local government reform - Restructuring Local Government
LOCAL GOVERNMENT REFORM: THE NEED FOR A STATE PARTNER Cornell University Mildred Warner Department of City and Regional Planning
December at Gideon Putnam Resort, Saratoga February 9,9, 2014 2015 NYS Conference of M ayors Springs, Albany, NY NY
Visit www.mildredwarner.org/restructuring/fiscal-stress & www.cardi.cornell.edu for more information.
Cuomo’s Charge to Cities: Fix Yourselves! "You are unsustainable. You need jobs, an economy, business.” Gov. Cuomo, referring to upstate ciGes like Syracuse. Syracuse Post Standard Feb 2015
Indexed Non-Farm Employment (2001=100%)
NYC is booming. Upstate ciGes growth hurt by • cuts in state funding, • dependence on manufacturing, • decaying infrastructure, • concentrated poverty.
110 105
New York City
100 95
Rest of New York State
90
2007 2008 2009 2010 2011 2012 2013 2014 Year BLS, Current Employment StaGsGcs. Analysis Floss, F. Fiscal Policy InsGtute and and Xu, Y. Cornell
State Austerity Policy Undermines Economic Growth Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
2
Older industrial regions have not recovered 110.0%
NYC Ithaca
108.0%
NYS Average
106.0% 104.0% 102.0% 100.0% 98.0% 96.0% 94.0% 92.0%
Long Island Albany US Buffalo Average Rochester Westchester Syracuse UGca Kingston Glens Falls Binghamton
90.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 Data Source: BLS Current Employment StaGsGcs, MSAs, nonfarm employment, normalized to 2007. Floss, F. (2014). State of Working New York: Employment trends, an uneven recovery. Fiscal Policy Ins-tute. State Austerity Policy Undermines Economic Growth CORNELL UNIVERSITY 3 Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
A Tale of Two Cities: NYC and All Others NYC
Other Ci-es
Employment Growth (nonfarm) 2009-‐2013
8.01%
-‐1.34%
% State Aid of Total Expenditure 2009-‐2013
18%
Average State Aid per capita 2009-‐2013
$ 1376
15% (Avr. City) 6% (Avr. Village) $ 296 (Avr. City)
$ 95 (Avr. Village) $ 1947 (City) Average Total Expenditure $ 8 900 per capita 2009-‐2010 $ 1857 (Village) Only 45% get Pre K Pre K Universal Pre K 232 districts do not offer Income Tax, No Tax Cap, No Income Tax, Tax Cap, Local Ability to Innovate 70 BIDs BIDs subject to tax cap Sources: BLS, NYS and NYC Comptroller, NIEER
Austerity does not promote growth, public investment does Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
4
Need Regional Approaches: Equity Syracuse
Buffalo Rochester
Poverty concentrated in cities. Regional equity and service coordination, not inter-regional competition, needed for economic growth. Equity is a Superior Growth Strategy Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
5
New York State Imposed Austerity Policy • The Problem • High taxes
Will these approaches promote growth?
• Slow growth upstate
• The Governor’s Solution
Research evidence says “No.”
• Cut Taxes • Cut Aid to Local Governments • Cut Education Funding • Underinvest in Infrastructure
State austerity policy undermines economic growth
• Increase Tax Breaks to Firms
State Austerity Policy Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
6
Global Context: Great Recession & Austerity • National and International Level • Prop up markets, leave localities to fend for themselves • Pass fiscal crisis down to the local level
• Local Level – varied response • Hollowing Out – cut services, laying off staff • Riding the Wave – explore service delivery reforms • Pushing Back – reassert role of public service
• Citizen Level – varied response • US: Acquiescence or Tea Party • Europe: Political Protest (Occupy Movement) Warner and Clifton (2014), MarkeGzaGon, Public Services and the City… PotenGal for Push Back. Cambridge J. of Regional Economics and Policy. CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
7
View from Europe: Austerity in Spain Austerity Policy Cuts to health and educaGon
The white Gde – doctors and nurses The green Gde – teachers
Spain Unemployment 24% 54% among youth Youth outmigraGon undermines the future CORNELL UNIVERSITY
Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
8
New York: Policy Proposal vs. Reality
1. Tax Cap for governments and school districts 2. Property Tax Freeze - Tax Circuit Breaker for homeowners 3. Mandate Relief CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
9
New York State Context Need all three reforms for comprehensive relief • Tax Cap without the other reforms provides no real relief to tax payers. It just starves the cities and citizens of services
• Property Tax Freeze - Tax Circuit Breaker now proposed but with strings attached Requires new sharing arrangements Ignores prior history of sharing, this especially hurts upstate which already has a long history of sharing
• Mandate Relief still needed New York shifts more expenditures to local level than other states Restricts local efforts to promote efficiency Elements of Reform Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
10
Local Governments are controlling expenditures $450
Average Expenditure of Local Governments in New York Constant U.S. Dollars, 2009=100
$350
Counties
$250 Million
$150 $50
Cities (w/o NYC)
$10
Towns
$5
Villages
$0 03
04
05
06
07
08
09
10
11
12
13
Data Source: New York Comptroller Local Government Finance Data 03-‐13
Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
11
Property Taxes are Flat (even before the tax cap)
Average Property Tax of Local Government in New York Constant U.S. Dollars, 2009=100 $90 Counties
$70
Million
$50 $30
Cities (w/o NYC)
$10 Towns
$4
Villages
$2 $0 03
04
05
06
07
08
09
10
11
12
13
Data Source: New York Comptroller Local Government Finance Data 03-‐13
Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
12
What Happened to Mandate Relief? • NYS has the highest level of state decentralizaLon of fiscal responsibility of any state in the naGon. • 64% of all state and local expenditures are handled at the local level in NYS! (2nd highest in the naGon) • 83% of educaGon expenditure is local (1st in naGon)
• These are primary drivers of high local property taxes in NYS State Local Share of Decentraliza-on Educa-on Funding State NY PA NJ CT MA VT
0.64 0.51 0.53 0.47 0.43 0.38
0.82 0.72 0.73 0.73 0.70 0.62
US Census of Government Finance, 2012 Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
13
State Aid has fallen since the recession $60
Average State Aid to Local Government in New York Constant U.S. Dollars, 2009=100
$50 Counties
Million
$40 $30 $20
Cities (w/o NYC)
$10 $1.0 $0.5
Towns Villages
$0.0 03
04
05
06
07
08
09
10
11
12
Data Source: New York Comptroller Local Government Finance Data 03-‐13
Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
13 CORNELL UNIVERSITY
14
Local Government Response Hollowing Out •
Cut services, lay off workers Non Profit
Riding the Wave • Shared Services • Now larger than privatization • Promotes regional collaboration • NY shared services survey 27%, • Higher than national average
For Profit InterMunicipal ContracGng
• Cautious Privatization Insourcing equals Outsourcing
5
2012 2007
7
16 17 21 16
ICMA 2007, 2012 NaGonal surveys
Design New Forms of Service Delivery • User fees, impact fees to fund public services, Co-production • Economic Development Strategies: Anchor institutions, Land banks, BIDs Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
15
NYS Shared Services Surveys 2013 Cities Counties Towns Villages School Total Districts Total NYS
62
57
932
556
675
2282
Number of Responses
49
44
494
359
245
1191
Response Rate
79%
77%
53%
65%
36%
52%
Conducted in collaboraGon with New York Conference of Mayors New York State AssociaGon of Towns New York State AssociaGon of CounGes New York State Council of School Superintendents Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
16
NYS Municipal Responses to Fiscal Stress 41%
Increase user fees Explore additional shared service arrangements
34%
Personnel cuts/reductions
34% 22%
Reduce service(s)
18%
Explore consolidation with another government
15%
Consolidate departments Deliver services with citizen volunteers
11%
Eliminate service(s)
10%
Sell assets Consider declaring bankruptcy/insolvency
7% 0.4%
Cornell, NYS Shared Services Survey, 2013 Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
17
New York is a Leader in Shared Services Of 29 services measured, sharing rate was 27% § Public works, public safety, parks and recreaGon showed highest levels of sharing
Cost savings were only one goal – and only achieved half the -me. • Other goals include improved service quality and regional coordina-on.
This is similar to internaGonal studies which show coopera-on is not primarily driven by cost savings and cost savings are not always found. Why? • Limited economies of scale • Design and management costs • Improved service quality Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
18
Cost Savings – It Depends Cost
Single Municipality
Multiple Municipalities
Cost savings only occur if: • economies of scale exist • administraGve costs are low
Costs can rise – level up to the higher cost neighbor Leveling Up
P1
AC + Mgmt cost Average Cost
P2
Savings Qsm
Qmm
Quan-ty
Bel and Warner (2014) Inter-‐Municipal CooperaGon and Costs, Public AdministraLon Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
19
Shared Services & Cost Savings • Regression Results across NY Municipalities – • Municipal expenditures (NYS Comptroller data) controlling for service sharing, population, density, metro status Lower Cost if Shared Service
No Cost Difference if Shared Service
Solid Waste
Administration
Roads and Highways
EMS
Police
Youth Recreation
Libraries
Elder Services
Sewer
Fire
Water
Planning and Zoning Economic Development
Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
Service quality and coordinaGon are important reasons for sharing
Qian and Warner analysis, based on NYS Shared Services Survey, 2013 CORNELL UNIVERSITY
20
Outcomes of Inter-municipal Shared Services Cost savings
Improved regional Improved service quality coordination
All 29 Services
56%
50%
35%
Public Works & Transport.
53%
56%
39%
Administrative/Support
70%
39%
25%
Recreation & Social Services
44%
59%
38%
Public Safety
48%
54%
38%
Economic Dev. & Planning
51%
52%
46%
NY Shared Services Survey, 2013 Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
21
Administrative & Support Services Municipalities Engaged in Sharing
Average Most Length in Common Years Agreement
Cost Savings Achieved
Tax assessment
39%
17
MOU
71%
Energy production or purchase
25%
10
MOU
88%
Purchase of supplies
17%
14
MOU
88%
Health insurance
12%
10
MOU
79%
Liability insurance
6%
12
Joint ownership
76%
Information technology
8%
7
MOU
73%
El Samra, S. 2014. Shared Services in NYS: Successful Cases in Energy, Health Insurance and Joint Purchasing NY Shared Services Survey, 2013 Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
22
Factors Predicting Sharing Among Municipalities
Regression Model Results • Larger municipaliGes share more • Management factors (increase sharing) • Obstacles and incompaGble data and budget systems (reduce sharing) • Social networks increase sharing • Councils of Government, tenure of sharing agreement • Inter-‐municipal compeGGon is not a barrier • Heterogeneity by income, race, age, property tax (reduces sharing)
Qian and Warner, 2014, Do MunicipaliGes Share with Poorer Neighbors? Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
23
NY Municipalities Less Likely to Share Across Difference
Shared Services, Qian and Warner (2014) Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
24
Factors Predicting School/Community Sharing Community Services: RecreaGon FaciliGes, Preschool, Health, NutriGon AdministraGve Services: Payroll, TransportaGon, Purchases, Health Insurance, School Resource Officer
Regression Model Results
• Smaller school districts share more • Small ciGes and rural places share more • Management issues, budget accountability and obstacles reduce sharing • Formal contracts increase sharing • Schools with more poor children share less Wang & Warner, 2014, Sharing … Least where need is greatest Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
25
Management Costs – Designing the Sharing Agreements
Need an administrative structure to promote sharing • Design, finance, management and oversight • Empower Counties • Empower Councils of Government • Expand BOCES’ remit to include municipal services
State aid to promote sharing with poorer partners Review State rules that limit sharing • Most commonly listed obstacles to service sharing: • Liability, accountability and state rules
Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
26
Address State Imposed Barriers to Sharing § In sharing services with other municipalities and districts § Allow sharing even if lack individual authority § Count sharing with Special Districts § Allow some sharing without public referendum (trade off between potential cost savings and local democracy)
§ In cooperative purchasing § Eliminate procurement sunset
§ In contract design § Prevailing Wage should reflect local market § Raise Wicks Law contract thresholds
§ In labor negotiations § Encourage labor to partner with municipalities in exploring more service sharing (Taylor Law and Triborough) Li, X. (2015) Barriers to Inter-municipal Service Sharing in NYS. (MIX) Barriers to Service Sharing Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
27
The Need for a State Partner State Reform SGll Needed ü Increase State Aid ü Provide Mandate Relief ü Provide Support for Service Sharing ü Fix the Tax Cap
State Reform Needed Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
28
TAX CAP IMPACT ON NEW YORK LOCALITIES • Adds to fiscal stress in most localities • Encourages municipalities to cut services • Does not address rising expenditures • Localities shift to other sources of revenues • Overrides and user fees may worsen existing inequality • Spending on mandates crowds out economic development
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
19
SHORT TERM IMPACT OF THE TAX CAP
Cities and Villages Major Expenditure Change 2011-2013, NYS Comptroller Data
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
10
WHO IS AFFECTED MOST? DEPENDENCE ON PROPERTY TAX
Cities
Villages
Percentage of Total Revenues by Source
Percentage of Total Revenues by Source
35.0%
60.0%
30.0%
50.0%
25.0%
40.0%
20.0% 30.0%
15.0%
20.0%
10.0% 5.0%
10.0%
0.0%
0.0%
Real Property Taxes
Charges for Services
Sales and Use Tax
State Aid
NYS Comptroller Data
• Cities equally dependent on several revenue sources • Villages most dependent on property taxes New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
11
LONG TERM EFFECTS OF TAX CAP: ‘WHAT IF’ MODEL
Question What would the revenue shortfall be if the NY Property Tax Cap was implemented 10 years ago? Methodology (Previous Property Tax Levy1 × Growth Factor2) × Tax Cap3 = Allowable Tax Levy Data Sources 1 Local
Government Finance Data, New York Comptroller, 2000-2011 2 New York State Comptroller Property Tax Cap Data, 2012-2013 3 U.S. Department of Labor, Bureau of Labor Statistics, 2013
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
13
PROPERTY TAX REVENUE SHORTFALL IF NY PROPERTY TAX CAP WERE IMPLEMENTED 10 YEARS AGO
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
14
MODEL RESULTS: WHO IS AFFECTED MOST BY TAX CAP? Results of “What if” Model imposing tax cap 10 years ago Annual Increase
Total Increase
Observed
Projected Shorrall
City
3.7%
2.1%
-‐1.6%
-‐26.6%
County
4.0%
2.2%
-‐1.8%
28.6%
-‐33.6%
Town
4.5%
2.3%
-‐2.2%
67.6%
25.9%
-‐41.7%
Village
4.8%
2.1%
-‐2.7%
57.5%
27.5%
-‐30.0%
Total
4.2%
2.2%
-‐2.0%
Observed
Projected Shorrall
City
48.9%
26.1%
-‐22.8%
County
53.7%
27.2%
Town
62.2%
Village Total
• 2.2% average annual property tax increase under cap, 4.2% without • 30% shortfall in property tax, over $13 billion loss to NY localities (2000-2011) • Cities will lose 23% and villages will lose 42% of property tax revenue.
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
16
Impacts of Tax Caps Lessons from Other States • Tax Caps do not reduce expenditures • Tax Caps increase use of revenue sources that are more volatile, (sales tax), less transparent (impact fees), and more regressive (user fees) • Tax Caps disproportionally affect communities with lower income and smaller populations • Tax Caps force municipalities to reallocate economic development dollars to maintain mandated services CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
35
What’s Wrong with the Tax Cap? What do Other States Do to Reduce These Negative Outcomes? • Increase state aid to localities and schools • Centralize fiscal responsibility for state mandated services • Exempt infrastructure investment from tax cap • Exempt emergency or disaster expenses • Allow simple majority overrides • Exempt special districts CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
36
We Need a State Level Partner ü Mandate Relief • Recentralize fiscal responsibility for services to the state level • State should pay for services state requires
ü Increase state aid to municipalities • •
Don’t starve the cities Invest in infrastructure
ü Loosen the Tax Cap § Allow exemptions for investment, emergencies, local initiative
ü Give local governments flexibility to innovate § In sharing services § In contract design
ü Promote Real Economic Development § Invest in Infrastructure and Education, § Not inter-regional competition and casinos Conclusion Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
37
Thank You
For more informaGon see www.mildredwarner.org/restructuring/fiscal-‐stress or www.cardi.cornell.edu C U 38 ORNELL
Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
NIVERSITY
December at Gideon Putnam Resort, Saratoga February 9,9, 2014 2015 NYS Conference of M ayors Springs, Albany, NY NY
Visit www.mildredwarner.org/restructuring/fiscal-stress & www.cardi.cornell.edu for more information.
Cuomo’s Charge to Cities: Fix Yourselves! "You are unsustainable. You need jobs, an economy, business.” Gov. Cuomo, referring to upstate ciGes like Syracuse. Syracuse Post Standard Feb 2015
Indexed Non-Farm Employment (2001=100%)
NYC is booming. Upstate ciGes growth hurt by • cuts in state funding, • dependence on manufacturing, • decaying infrastructure, • concentrated poverty.
110 105
New York City
100 95
Rest of New York State
90
2007 2008 2009 2010 2011 2012 2013 2014 Year BLS, Current Employment StaGsGcs. Analysis Floss, F. Fiscal Policy InsGtute and and Xu, Y. Cornell
State Austerity Policy Undermines Economic Growth Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
2
Older industrial regions have not recovered 110.0%
NYC Ithaca
108.0%
NYS Average
106.0% 104.0% 102.0% 100.0% 98.0% 96.0% 94.0% 92.0%
Long Island Albany US Buffalo Average Rochester Westchester Syracuse UGca Kingston Glens Falls Binghamton
90.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 Data Source: BLS Current Employment StaGsGcs, MSAs, nonfarm employment, normalized to 2007. Floss, F. (2014). State of Working New York: Employment trends, an uneven recovery. Fiscal Policy Ins-tute. State Austerity Policy Undermines Economic Growth CORNELL UNIVERSITY 3 Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
A Tale of Two Cities: NYC and All Others NYC
Other Ci-es
Employment Growth (nonfarm) 2009-‐2013
8.01%
-‐1.34%
% State Aid of Total Expenditure 2009-‐2013
18%
Average State Aid per capita 2009-‐2013
$ 1376
15% (Avr. City) 6% (Avr. Village) $ 296 (Avr. City)
$ 95 (Avr. Village) $ 1947 (City) Average Total Expenditure $ 8 900 per capita 2009-‐2010 $ 1857 (Village) Only 45% get Pre K Pre K Universal Pre K 232 districts do not offer Income Tax, No Tax Cap, No Income Tax, Tax Cap, Local Ability to Innovate 70 BIDs BIDs subject to tax cap Sources: BLS, NYS and NYC Comptroller, NIEER
Austerity does not promote growth, public investment does Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
4
Need Regional Approaches: Equity Syracuse
Buffalo Rochester
Poverty concentrated in cities. Regional equity and service coordination, not inter-regional competition, needed for economic growth. Equity is a Superior Growth Strategy Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
5
New York State Imposed Austerity Policy • The Problem • High taxes
Will these approaches promote growth?
• Slow growth upstate
• The Governor’s Solution
Research evidence says “No.”
• Cut Taxes • Cut Aid to Local Governments • Cut Education Funding • Underinvest in Infrastructure
State austerity policy undermines economic growth
• Increase Tax Breaks to Firms
State Austerity Policy Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
6
Global Context: Great Recession & Austerity • National and International Level • Prop up markets, leave localities to fend for themselves • Pass fiscal crisis down to the local level
• Local Level – varied response • Hollowing Out – cut services, laying off staff • Riding the Wave – explore service delivery reforms • Pushing Back – reassert role of public service
• Citizen Level – varied response • US: Acquiescence or Tea Party • Europe: Political Protest (Occupy Movement) Warner and Clifton (2014), MarkeGzaGon, Public Services and the City… PotenGal for Push Back. Cambridge J. of Regional Economics and Policy. CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
7
View from Europe: Austerity in Spain Austerity Policy Cuts to health and educaGon
The white Gde – doctors and nurses The green Gde – teachers
Spain Unemployment 24% 54% among youth Youth outmigraGon undermines the future CORNELL UNIVERSITY
Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
8
New York: Policy Proposal vs. Reality
1. Tax Cap for governments and school districts 2. Property Tax Freeze - Tax Circuit Breaker for homeowners 3. Mandate Relief CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
9
New York State Context Need all three reforms for comprehensive relief • Tax Cap without the other reforms provides no real relief to tax payers. It just starves the cities and citizens of services
• Property Tax Freeze - Tax Circuit Breaker now proposed but with strings attached Requires new sharing arrangements Ignores prior history of sharing, this especially hurts upstate which already has a long history of sharing
• Mandate Relief still needed New York shifts more expenditures to local level than other states Restricts local efforts to promote efficiency Elements of Reform Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
10
Local Governments are controlling expenditures $450
Average Expenditure of Local Governments in New York Constant U.S. Dollars, 2009=100
$350
Counties
$250 Million
$150 $50
Cities (w/o NYC)
$10
Towns
$5
Villages
$0 03
04
05
06
07
08
09
10
11
12
13
Data Source: New York Comptroller Local Government Finance Data 03-‐13
Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
11
Property Taxes are Flat (even before the tax cap)
Average Property Tax of Local Government in New York Constant U.S. Dollars, 2009=100 $90 Counties
$70
Million
$50 $30
Cities (w/o NYC)
$10 Towns
$4
Villages
$2 $0 03
04
05
06
07
08
09
10
11
12
13
Data Source: New York Comptroller Local Government Finance Data 03-‐13
Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
12
What Happened to Mandate Relief? • NYS has the highest level of state decentralizaLon of fiscal responsibility of any state in the naGon. • 64% of all state and local expenditures are handled at the local level in NYS! (2nd highest in the naGon) • 83% of educaGon expenditure is local (1st in naGon)
• These are primary drivers of high local property taxes in NYS State Local Share of Decentraliza-on Educa-on Funding State NY PA NJ CT MA VT
0.64 0.51 0.53 0.47 0.43 0.38
0.82 0.72 0.73 0.73 0.70 0.62
US Census of Government Finance, 2012 Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
13
State Aid has fallen since the recession $60
Average State Aid to Local Government in New York Constant U.S. Dollars, 2009=100
$50 Counties
Million
$40 $30 $20
Cities (w/o NYC)
$10 $1.0 $0.5
Towns Villages
$0.0 03
04
05
06
07
08
09
10
11
12
Data Source: New York Comptroller Local Government Finance Data 03-‐13
Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
13 CORNELL UNIVERSITY
14
Local Government Response Hollowing Out •
Cut services, lay off workers Non Profit
Riding the Wave • Shared Services • Now larger than privatization • Promotes regional collaboration • NY shared services survey 27%, • Higher than national average
For Profit InterMunicipal ContracGng
• Cautious Privatization Insourcing equals Outsourcing
5
2012 2007
7
16 17 21 16
ICMA 2007, 2012 NaGonal surveys
Design New Forms of Service Delivery • User fees, impact fees to fund public services, Co-production • Economic Development Strategies: Anchor institutions, Land banks, BIDs Changing the Narrative Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
15
NYS Shared Services Surveys 2013 Cities Counties Towns Villages School Total Districts Total NYS
62
57
932
556
675
2282
Number of Responses
49
44
494
359
245
1191
Response Rate
79%
77%
53%
65%
36%
52%
Conducted in collaboraGon with New York Conference of Mayors New York State AssociaGon of Towns New York State AssociaGon of CounGes New York State Council of School Superintendents Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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NYS Municipal Responses to Fiscal Stress 41%
Increase user fees Explore additional shared service arrangements
34%
Personnel cuts/reductions
34% 22%
Reduce service(s)
18%
Explore consolidation with another government
15%
Consolidate departments Deliver services with citizen volunteers
11%
Eliminate service(s)
10%
Sell assets Consider declaring bankruptcy/insolvency
7% 0.4%
Cornell, NYS Shared Services Survey, 2013 Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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New York is a Leader in Shared Services Of 29 services measured, sharing rate was 27% § Public works, public safety, parks and recreaGon showed highest levels of sharing
Cost savings were only one goal – and only achieved half the -me. • Other goals include improved service quality and regional coordina-on.
This is similar to internaGonal studies which show coopera-on is not primarily driven by cost savings and cost savings are not always found. Why? • Limited economies of scale • Design and management costs • Improved service quality Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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Cost Savings – It Depends Cost
Single Municipality
Multiple Municipalities
Cost savings only occur if: • economies of scale exist • administraGve costs are low
Costs can rise – level up to the higher cost neighbor Leveling Up
P1
AC + Mgmt cost Average Cost
P2
Savings Qsm
Qmm
Quan-ty
Bel and Warner (2014) Inter-‐Municipal CooperaGon and Costs, Public AdministraLon Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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Shared Services & Cost Savings • Regression Results across NY Municipalities – • Municipal expenditures (NYS Comptroller data) controlling for service sharing, population, density, metro status Lower Cost if Shared Service
No Cost Difference if Shared Service
Solid Waste
Administration
Roads and Highways
EMS
Police
Youth Recreation
Libraries
Elder Services
Sewer
Fire
Water
Planning and Zoning Economic Development
Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
Service quality and coordinaGon are important reasons for sharing
Qian and Warner analysis, based on NYS Shared Services Survey, 2013 CORNELL UNIVERSITY
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Outcomes of Inter-municipal Shared Services Cost savings
Improved regional Improved service quality coordination
All 29 Services
56%
50%
35%
Public Works & Transport.
53%
56%
39%
Administrative/Support
70%
39%
25%
Recreation & Social Services
44%
59%
38%
Public Safety
48%
54%
38%
Economic Dev. & Planning
51%
52%
46%
NY Shared Services Survey, 2013 Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
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Administrative & Support Services Municipalities Engaged in Sharing
Average Most Length in Common Years Agreement
Cost Savings Achieved
Tax assessment
39%
17
MOU
71%
Energy production or purchase
25%
10
MOU
88%
Purchase of supplies
17%
14
MOU
88%
Health insurance
12%
10
MOU
79%
Liability insurance
6%
12
Joint ownership
76%
Information technology
8%
7
MOU
73%
El Samra, S. 2014. Shared Services in NYS: Successful Cases in Energy, Health Insurance and Joint Purchasing NY Shared Services Survey, 2013 Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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Factors Predicting Sharing Among Municipalities
Regression Model Results • Larger municipaliGes share more • Management factors (increase sharing) • Obstacles and incompaGble data and budget systems (reduce sharing) • Social networks increase sharing • Councils of Government, tenure of sharing agreement • Inter-‐municipal compeGGon is not a barrier • Heterogeneity by income, race, age, property tax (reduces sharing)
Qian and Warner, 2014, Do MunicipaliGes Share with Poorer Neighbors? Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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NY Municipalities Less Likely to Share Across Difference
Shared Services, Qian and Warner (2014) Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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Factors Predicting School/Community Sharing Community Services: RecreaGon FaciliGes, Preschool, Health, NutriGon AdministraGve Services: Payroll, TransportaGon, Purchases, Health Insurance, School Resource Officer
Regression Model Results
• Smaller school districts share more • Small ciGes and rural places share more • Management issues, budget accountability and obstacles reduce sharing • Formal contracts increase sharing • Schools with more poor children share less Wang & Warner, 2014, Sharing … Least where need is greatest Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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Management Costs – Designing the Sharing Agreements
Need an administrative structure to promote sharing • Design, finance, management and oversight • Empower Counties • Empower Councils of Government • Expand BOCES’ remit to include municipal services
State aid to promote sharing with poorer partners Review State rules that limit sharing • Most commonly listed obstacles to service sharing: • Liability, accountability and state rules
Shared Services Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
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Address State Imposed Barriers to Sharing § In sharing services with other municipalities and districts § Allow sharing even if lack individual authority § Count sharing with Special Districts § Allow some sharing without public referendum (trade off between potential cost savings and local democracy)
§ In cooperative purchasing § Eliminate procurement sunset
§ In contract design § Prevailing Wage should reflect local market § Raise Wicks Law contract thresholds
§ In labor negotiations § Encourage labor to partner with municipalities in exploring more service sharing (Taylor Law and Triborough) Li, X. (2015) Barriers to Inter-municipal Service Sharing in NYS. (MIX) Barriers to Service Sharing Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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The Need for a State Partner State Reform SGll Needed ü Increase State Aid ü Provide Mandate Relief ü Provide Support for Service Sharing ü Fix the Tax Cap
State Reform Needed Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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TAX CAP IMPACT ON NEW YORK LOCALITIES • Adds to fiscal stress in most localities • Encourages municipalities to cut services • Does not address rising expenditures • Localities shift to other sources of revenues • Overrides and user fees may worsen existing inequality • Spending on mandates crowds out economic development
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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SHORT TERM IMPACT OF THE TAX CAP
Cities and Villages Major Expenditure Change 2011-2013, NYS Comptroller Data
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
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WHO IS AFFECTED MOST? DEPENDENCE ON PROPERTY TAX
Cities
Villages
Percentage of Total Revenues by Source
Percentage of Total Revenues by Source
35.0%
60.0%
30.0%
50.0%
25.0%
40.0%
20.0% 30.0%
15.0%
20.0%
10.0% 5.0%
10.0%
0.0%
0.0%
Real Property Taxes
Charges for Services
Sales and Use Tax
State Aid
NYS Comptroller Data
• Cities equally dependent on several revenue sources • Villages most dependent on property taxes New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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LONG TERM EFFECTS OF TAX CAP: ‘WHAT IF’ MODEL
Question What would the revenue shortfall be if the NY Property Tax Cap was implemented 10 years ago? Methodology (Previous Property Tax Levy1 × Growth Factor2) × Tax Cap3 = Allowable Tax Levy Data Sources 1 Local
Government Finance Data, New York Comptroller, 2000-2011 2 New York State Comptroller Property Tax Cap Data, 2012-2013 3 U.S. Department of Labor, Bureau of Labor Statistics, 2013
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
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PROPERTY TAX REVENUE SHORTFALL IF NY PROPERTY TAX CAP WERE IMPLEMENTED 10 YEARS AGO
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
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MODEL RESULTS: WHO IS AFFECTED MOST BY TAX CAP? Results of “What if” Model imposing tax cap 10 years ago Annual Increase
Total Increase
Observed
Projected Shorrall
City
3.7%
2.1%
-‐1.6%
-‐26.6%
County
4.0%
2.2%
-‐1.8%
28.6%
-‐33.6%
Town
4.5%
2.3%
-‐2.2%
67.6%
25.9%
-‐41.7%
Village
4.8%
2.1%
-‐2.7%
57.5%
27.5%
-‐30.0%
Total
4.2%
2.2%
-‐2.0%
Observed
Projected Shorrall
City
48.9%
26.1%
-‐22.8%
County
53.7%
27.2%
Town
62.2%
Village Total
• 2.2% average annual property tax increase under cap, 4.2% without • 30% shortfall in property tax, over $13 billion loss to NY localities (2000-2011) • Cities will lose 23% and villages will lose 42% of property tax revenue.
New York Property Tax Cap| Implications On Local Fiscal Health Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
CORNELL UNIVERSITY
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Impacts of Tax Caps Lessons from Other States • Tax Caps do not reduce expenditures • Tax Caps increase use of revenue sources that are more volatile, (sales tax), less transparent (impact fees), and more regressive (user fees) • Tax Caps disproportionally affect communities with lower income and smaller populations • Tax Caps force municipalities to reallocate economic development dollars to maintain mandated services CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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What’s Wrong with the Tax Cap? What do Other States Do to Reduce These Negative Outcomes? • Increase state aid to localities and schools • Centralize fiscal responsibility for state mandated services • Exempt infrastructure investment from tax cap • Exempt emergency or disaster expenses • Allow simple majority overrides • Exempt special districts CORNELL UNIVERSITY Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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We Need a State Level Partner ü Mandate Relief • Recentralize fiscal responsibility for services to the state level • State should pay for services state requires
ü Increase state aid to municipalities • •
Don’t starve the cities Invest in infrastructure
ü Loosen the Tax Cap § Allow exemptions for investment, emergencies, local initiative
ü Give local governments flexibility to innovate § In sharing services § In contract design
ü Promote Real Economic Development § Invest in Infrastructure and Education, § Not inter-regional competition and casinos Conclusion Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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Thank You
For more informaGon see www.mildredwarner.org/restructuring/fiscal-‐stress or www.cardi.cornell.edu C U 38 ORNELL
Research and findings under the direction of Dr. Mildred Warner, Department of City and Regional Planning
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