-Troy are about 20% higher than in Utica-Rome and Buffalo, and about 13% higher than in Rochester and Syracuse.  Household incomes in Nassau County are 60% higher than in Albany-Schenectady-Troy, while incomes in Westchester area about 33% higher.  Municipal (City, Village and Town) municipal property taxes per household are similar in Binghamton, Syracuse and Rochester but taxes in Buffalo-Niagara Falls were about 30% higher than in most other upstate metros.   Per household municipal property taxes in Nassau and Westchester were about almost twice as has as in most upstate metros.  Overall, property tax per resident by cities, towns and villages tracks household income more closely than home values.

Within metropolitan areas, the difference in household incomes is much greater than the differences between metros would suggest.  In the Rochester metropolitan area, median incomes range from $31,700 in the Village of Penn Yan to $110,544 in the Town of Pittsford.  In the Albany-Schenectady-Troy metropolitan area, the range is from $34,495 for the Village of Cobleskill to $105,398 for the Town of Niskayuna.
All upstate cities, except for Saratoga Springs had median incomes per household that were lower than the upstate average.  But large cities like Buffalo, Yonkers, Rochester, Syracuse get far more than can be justified based on median household income relative to other cities.

Although Buffalo, Rochester and Syracuse each have about the same household incomes, Buffalo gets more aid per household ($1,458) than either Rochester ($1,024) or Syracuse ($1,290).  Niagara Falls ($835), Lackawanna ($844), Rome ($708), Utica ($686), Troy ($614) and Binghamton ($463) also get less aid per household, despite having similar median household incomes.  Jamestown, which is the city with the lowest median household income gets $358 per resident compared to Buffalo’s $1,458, even though its median household income is lower.

On average, AIM benefits per household were much smaller for villages and towns than for cities, averaging $17 compared with $756 for cities.  But, like AIM assistance for cities. AIM assistance for towns and villages with similar median household incomes varied substantially.  For example, the Village of Kaser in Rockland County had a median household income of $17,564 and received $17 per household in AIM assistance.  Two towns in the Adirondack forest preserve received much more.  The Town of Newcomb, with a median household income of $46,500 received $752 for each household, and the Town of Long Lake which had a median household income of $55,795 received $766.

Reforming AIM Revenue Sharing

Reducing the large disparity in tax rates between cities, towns and villages with high property taxes and those with lower tax rates should be a priority for reform of the current AIM revenue sharing program. Cities have been coping with losses of population for many years.   Public concerns about public safety, deteriorating housing stock and school quality as well as racial, ethnic and religious fears can discourage home buyers from considering city locations.  Attaching a significant property tax penalty to cities and other high tax municipalities further deters housing consumers.

This table compares municipal tax rates for cities and towns (including special districts) in metropolitan areas.  It also shows the 2017 municipal property tax based on a median priced home (source: www.zillow.com) in the metropolitan area.  (Note that school and county taxes are not included here.  Village taxes were also not included because village taxpayers also pay town taxes, which would have made calculations much more complex.)   For example, in the Buffalo metropolitan area, the municipal tax on a median priced home in Buffalo, Erie County would have been $296 more than the average for towns in the Burralo-Niagara Falls MSA.  But, home owners in smaller cities in the MSA saw much larger differences.  Residents in Niagara Falls would have paid $1,868 more, while residents of Tonawanda would have paid $1,598 more than average town residents.

To make the state’s AIM revenue sharing program more effective, the State legislature could consider increasing assistance to high tax municipalities.  As a hypothetical example, the legislature could provide enough additional revenue sharing aid to reduce the maximum tax rate differential to thirty percent more than the average for towns (including fire districts) within a metropolitan area or county.

This table shows that increasing AIM aid to ensure that the municipal property tax rate for every locality in a county to no more than 30% more than the average for towns, villages and special districts  in a metropolitan area or county would even out the burden on in different localities.  The most dramatic case is that of the City of Schenectady, which would see taxes on a median priced home decrease from $3,504 to $1,274. Troy taxpayers would have substantial savings as well – about $1,800 on a median priced home.   Utica taxpayers would save nearly $1,500.  Again, note that there are variations in median home values within counties.  Home values in most cities are lower than in most suburbs.

Conclusions

Currently, New York property taxes impose a substantial penalty on residents of municipalities with high taxes.  Cities, other than Rochester, Syracuse and Buffalo, face a significant disadvantage in attracting homebuyers because property taxes in cities are typically thousands of dollars higher than in surrounding communities.  High property tax rates can reduce home values in a municipality because tax rates factor into their affordability.

Remedying the problems with AIM would be simple, though politically difficult.  A uniform approach to cities, towns and villages that provides enough funding to reduce the tax penalty for living in high tax cities and other localities to a few hundred dollars for a typical taxpayer would go a long way to resolving the problem.  The approach should focus on differentials within housing markets – metropolitan areas or counties, not against statewide averages, since home buyers and owners are primarily interested in tax differentials within the areas that they might consider choosing.

The cost of making AIM more effective would be $510 million.  But the important point is that an effective revenue sharing reform would not add to overall state and local spending. Instead, by reducing local tax bills and moving costs to the state, it would even out tax burdens paid by residents for local government services.  $510 million is a significant amount of money for state government to raise.  But the cost should be viewed in context.  Last year, state school aid increased by $995 million.  And, a reform to AIM need not be implemented all at once.  Instead, it could be introduced gradually.

The State’s AIM revenue sharing does not address another large inequality that results from local government reliance on property taxes to pay the cost of local services.   Because property taxes tax the value of homes and other real property in a community, they do not reflect ability to pay, which, for households, depends on income.  Because there are large income variations within every municipality in the state, some homeowners face a substantial burden in paying property tax bills.

The state does offer one program, the STAR tax credit, that provides property tax relief to homeowners.  The program has one income sensitive element, available only to seniors, that provides additional assistance to homeowners with incomes below $86,300. Additionally, homeowners who itemize deductions receive larger deductions if they have larger property tax bills.  But the state could consider additional mechanisms to aid low income householders with high property tax burdens by extending property tax deductions to non-itemizers or by structuring the STAR tax credit to be more progressive.




How the State Senate Gerrymander Ultimately Hurt Upstate Residents

The November election brought a marked change in the composition of the New York State Senate that will have significant implications for upstate New York residents.  Tom Precious in the Buffalo News noted, “Majority party rules and minority party lawmakers are left with table scraps when it comes to funding and policy matters.  As a result, millions of upstate residents could see themselves lose the sole remaining seat at the table in closed door Capitol talks…”[1]

Kent Gardner wrote in the Rochester Beacon, “A New York State Legislature wholly controlled by downstate interests won’t stop sending education aid Upstate or close the state parks…. Complete control of the NYS Legislature by downstate reps will change things over time. Party aside, upstate has a lot at stake in this election.”

This post will seek to answer two questions:  Why did Republicans lose control of the State Senate, and why does upstate have so little majority party representation?

Republicans had controlled the State Senate from 1966, with only a brief break in 2012, when Democrats gained a majority and then splintered into two factions – one of which joined the Republicans to form a majority.  But in 2018, voters decisively gave control to Democrats, who will hold 40 of 63 seats.  The loss of Republican control will significantly reduce upstate’s representation in the party controlling the Senate, since only three seats outside the New York metropolitan area are held by Democrats.  In the most recent legislative session, 18 upstate Senators were in the Republican/Reform Democrat Senate Majority.

For many years, the Republican Senate majority was composed of a coalition of upstate, Long Island and Hudson Valley members.  In 2000, Republicans maintained control in the State Senate by winning 35 of 61 districts in all parts of the State – 17 in upstate New York, nine on Long Island, five in New York City, and four in the Hudson Valley portion of the metropolitan area.

In 2018, Senate Republicans won only three seats on Long Island, one in New York City and one in the Hudson Valley portion of the metropolitan area.  Only in upstate New York did the party increase its strength – to 18 seats.

The regions that moved towards the Democratic party – Long Island, New York City and the lower Hudson Valley — had substantial Democratic party representation by 2018.  Two-thirds of Senators from Long Island will be Democrats, all but one Senator in New York City and all but one in the Hudson Valley portion of the metropolitan area will be Democrats.

In upstate New York, only three of 21 State Senators will be Democrats.  Ironically, had the Senate’s legislative district apportionments more accurately represented voter party preferences, about half of upstate’s Senators would be Democrats.

Upstate’s majority party representation in the State Assembly will now be stronger than in the Senate.  Twenty-three of 48 upstate seats in the Assembly will be held by Democrats.[2]

Differences in Regional Party Affiliations

In New York City and in the lower Hudson Valley, Democrats and allied parties hold commanding registration advantages in 2018. Of those affiliated with a political party, 87% were Democrats in New York City and 62% in the lower Hudson Valley.  Long Island and Upstate New York are competitive – Democrats and allied parties are 52.5% of Long Island voters whore were affiliated with a political party in 2018, and in upstate New York, 52.7% were affiliated with Democrats or allied parties.

Upstate party registrations have shifted toward the Democratic party – from 47.3% to 52.7% between 2000 and 2018.  In 2000, in most upstate metropolitan areas Republicans and Conservatives were a majority of voters affiliated with a political party.[3]  By 2018, Republicans were in the majority in Binghamton and Utica, but Democrats (with Green Party, Working Family Party and the Women’s Equality Party) had majorities of party affiliated voters in the Albany-Schenectady-Troy, Buffalo-Niagara Falls, Rochester, and Syracuse metropolitan areas and in Tompkins County.

Within upstate New York, there are significant differences in the political affiliations of voters in metropolitan areas and outside them.  About one-third of upstate voters live outside the six metropolitan areas.  Almost 60% of these non-metropolitan residents who are affiliated with a party are Republicans.  But, residents of upstate’s larger metropolitan areas – Buffalo-Niagara Falls, Rochester, Albany-Schenectady-Troy and Syracuse lean Democratic.  Even the area’s smaller metropolitan areas – Utica-Rome and Binghamton show close to an even division between parties.

The significance of the split between registered Republicans and Democrats is somewhat weakened by the large number of upstate voters who are unaffiliated with a political party. 890,000 of the 3.84 million registered voters in upstate New York fall into this category.

Also note that the Independence Party was not included in this analysis because its candidate affiliations have been inconsistent.  Initially, In New York State, the party supported Tom Golisano, a wealthy Rochester businessman who ran on conservative a platform in 1994, 1998 and 2002.  More recently, the party has supported Democratic Gubernatorial candidates Eliot Spitzer and Andrew Cuomo.  The Independence Party is by far the largest splinter party in upstate New York, with 213,000 members.

Republican and Democrat Voting Strength in Upstate New York

This map, above (from Wikipedia), of the 2016 Presidential Election result suggests that Republican voters (in red) dominate upstate New York.  Other than metropolitan counties like Albany, Onondaga, Monroe and Erie, and a few counties in the Hudson Valley, most of upstate New York voted for Donald Trump, the Republican nominee.

This map looks like Republicans dominate upstate, but most of the red colored Republican Counties are sparsely populated, while the blue Democratic areas are population centers. And, the map is based on a single race. Voter preferences are more complex than can be captured in the results of a single face-off.

Contests for Congress and for Governor show that voting in elections in upstate New York is closely divided between Republicans and Democrats.  Republicans had more votes than Democrats upstate in the 2016 election for President and the 2018 election for Governor, but more votes were cast for Democrats in the 2012 Presidential election and the 2018 Senate and House of Representatives elections.

Why Upstate State Senate Representation Does Not Reflect Voter Preferences

Upstate representation in the State Senate does not reflect underlying party preferences as measured by party registration or voting behavior.  Democrats only hold three of twenty-one upstate State Senate seats, even though races at the State and Congressional levels have been highly competitive, with Democrats winning 5 of 9 upstate congressional districts in 2018, and 23 of 48 Assembly seats as well as gaining more votes in one of two presidential elections and in the most recent U. S. Senate election.  Why is the Senate unrepresentative of upstate party preferences and election performance?

When I began researching this question, I assumed that the primary cause of the difference in electoral results in upstate State Senate districts and other elections had to be legislative district gerrymandering.  After all, what else could explain the fact that Republicans control 18 of 21 districts, even though party preferences are about evenly split between the parties?  Though there is clear evidence that the controlling parties in the Legislature structured districts to favor members of their own parties, another factor appears to be important.  Republicans continue to succeed in electing candidates in upstate Senate districts where there are more Democrats than Republicans.

Gerrymandering

The State Legislature has historically controlled the redistricting process, creating gerrymandered districts that favored the parties in control.  In 2010, Republicans controlled the State Senate, and Democrats controlled the Assembly.  The result was a series of gerrymandered districts.

For example, State Senate District 50 in the Syracuse Metropolitan Area was carefully constructed to include suburban Republican votes, while excluding Democratic votes in the city of Syracuse.  The seat was held for many years by Senator John DeFrancisco until his retirement this year.  In the 2018 election, another Republican, Bob Antonacci, was the victor.

Assembly District 101, which looks like a worm that connects the town of Montgomery, just west of Newburgh with New Hartford – a suburb of Utica – is another example. The district, which carefully avoids nearby cities (with higher Democratic enrollment), is about 150 miles long and includes parts of Oneida, Herkimer, Otsego, Delaware, Ulster and Orange Counties! It is held by Republican Brian Miller.

Gerrymandering in the legislative apportionment process attempts to make one party waste as many votes as possible by concentrating voters in that party in overwhelmingly one-party districts, while spreading votes in the party benefiting from the gerrymander across districts in smaller, but safe majorities.

Since the mere requirement of population equality does not necessarily result in the creation of legislative districts that come close to reflecting the political preferences of residents, political parties within legislatures have taken advantage of the opportunity to maintain control, often creating legislative majorities that are much stronger than voter preferences would indicate, or in some cases, maintaining control despite the fact that only a minority of voters prefer them. Misalignments between voter preferences and public policy result from partisan gerrymanders.

Additionally, upstate Senate districts on average have fewer residents than downstate districts in order to strengthen upstate’s presence.  The difference in district sizes increased the region’s representation from 20 to 21 seats.  Under the law, legislative district populations may vary by 10%.

In upstate New York, State Senate districts were engineered to break up metropolitan areas into a series of districts that also contained large numbers of non-metropolitan residents, predominantly Republican voters.  The result has been to weaken the ability of democratic leaning metropolitan area voters to elect representatives who shared their political preferences.

For example, the Albany-Schenectady-Troy metropolitan area has 887,000 residents.  With 63 Senators, each Senate District should have approximately 315,000 residents.  The area has enough residents for almost three State Senate districts.  But the most recent Senate Reapportionment in 2016 split the metropolitan area into pieces of four State Senate districts that encompass large rural areas outside the metropolitan area.  In the process, three of the area’s primary cities – Troy, Schenectady and Saratoga Springs were each split into two Senate districts, disregarding their boundaries.

Similarly, the Rochester MSA, with a population of 1.1 million has enough residents to populate three and one third Senate districts but has been split into five Senate Districts including substantial non-metropolitan populations.

An analysis by Jeremy Creelan and Allison Douglas of the Rockefeller Institute, “New Tools to Challenge Partisan Redistricting in New York State”[4]  measured the extent of partisan gerrymandering in New York and examined the reviews of other authors and came to the conclusion that the extent of partisan gerrymandering in New York favoring Republicans was substantial, quoting an analysis by Simon Jackman of Stanford University that concluded that New York’s districts were “the most Republican favoring out of any state…”[5]

Democratic Underperformance

Although State Senate districts were structured to disadvantage Democratic party candidates by mixing Democratic majorities in metropolitan areas with rural, Republican voters, Democrats have not elected as many State Senators as would be expected from upstate Senate districts’ partisan makeups.  Eight of 21 upstate Senate districts have more Democratic voters than Republicans, but only three districts are represented by Democratic State Senators.  Several factors may account for Democrats’ underperformance.

  • The natural advantage conferred by incumbency is reinforced by gerrymandering. In 2018, 18 of 21 Senate contests involved Republican incumbents. The Democrats didn’t even field a candidate in 7 of these races. The three winning Democrats were incumbents. (A similar dynamic plays out in the Assembly. Eighteen of 48 Assembly contests were uncontested.)
  • There is a large fall-off in voting between statewide candidates, and those for the State Senate – 15% of those who voted in the election for U. S. Senate did not vote for a State Senate candidate. This may reflect Democratic voters’ decision to abstain from voting when the race is uncontested or manifestly uncompetitive.

Implications

Viewed purely with “sectional” eyes, upstate New York’s influence in Albany may have been greater because Republican gerrymandering granted upstate control of one of the Legislature’s two houses.  But that power meant that the views of about half of upstate’s residents – Democratic voters who make up the majority of residents of metropolitan areas – were underrepresented in the State Legislature.  The upstate Republican leadership of the State Senate primarily represented the interests of conservative rural and suburban residents.  Upstate city residents and people whose policy views corresponded with Democratic party positions received little Senate attention.

With Democratic party control of the State Senate, upstate now has less majority party representation than it would if Senate districts had not been gerrymandered in favor of Republicans, weakening the region’s voice in the State Capitol.

To be sure, fairer legislative districts would not ensure particular outcomes in State Senate races, because voters do not vote for parties in legislative elections any more than they do in elections for Governor or the U. S. Senate.  The large difference in the percentage of upstate voters who favored Andrew Cuomo (46%) against Republican Marcus Molinaro compared with the support given Kristin Gillibrand (57%) against Republican Chele Farley illustrates this point.  In fact, in much of upstate New York, party affiliations are relatively evenly divided, with electoral results in Statewide elections favoring each party in different races.

Reapportionment after the 2020 Census

Reapportionment after the 2020 Census is likely to create legislative districts that more accurately represent the partisan preferences of New York residents than past apportionments.  In 2012, New York voters passed a Constitutional amendment that reforms the apportionment process and institutes new Constitutional requirements for district representativeness.  The process is a mixed bag, containing features that could work against accurate voter representation, and others that could work for it.

The amendment sets up a ten-member redistricting commission with four members appointed by each of the major parties’ legislative leaders plus two additional members selected by the eight.  The amendment also requires that any plan developed receive the support from members nominated by both political parties.  The State Legislature must vote upon the plan submitted by the Commission without amendment. If two successive plans from the Commission fail to receive Legislative and gubernatorial approval, the Legislature is then empowered to present its own plan. As legislative approval is required, there will be an unnamed “third party” involved in the redistricting effort, the “Party of the Incumbency.” Logrolling and trading to preserve the prerogatives of incumbents and secure the required approvals may work against representation of voter preferences within legislative districts.[6]

The Constitutional amendment includes a prohibition against partisan gerrymandering, “[d]istricts shall not be drawn to discourage competition or for the purpose of favoring or disfavoring incumbents or other particular candidates or political parties.  This important provision is intended to prevent the redistricting commission from manipulating district boundaries to advantage particular parties and candidates and  creates a constitutional basis for a court challenge to a legislative districting plan that is gerrymandered.

Because of the statewide shift in voter preferences to the Democratic party, Republicans are unlikely to retake control of the State Senate, at least in the near future.  Upstate New York is unlikely to have as much influence as it had in the past in the State legislature.  But if the  passage of the 2012 constitutional amendment achieves the goal of representational equity,   the Senators who represent it will be more likely to represent the policy preferences of upstate residents.

(Note:  An abridged version of this post appears in the Rochester Beacon, titled, “The Cost of Gerrymandering”)

[1]Potential State Senate Power Shift Offers Big Implications for Upstate,” Tom Precious, Buffalo News, October 7, 2018.

[2] Upstate districts outside the New York metropolitan area are districts 101-103 and 106-150.

[3] The Independence Party is excluded from the analysis.

[4] Jeremy Creelan and Allison Douglas, New Tools to Challenge Partisan Redistricting in New York State?”, Rockefeller Institute of Government, August 31, 2017, https://rockinst.org/issue-area/new-tools-challenge-partisan-redistricting-new-york-state/

[5] Simon Jackman, “Assessing the Current Wisconsin State Legislative Districting Plan,”  July 7, 2015, http://www.campaignlegalcenter.org/sites/default/files/Jackman-WHITFORD%20V.%20NICHOL-Report_0.pdf

[6] Creelan and Douglas, op. cit.