How the Village of Nyack Righted Its Finances
by Max Cea
On June 1, the Village of Nyack’s 2016-17 budget went into effect. It included a fairly typical list of revenue sources and expenditures. More notable was what it omitted: a property tax increase. Last year the village levied a little less than $3.5 million in property taxes; this year the village will levy the same amount — $3,446,521, to be precise. Though Nyack residents’ taxes remain quite high, those residents who don’t like paying taxes — all? — have reason to celebrate. Immediate savings, sure. Being lucky enough to live in the rare municipality where taxes are frozen, yes. But take a step back. The real significance of the tax freeze lies in the story it tells, the progression it illustrates, and for what it portends.
2010: “We were going down the drain fiscally”
“Much to my dismay, when Doug Foster and I became trustees in 2010 it became clear that the village was operating at a really substantial deficit,” said Nyack Mayor Jen Laird White. “In a village where $30,000 is roughly a one percent tax increase, there was $700,000 in unaccounted for funds.” Neither White nor Foster had a background in finance. “We didn’t know where it had gone, but there was a $700,000 debt that was going to be very difficult to make up.” The inner workings of Nyack Village Hall and the way the village was handling its finances would quickly prove to be Nyack’s most pressing issues.
A forensic accountant hired by the village reported that monies didn’t go missing because of substantial theft but because of inadequate financial controls. The village was utilizing its staff as best as it could, but the people in place lacked experience working with municipal budgets. Meanwhile debt was accruing and money was disappearing.
“When Jen White and I ran for trustee together six years ago, we were really in a debt spiral,” said Foster. “We were going down the drain fiscally. We couldn’t pay our vendors. We were running out of money with six months to go in the budget year. That first year we passed an 8.9 percent tax increase, which was fantasy, but we didn’t want to pass a 30 percent tax increase, which is what we really needed to do.”
Although large tax increases were necessary to keep the village running, it wasn’t sustainable to force residents to pay an additional 9 percent on their already-steep property taxes every year. The village budget was in need of structural change. And so when the treasurer retired, White and Foster worked with Mayor Richard Kavesh to repurpose the former treasurer’s salary and hire a village administrator. It was a job that hadn’t previously existed in Nyack nor anywhere else in Rockland County.
The village administrator would serve as a full-time village chief operating officer, complementing the part-time, elected position of village mayor. “Because a village administrator is highly trained in municipal government and the operation of municipal government – they have a degree in public administration and have to have a wealth of experience – they are considered an asset,” White said, referring to how an administrator would be viewed by a bonding agency.
After interviewing the many candidates who applied for the job, the Village Board chose Jim Politi, who had 18 years of experience as a village manager and department head in New York state municipalities. “We hired Jim Politi as village administrator and he started putting in real management,” Foster said. “And that enabled us to bond money. The first bonding agency said, ‘The Village of Nyack has hired professional management and they are on the right path, and for that reason and that reason only we are giving them a bond rating of a BB.’ That allowed us to cut our debt services in half; it allowed us to spread the payment over 30 years. That took us from a debt spiral to the position where we could pass a less than 1 percent tax increase.”
In 2010, Nyack hired retired banker John Malesardi as Village Treasurer. “John was devoted to getting Nyack’s finances on the right track and revolutionized and modernized the way our village looks at and deals with taxpayer money,” said White. Malesardi passed away in November 2015 and was replaced by Nyack’s current treasurer, John Pintos.
2011: New York State Property Tax Cap
While the village was undergoing management changes, the state was enacting policy changes. The 8.9 percent tax increase that the village levied in 2010-2011 wasn’t so extraordinary in late 20th/early 21st century New York. Property taxes in New York State grew at an average annual rate of 5.7 percent from 1980 to 2010. As a means of comparison, the average annual increase in the Consumer Price Index was 3.3 percent during that period. And the height of the increases occurred between 2000 and 2010, in the Mid-Hudson Valley, where property taxes grew at an average annual rate of 6.2 percent, more than double the rate of inflation. For 30 years, New York was rapidly becoming a prohibitively expensive place to live.
The state acknowledged that the growth in property taxes was “unsustainable,” and in 2011 Gov. Andrew Cuomo proposed, and Albany passed, a property tax cap, the first in the state’s history. The tax cap limited “increases in school and local property taxes to two percent a year, or the rate of inflation, whichever is less, with narrow limited exemptions, while maintaining local control.” In order for a municipality or school district to levy taxes greater than two percent (or the rate of inflation, if that figure is lower), 60 percent of the local government’s board would need to approve the tax hike.
The tax cap helped change taxpayers’ perception of tax increases: Large tax hikes were recast as a deviation rather than the norm. “Many more people are thinking about, ’Well, how much is my municipality increasing taxes? Are they staying within the cap?’ than were thinking about those things six years ago,” said Geoff Gloak, a New York State tax spokesman. “The more you have a property tax cap in place, the more the savings compound. And it forces local governments to make tough decisions and look for opportunities to collaborate, to share resources, and to do so on behalf of property tax payers who have been suffering for years now under some of the highest property taxes in the nation.”
White, who was elected mayor in 2011, recalls initial outrage from New York municipalities, many of which had long relied heavily on large tax increases as a means of funding their needs and wants. “Many municipalities screamed, ‘This is an impossibility! How are we going to do this?’” White said. “But it actually made a lot of sense to me. The governor said that the only way to get municipalities to change their way of thinking was to force them to – or to at least use a carrot. He basically said that if you can stay below the tax cap your residents will get a tax refund check. And if the school district stays below it they will get a bigger check. And if the county stays below it you’ll get an even bigger check. It’s a kind of complicated reward program. But it made complete sense to me, because what municipality was going to voluntarily try to really cut costs and be frugal unless there was some reason to do so?”
Despite White’s enthusiasm for the governor’s new policy, it wasn’t easy to sell everyone in Village Hall on embracing the cap. “The Village Board agreed that the 2 percent was a great exercise. It was a little hard convincing our treasurer, it was a little hard convincing the village administrator. It was a very austere way of looking at your tax budget,” White said.
Ultimately, though, the people responsible for handling the village’s finances found ways to work within the cap. They just had to approach the budget with a different mentality. White recalls, “It really made you look at your spending like you look at your household spending. I can’t afford to pave as many roads as I want; I can’t afford to hire an employee that’s desperately needed in the buildings department; I can’t afford to do luxury things like hanging flower baskets on the street; I can’t afford to fund a new skate park in the park. What it forces is a more creative approach to budgeting. If you basically acknowledge that you can’t afford to just buy everything you need or want, you have to be careful and prudent.”
The village subsequently tightened its staff, eliminated public works overtime – a big expense for municipalities – and took on a conservative approach to spending. They wed themselves to thrifty principles. “Every year we try to pave 10 percent of our streets, which is sort of the municipal standard,” White said, providing an example. “Do we have more than 10 percent of our streets that need paving? Absolutely… But we can’t afford it while keeping taxes low.”
While there’s no question that White’s administration deserves credit for balancing the budget and for drastically reducing property taxes through both creative and common sense measures, in the scope of New York state, Nyack is hardly exceptional. The village is one of many municipalities throughout the state that successfully met the new tax standard set by the cap. “Through the first three years of the cap, the typical property taxpayer has saved more than $800, compared to if taxes had continued to grow at the previous growth rate,” New York state has reported. The savings for Rockland residents have been even greater: At the conclusion of the program’s third year, Rockland enjoyed the second highest estimated average savings ($2,042) of any New York county, behind only Westchester ($2,223); and now, five years in, Rockland residents are estimated to have saved more than $5,000.
2016: Down to Zero
“Guys, I think it would be awesome if we didn’t raise taxes at all this year. Can we do that?” White remembers asking Politi and Treasurer John Pintos. “And they looked at me cross-eyed. And then they pulled it off.”
How did they do it?
The truth is, there’s not a simple answer. Budgets, by their nature, though meticulous, are messy: Even a municipality as small as Nyack, which is working with a general fund in the $6 million range, has hundreds of lines of expenditures and revenues. Inevitably the unpredictable occurs – an employee dies, a natural disaster strikes, etc. – and the actual budget diverges from the initial adopted budget. The 2016-17 budget anticipates revenues dropping $77,000 – partially due to a drop in parking-related fees. Had the village increased taxes with the cap, which was .73 percent this year, they would have had to cut approximately $52,000. Instead, to get to a zero percent increase, they had to cut $77,000; that’s not an enormous difference, but still, it was $25,000 less that the village could allocate for spending.
Neither Politi nor Pintos was able to pinpoint a single cut they made that allowed the village to square away the $77,000 decrease in expenditures. The greatest savings came from an expiring program and a freed up salary. Getting to a zero percent increase from a .73 percent increase, though, Politi attributes to a judicious mindset towards spending and a little bit of lucky weather. “We figured out how to buy cheaper paper, at larger bulk – things like that, the clerk double-siding paper, all those little things, in the scale of a municipality, it adds up and is efficient,” Politi said. “And then we saved a lot through Public Works. When I first arrived – I’m entering my seventh year – we had a couple of heavy winters that beat up the budget, because probably the largest budget in our general fund is the [Department of Public Works]… Now you’re able to see some surplus out of that because you had a lighter winter last year. So we were able to save money on overtime, fuel, repair to trucks, etc. That played a part in building up a surplus.”
Though Politi, White, Foster and others in the current administration are extraordinarily proud to have lifted the burden of increasing taxes from Nyack residents this year, in the grand scheme of things, as most of them would tell you, $25,000 was not going to make a huge difference for the village or for taxpayers – nor was a zero percent increase an unheard of feat for municipalities.
Declining to increase taxes is only impressive insofar as necessary services are still being provided and the given municipality has a sustainable fund balance. Foster argued that isolating the zero percent increase tells an incomplete story. “We couldn’t do more than .73 percent, so getting to zero from there isn’t what’s amazing about it,” he said. “What’s amazing is what strong financial position we’re in. We’re able to do this while we’re in an expansive mode. We’re adding staff, improving our services; we’re doing things like the [Comprehensive Master] Plan and the work on the Nyack Marina. And we wouldn’t be able to if we weren’t in this position. We’d be cutting staff to try to get the budget down. That’s what we were doing when we first came into office.”
Foster wasn’t being self-congratulatory. In 2010 Nyack was running at a deficit. Now the village’s surplus is up to nearly $1.6 million. There are exciting projects – such as orchestrating a ferry to Manhattan, putting a 1,000-foot waterslide on Main Street, and finding a new tenant for the River Club space – in the works. It’s hard to imagine any of that happening if not for the decision to hire an administrator.
Mayor Jen Laird White says she will not seek a fourth term when the 2017 mayoral election rolls around. But she feels as though her administration has created the infrastructure for the village to prosper financially in the long term. “What we’ve done is manage to streamline the expenses to a degree where we don’t need to raise taxes to cover them,” she said. “We’re living within our means. That said, if there’s some big infrastructure project that needs to happen, that might mean that taxes need to get raised that year. The fact that we have a lot of residents moving here and that our stores and businesses are doing well just says that our taxes [in the] long term will improve.”
Politi agreed. “I don’t know how long you could go with zero [percent tax increase]. But every once in awhile, you should be able to do that. Just take a breather.”
With nearly $1.6 million in surplus funds, the village is positioned to give residents lots of breathers – or pave a few additional roads, or invest in a ferry. The challenge that will face the next mayor, Politi, and the Nyack Village Board will be how best to invest in the village. How will Nyack’s surplus shape its future?
White still has a year left; in that time, and going forward, her desire is to “figure out how to move [Nyack] forward and have [the village] grow in a healthy, interesting way while maintaining the very thing that we all love about this place.”
That has been the philosophy behind projects like building a skate park in Memorial Park, redesigning the waterfront through the Comprehensive Master Plan, and exploring the possibility of a Nyack-to-NYC ferry system. “There’s an old school of Nyack who wants the village to stay exactly the same. But these are also the same people who don’t want to pay higher taxes but who also always say, ‘Why can’t we have flower beds?’ And the problem with staying the same is that we would have the same tax base and essentially the same kind of businesses would be supported by that limited tax base,” said White.
Change, though, according to White, doesn’t have to mean a change in Nyack’s fabric. “We’re going to have to work hard to make sure that the demographic stays interesting, that it doesn’t become Westchester,” she said. “I like that on Upper Main, the Sew What’s New building is going to become essentially a Section 8 low income project, and it’s going to be right next to these lofts that are going to be market rate – sort of looking for hipsters. That’s what’s great about Nyack: that you have sort of every socioeconomic race, color, religion. And I think whoever is in government in the village is going to have to work hard to make sure it doesn’t become too hip, too cool – we’ll lose the thing we all love about it which is our diversity.”
Max Cea is Nyack News & Views’ Deputy Editor. He has written for Grantland, Nymag.com, and Spin.
- Five Tax Cap Things to Know About Cuomo’s Trip To Nyack, 6/10/2015
- The New York State Property Tax Cap: 2015 Results. Success. Savings. governor.NY.gov
- John Malesardi, Nyack Village Treasurer, 68, 11/10/2015
- Comprehensive Master Plan: All Roads Lead to the Water, 4/2/2016