February 1, 2011

RE: Property Tax Cap/Senate Bill 2706 (Skelos, at request of the Governor)

Dear Senator:

New York property taxes are nearly 80% above the national average. While controlling the level of local
government property tax growth sounds like something positive, actually reducing these taxes and
addressing their root causes is far more important.

For counties, the major cost drivers are delivering state services and other fixed costs. Our fixed costs
include employee health care insurance benefits and pension contributions, which rise and fall with
economic circumstances. Pension costs are rising now because the recession caused the investment
income in the state retirement system to plummet. Pension costs, alone, consume over $500 million
annually and are expected to rise substantially over the next several years.

The other major cost drivers are unfunded and underfunded state mandates, the largest of which is
Medicaid. There are nine State mandates that consume 90% of the county property taxes levied
statewide outside NYC. State mandates account for $4 billion of the $4.4 billion in county property taxes
levied last year. Medicaid alone costs county taxpayers outside New York City over $2 Billion annually
and automatically increases over $60 million every year.

The increased costs of Medicaid and pensions alone—programs over which counties have no control—
will far exceed any allowable property tax growth under the proposed cap. The resulting fiscal gaps for
counties will reach into the hundreds of millions of dollars in the first year of implementation, and these
state imposed fiscal gaps will remain for many years unless existing and new unfunded mandates are
reduced or eliminated.

Simply capping property taxes without enacting corresponding meaningful relief from existing and new
unfunded mandates does nothing to reduce the costs of these and many other State services that
counties must pay for and implement at the local level. And, worse off, preserves the distinction of NY
having the highest property taxes in the nation. This continues to drive people and businesses out of New
York and acts as a deterrent to re-location to our state.

NYSAC encourages all parties, state and local, to do better. NYSAC urges the Governor and Legislat ure
to enact legislation to CUT STATE SPENDING and to reform the service delivery system and address the
root cause of high property taxes. Taking these bold steps will in turn reduce the property tax burden and
not preserve the status quo.

Sincerely,

Stephen J. Acquario

Enc: Cutting Property Taxes through Mandate Reform