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STATE OF NEW YORK
- FRANK C. MOORE
DEPARTMENT OF AUDIT AND CONTROL a
ALBANY
FOR RELEASE FRIDAY PAPERS OF JUNE 20, 1947
FROM:E.A,O'HARA, JR, ExBCUTIVE ASSISTANT TO THE COMPTROLLER
meme rm meen en mmm metas mmm meme meme meme me ee oe
Speech to be delivered by State Comptroller
Frank C, Moore at the 38th annual meeting of the
New York State Conference of liayors and other iwinicipal
os oe Statler, Buffalo, Thursday evening,
(June 19, 1947
SOL SEMAINE
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STATE — LOCAL FISC*L RELATIONS
The relationship between the State of New York and its
subdivisions is ever-changing, because it depends upon factors that
are seldom static.
Some of these influences are subject to control by the
localities or by the State, But others + such as war and periods of
economic depression or inflation - are, of course, beyond control
by either. Only by the close cooperation of the State and the
localities can their effect be overcome. This is especially true
in fiscal affairs.
Today there is real need for such co-operation, not
merely to find some temporary solution for the problems of municipal
finance in_/ period of upsurging prices but to generally strengthen
local finances to meet all tests in the years ahead, Cooperation
in this instance means not only joint action by the State and the
localities but such separate action by eech as may be necessary to
achieve the desired rebuilt.
It is the purpose of this talk to suggest the action
each should take; but, first, let us outline the problem.
To state it simply, quite a few of our municipalities
find it difficult to live within their income.
Unable to raise more money by real estate taxes, because
of legal or practical limitations, they seek additional revenues
from other sources. Some look to the Stete to bridge the gap between
their expenditures and their real estate tax revenues,
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In recent years, the Stete has greatly increased the . i
scope end dollser amount of its financial assistance to the localities,
Lest year, for example, the State agreed to reimburse the localities
to the extent of eighty per cent of their expenditures for home
relief end to pay en increased share of three other important welfare
services, In so doing, the Stete has essumed a financial risk we
cannot new meesure. ‘ith welfere costs moving Steedily upwards, it
is clear that the State cannot increase its other assistance to the
localities within the present tax structure of the State,
Of course, the State could impose further state taxes end
turn the proceeds over to the locelities, Eut more state assistance
may destroy the very thing ve are trying to help. As the locslities
become increasingly dependent on the stete for financial support,
local responsibility is lessened and locel government weakened,
Today, fifty-five cents out of every dollar of state tax
revenues is set apart for assistance to our local governments, As
welfare costs rise, the State will turn over a still lerger shere of
state revenues to the localities. The state may find it necessary
to increase state taxes to meet this edied burden together with the
rising cost of state government,
Last December, your orgenization recognized this when it
submitted to the Governer and Legislature its 1947 program of legis-
lation, Among other things you recommended that:
"the sound principle of home rule end local
responsiovility be enlarged to encompass the
financial needs of the cities and villages by
granting them adequate povers to levy other
substantial taxes in addition to the real
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Woy oe he hehe hWWAthout financiel home rule power
their administration is handicapped and is so
now, The alternetive to this home rule power
is additional State aid, additional State regula--
tion, less local respons ipility end less local
self-determination....
In his Annual Message to the Legislature of 1947, the
Governor called attention to your views end urged favorable action
with regard to them,
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Various proposals were made with respect to the legis-—
lative grant of local taxing powers, including some by the Conference
however, ‘
of Mayors,.. Your organization/has expressed disagreement with the
bill finally enacted into lav,
aa first
By coincidence, we are meeting tonight in the/county in
the State to exercise the powers conferred
by the recent legislation. The Board of Supervisors of Erie County
has imposed a one per cent sales tax,
New York City has successfully used local taxes for more
than twelve years. In populsetion, Erie County is the largest county
in the State outside of New York City; and Buffalo is our second
largest city, Not many areas of the State offer as : favorable a
testing ground for local taxes, By keeping the rate of sales tax
low ana by generous exemptions, the Board of Supervisors of Erie
County hes encouraged success, There is other evidence of a deter-
mination to make the new tax work, The entire up-state will watch
with great interest the operation of the new plan in Erie County.
From a statewide viewpoint, some of the features of the
new law are cleerly experimentel. I particularly refer to:
1, The levy of locel taxes by counties to assist
school districts;
2. The limitations “hich restrict to cities of
more than 100,000 the pover to levy local
taxes for general purposes.
Some of the municipalities have compalined because the
new law does not make local texing powers available to them, But,
of the 57 counties and 6 cities authorized to impose local taxes,
only 1 county, end no city, has heretofore acted. It is possible
that there is no present need for local taxing powers in some of
the counties end cities, It is also possible that some municipal-
ities are waiting to observe the results of the new plan in other
communities, It seems clear, hovever, that some have refrained
from acting because they are hopeful the State will increase still
further its financial assistance to the localities,
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The Legislature granted local texing povers to counties
to assist the school districts in financing the increased cost of
school
teachers' salories, new/buildings and other costs of educetion.
Obviously, such increased cost cannot be financed out of local
non-property taxes if the boards of supervisors, for any reason,
fail to levy such texes,
I repeat whet I said in Geneva a few days aso -—- all this
demonstretes the need for a new approach if local non-property taxes
are to be used gencrally throughout the State to finance the in-
creased cost of education, ‘Je all have an obligation to join with
the administretion in developing such new approach.
Certainly your efforts to obtein local taxing powers shoul<
not be discouraged because of differences of mechanism,
Last winter, your organization urged that local taxing
powers be granted to the cities and villages 2s a means to"financial
home ruletand greater local responsibility.
No state has entrusted to its municipalities and districts
greeter powers of self~government than Nev York Stete. In no other
state, do the subdivisions enjoy grcater freedom from state inter-
ference in local affairs, But es the locelities have increased their
powers of self-government, they have looked to the Stete more and
more for additional revenues, Groving dependence upon the State not
only weakens our local government but leads to greater stete super-
vision and centrelization of governmental authority,
Your present stete administration is opposed to the
centralization of government, It docs not want greater state control
over local affairs. Instead, it desires self-reliant, vigorous and
couregeous locel governments.
Local responsibility in this Stete has not kept pace with
the growth of home rule povers, If our municipalities want
financiel home rule, they must demonstrate e willingness to accept
financial responsibility for their acts, ‘Without adequate financial
responsibility, the grant of greater home rule powers is as dangere
ous as the gift of a check executed in blank,
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Some years ago, at a4 public hearing in Nev York, I heard
a critic of home rule define it eas the right to be misgoverned by
your friends, I believe it is the right to voluntarily bring about
the best possible government in your home torn,
The quantity, quality and cost of local government very
tremendously in the various subdivisions of the Stete, but, in
Every conmunity, there are opportunities to bring about improvements
in administretion which will be rcflected in better Services or
reduced costs, or both,
Governor Dewey pointed out the urgent need for such im—
provencnts when he said et Hamilton College a few days ago,
"Government, as well es industry, must ’
give a better product for less unit cost,"
The beginning point of + successful career for a municipal-
ay)
ity is careful realistic self-appraisal which -ill reveal veaknesses
in the city's fiscal structure end point the way to their elimination,
Some Cities and a few villeges are attempting to operate
under charters thet were obsolete long before the First ‘orld ‘ar,
It is not surprising thet they find it difficult to provide the
kind of governient their citizens are entitled to. The cure for this
Situation is, of course, charter revision,
“ith here end there 2 notable exception, local essessing
practices shov little sign of improvement. False economy, local
politics end inertia are usuelly to blame,
By unijere-assessing their taxable real estste, some cities
anc villeges have established a very low celing upon the amount of
reel estate tax they can reise. ‘“s a result, they find themselves
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in a very unigue position, Rasy vere close to their real estate
tax limit although the tax burden of their property owners may be
below the average for similer units.
Last year, the Legislature put teeth in the constitution—
al tax limit. The Comptroller was directed to withhold from any
municipality which exceeded its constitutional tax limit, state -
assistance in an amount equal to such excess, For example, if a
city or/Village levies real estate taxes, in any fiscal year, in an
amount exceeding its constitutional tax limit by $5,000, the
Comptroller must ~itnhola from such city or village, in
thet fiscal year, state assistance in the amount of $5,000. Only
by corresponzing reduction in the subsequent tax levy can the muni-
cipality recover the amovnt so withheld,
A survey now in process in our Department discloses thet
Several villages have levied real estete taxes in excess of the con-
. . 5 : almost seven
Sstitutional limit. Im one case, the excess is f times as much
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as its total state assistance for the year.
In every instance, the are assessing their
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property far below the general stetevide average. In so doing, they
have imposed a serious finenciel hardship upon their taxpayers,
Because the constitutional tex limitation is based upon
the average of the veluations for five years, these villages cannot
quickly overcome their difficulties.
Improvements in assessing practices are long overdue in
many cities and villages.
There is a great need for better budget practices in a
nurber of cities. For example, the fiscal year of one of our cities
begins on December lst, but it does not collect taxes until July.
Year after year, this city borrows money to finance its operations
for the first seven months of the fiscal year, and year after year,
it levies taxes to pay the interest chorges on such loans, This
procedure is wasteful end wrong.
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In every municipality, the collection of taxes should
be so synchronized with the beginning of the fiscal year that the
municipelity can meet its costs of current Operations vithout
borroving.
Some of our cities have adopted cash basis budget plans,
By setting up reserves against uncollected taxes, they have elimina-—
ted tax anticipation borrowings with conscquent Savings in interest
charges,
Because of the high level of tax collections of recent
years, little attention is nov being paid to the improvement of tax
collection methods, Our municipelitics never had a better opportun-
ity than now to purge their assessment rolls of dead wood and to
strengthen their reel estate tax base to meet the fiscal streins
of the future,
At the cnd of next ycar, the borroving powers of all
cities, except Now York, vill be reduced to 9% and all villeges,
tovns and countics, except Nassau, to 8%,
This makes it necessary that our municipelities restrict
their borroving to the mininum,
Speaking of borroving, it is note~orthy thet interest
rates heve reversed their trend snd ere moving siowly upward, This
presents an interesting question to the municipalities contemplating
capitel progrems. If they initiate construction nov, they vill
heve the adventoge of the lov interest reotcs but the disadventage of
high construction costs, If thcy defcr their programs, they may be
obliged to pay higher interest rates vith no assurance of lower
price levels, Should they borrow now or defer construction until
leter?
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It would seem advisable, where possible, to defer both
coustruction and financing until construction costs sre reduced end,
meanvhile, to accumulate, in reserve funds, sufficient money to
make a substantial dorn payment in cash for the ner improvements. |
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If the municipality can efford to pay the debt service on a/bond
issue, it should be able to plece an ecuivalent aiount each yeer
in its reserve funds. To the extent thet the improvements ore
financed from moneys on hand, interest costs will, of course, be
reduced,
No municipality should enter upon any program of capital
improvements which will exhaust its borrowing power. Common sense
requires thst some margin be reserved for the emergency “hich may
lurk around the corner, iunicipalities tenpted to go on borrowing
Sprees should recall thet refunding is no longer popular in our
office. They vill be expected to pey their bonds as they become due,
The county ani torns ‘ere originally set up for the more
convenient administretion of state functions. It was intended that
cities and villages snoulil provide additional services such as sever
and water systems, ena fire and police protection,
From time to time, however, the Legislature has granted
charters to cities authorizing them to administer one or more
stete functions vrithin their corporete limits, ‘4s an administrative
agency of the otate, the county government has been thereby re-
stricted to the area outside of the «age eo ;
¢ 7 ¢20525. Put, as our citics have
expanded their truly municipal functions, they have found it
ineressingly difficult to finance, vithin the 2% tax limit, the
rising cost of these services and of the State functions they have
also taken over,
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During the war, we leerned by experience thet the county
was an ideal unit for civilien defense, In recent years, the county
hes assumed for greeter responsibilities in social velfare, public
health, veterans! services and juvenile delinguency,. For example,
“ithin the pest year, 36 cities have turned over their velfare
functions to the counties in which they are respectively situated,
tt is notevorthy thet nll of the services referred to cen
be described as strte functions, In taking over the performence of
these functions, the county is performing its original purpose,
Miey I add a word of caution in reletion to the transfer of
functions, I do not believe the State or county should take over
the performance of -eny local services thrt ere truly municipal in
cheracter, 7
In the lest 20 yeers, a nev egency hes come into iste
in our State for the performence of linitcd servicés of local geovern--
ment, I refer to the public authorities, of which we now have
sevcrel types, It seems to re thet, as a general rule, an authority
Should not be set up to supply services ususlly provided by our
local government, except as a means of cooperative action betrcen
several such units for the benefit of all,
sometimes the problems of - municipslity can be solved
only by the pessege of a special or local bill in the Legislature.
Because it affects only one community, the bill is not usually
subjected to es cnreful analysis es 2 generel lav, In this lics a
great danger because the Specirl sct of tnis ycoar becomes the
general law of next year,
Mey .I suggest thet the Legislstive Committee of your organ-
izetion give these local bills cven greeter attention than the bills
general epplicetion and that, et the risk of offcnding the members
of your orgenization, you oppose any local bill ~hich vould esteblish
an unwise precedent for general lcgisletion,
some of the problems which confront our municipslitics can-
not be solved by local action or by special acts of the Legislature,
They must be ettacked on a state-idc front,
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Among other things, I rcfer to the difficulties vhich
have erisen under our constitutional tax limitetion. Originelly
enacted in 1384, it was cxpended to all cities and ell villeges
on Jenuery 1, 1944, as a result of an amendment approved by the
voters in 1936,
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The 1938 amendment, hovever, creatcd a distinction
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between taxes levied for education and taxes levicd for other
current purposes, It excluded from the tax limit of the cities
under 100,000 populaticn all texcs levicd for school purposes where
the school district included territory outside the city or where the
school tax "AS levied for a union free school district wholly within
but not coterminous vith the city. It further authorized the
Legisisture to exclude part or *ll of the taxes levicd for education-
al purposes in the remaining citics of 1C00,00C or less inhabitants,
As a result the present constitutional tex limit is much
more restrictive in its epplication to the lerger citics than it ic
to the smeller cities, The cities of over 100,000 inhabitants
provide for education as s pert of the cost of city government,
“ithin the 2% limitation and ‘ithout the privilcgec of obtaining
legislative permission to exclude any of the taxes levied for school
purposes, But, all of the 56 citics having less than 100,000
population are permitted to exclude perts or all of the taxes levied
for school purposes in computing the amounts cf real cstate taxes
“hich they may raise each year under tne Constitutional limits of
2%
The present constitutional tax limitation is not scientific;
It favors some of our cities and discriminates against othcrs. It
should be restudied and revised to more intelligently restrict the a
levy of real cstate taxes, or discarded for a completely new device,
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In the other ten cities in this group, the city nani bi cies:
tion may reduce the totel amount of the education budget, but the
boerd of educntion has the sole porer to determine the amounts of the
individual items conteined in the budget, both before and after
reduction by the city administretion,
It hrs happened, in some instances where the city author
ities have ordered 2 reduction in the total amount of the school
budget, thet the borrd of education hes climineted a scrvice which
wes very much desired by the people end the city authorities have been
forecd, by public opinion, to restore the budget cuts in order to
enable the bosrd of cduestion to restore the service. The use of
this device, therefore, makes city control of the school tax levy
incffcctive, This condition, together ~ith cxpanding educational
services and increasing prices and wages, hes forced the suthorities
of some cities to reduce the gcncral city purpose side of the budget
and to curtail expenditures for othcr services which they may conside
er equally important or even more cssentinl then some educational
Services,
In the remaining fifty-one cities of the Strte, the school
authoritics have full pover to detcrmine the amount of taxes to be
levied for educationsl purposes on real cstete within the city.
City officiels have complrined to mc quite vigorously in
privete ebout preference which hes becn extendcd to education as
compared vith the other city scrviccs, On the other hand, school
bosrd members hrve cxpressed unhappincss over the attitude of city
administrations tovards thcir locsl cducsationsl systems,
Mr, Morgan Strong, on behalf of your organization, has
requested me to initiste a study of the legel-—fiscal relntionship
betveen school districts end cities, I hrvc assured him thet ve
vill be gl-d to underteke such a study with the cooperation of the
city and school euthoritics, Ye are nov accumulating some prelimin-:
ery informstion on the subject and ve expect to convene 1 conference
om the subject in September,.
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If there is a magic formula or ensy route to good govern—
ment, I hove never discovered it, Like good housekeeping, good
government consists of doing many smell trsks vell, dey «fter day,
retner then e fer occasionsl spectacular acts,
Experience of more than 27 years convinces me thrt the
vast mrjority of our local officials vant to do a good job and thrt
they engerly ‘elcome essistenec which vill equip them to better serve
their home communities,
The State of New York should not overlook any opportunity
to help them, It was for that réeeson ve reorgenizcd the Division
of Municipal Affreirs to cstsblish a Research and Statistics Sccetion
to sccumulste up-to-dste informstion conecrning municipsl «ffairs,
and a Consultant Section to meke advisory services aveilable to our
local officicls for the solution of their problems,
Eech yeer hundreds of locel officicsls meke use of these
nev services, I-.bclieve our St-te should further expsnd this type
of stete aid,
There is also great need for public service trrining not
only for the person in service but for those who scek such a crreer,
As the Governor srid , Lest weeks
"The public service requires the best talents
thet can be found,"
Some of our collcges sre contributing to beter government
by excellcnt courses in public administretion but their total
enrollment is very smell,
The new system of internships ineugurated by the State
last month is, I hope, only the beginning of a much Ilrrger pertici-
pation by our State in public scorvice training.
More than anything else, ve need a grcatcr appreciation
of the responsibility of the individual to his government, federal,
State end local,
We must utilize every means et our command to encourage
greater citizen participation in our government, Our local govern-
ments heve the most to gain therefrom, because they are closest to
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the people,
This is but a partial inventory of the many opportunities
we have to strengthen the foundstion of our nation, our local
governments, It should be our number one postvrr project everyvhere
in the State, In its accomplishment, I offer you our wholehearted
cooperstion,
Since the snnusl meeting of your Orgenization one yerr ago,
we heve shered a great loss. You have lost a splendid leader and |
I a close friend,
It was my pleasure to know Bill Capes for many years,
During a portion of that time ve represented municipal interests
that were occ-sionally in conflict, With vigor end intelligence,
he fought for the citics and villages of this State, but elrays
fairly end usuclly successfully,
In conclusion, I propose tht »s a memorinl to Bill Capes
ve join our efforts to bring ebdout in our State the kind of vigor-
ous, sclf-reliant end effective local government for vhich he gave
a lifetime of unselfish service,
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