Here are some frequently asked questions about our plan to dramatically cut property taxes, investing in housing and businesses.
Why cut property taxes?
People with choices are often not choosing Rochester. We have to figure out a way to attract new residents and businesses. We also have to figure out a way to help our current homeowners and renters, many of whom are struggling with housing costs. Our current approach of making incremental investments is not working. We need to think in terms of creating policies, not programs.
Our homestead tax rate – the rate paid by owners of one, two and three-family homes, is among the lowest in the county. But our residents are also the poorest.
Half of city homeowners earn less than $51,000. This plan directly helps them stay in their homes, make needed repairs and improvements and pay their monthly bills.
Half our our renters earn less $22,000. Sixty percent of renters are “burdened,” meaning they pay more than 30 percent of their income for housing. Our system shows how property taxes can be a regressive tax, as many renters live in buildings subject to the higher commercial tax rate.
Our commercial tax rate is among the highest in the county. It’s 50 percent higher than in Henrietta. This impacts the decisions of businesses to locate in Rochester, create jobs and thrive.
Cutting property taxes would be a massive investment in our housing stock, commercial real estate and jobs.
Is it really possible to reduce property taxes by 50 percent?
Yes, it is. Reducing taxes by 50 percent would reduce revenue by approximately $70 million in year one. In subsequent years, the revenue reduction would decrease due to increases in investment and property values. After five years, the entire revenue reduction would be offset by these investment increases. If Rochester has the lowest tax rate in the region – by far – new families and job-creating businesses will come to the city.
How will the City cover the revenue shortfall in the meantime?
There are many options and our plan details some of them. The largest would be the consolidation of the City and County water systems. The City’s water system has previously been valued at approximately $230 million, adjusted for inflation. If the City transferred ownership of the water system, the City would receive a lump sum of cash which could be set aside in a dedicated fund. The dedicated fund would then be tapped into to cover the short-term revenue reduction caused by the property tax cut. We would only move forward with consolidation after an extensive study and negotiation that ensures city taxpayers and ratepayers are protected.
The City could also seek increases in state aid or find efficiencies in the budget to add additional sources of revenue to the dedicated fund. Finally, the City receives a portion of revenue from a wide variety of others sources, such as the sales tax, mortgage recording tax, and others. Revenue from these sources would increase as a result of the property tax cut, thus further maintaining the City’s financial stability.
By setting aside a dedicated fund, we can do this without any cuts to services.
I own a home. What will this mean to me?
The average home in the city is $72,600, with a property tax bill of $1,394. The average homeowner would save $697 a year.
It’s likely the value of your home will increase, because taxes are capitalized into a home’s value.
You may be able to afford a more expensive home, as your monthly payments will go down.
If you need to make repairs, you will have more cash. A home equity loan may be easier to obtain, as well.
Will my assessment increase so much that it negates the tax cut?
No. The net effect for homeowners and businesses will be a reduction in total taxes paid. As an example, let’s say you own a $70,000 home and currently pay approximately $1,300 in City property taxes. If we reduce taxes by 50 percent, your new tax bill would be $670. Now let’s say your home increases in value by 50 percent (this is on the very high end of what would actually be expected) to $105,000. Even with that staggering increase in value, your new tax bill would be $960. This would still represent a savings of $340 compared to what is currently paid. The bottom line is that residents will be paying less in property taxes under our plan.
I own a commercial property. What does this mean for me?
Rochester’s commercial tax rate is very high, which squeezes businesses. The commercial rate is nearly double the homestead rate and among the highest in the region. Operating in the city sometimes comes with additional costs, including parking, environmental remediation and higher land prices.
The average commercial property is assessed at $285,800. The owner pays $10,772 in property taxes. Under our plan, this property owner would save $5,386. Business owners could use this money to hire more workers, offer better wages and benefits, make capital improvements and reinvest in their companies.
If Rochester makes economic sense for businesses, we can attract new employers and jobs.
I’m a renter. What’s in this for me?
This plan helps landlords make repairs and improvements. Landlords will also be able to keep rents stable or even lower rents, as multi-unit buildings are subject to the high commercial tax rate. Landlords who don’t pass on any benefits to their tenants will lose out to landlords who do.
By lowering property taxes, more renters will be able to afford to buy houses.
Our plan also calls for a tenant ombudsman who will advocate for tenants’ rights and help them solve problems related to housing.
Finally, both homeowners and renters will benefit by having more job-creating businesses move to the city.
What about school funding? I’m worried it will be cut.
Under state law, the city cannot cut funding to schools. Although your property tax bill shows a portion going to schools, the city does not have the authority to levy school taxes. As explained above, the city will balance its budget by putting money aside in a dedicated fund.
Isn’t this just “trickle-down economics?”
It’s the opposite. Right now, wealthy interests get property tax breaks as a condition to invest in the city, whether it’s an apartment building or new offices. This is not fair to existing businesses, renters or homeowners. We will end this distortion and make the system fair to everyone. We will immediately impact taxpayers who are in lower income households.
What about crime and schools? Should you fix that first?
There will be some people who say, “You can’t pay me enough to move back to the city. Property taxes are not the issue.”
This plan won’t be the sweet spot for some people. But it will be very attractive to others. Even modest growth can have a major impact on our city’s health.
We have a chicken and the egg problem. We believe it’s a lot easier to fix the schools and crime by reducing poverty and providing opportunity. That’s why it’s important to attract job-creating business, fund childcare and create a citywide fiber network. We will also open a jobs office and focus on code enforcement. This property tax plan won’t be happening in a vacuum, but it’s a key component in reviving the city.
Has this worked elsewhere?
Yes. In the 1970s, Boston and San Francisco were forced to cut property taxes after voter referendums. Despite predictions of deep cuts to services, the cities quickly recovered the lost revenue and experienced major growth. Boston and San Francisco didn’t have time to plan for the property tax cut. Our proposal calls for creating a dedicated fund to cover short term revenue loss.
Philadelphia created a 10-year property tax break program for new builds and improvements. That program was credited with spurring a lot of new construction and increasing home ownership. But it was also criticized for underwriting wealthy developers and homeowners. Our program will be available to everyone.
Finally, we’re already trying this in Rochester. We give property tax breaks to companies and developers willing to invest. That shows a need to fix our system to make it fair and welcoming to all.
Our proposal is a long term investment in Rochester’s housing and businesses. If we do this, Rochester will see real growth that strengthens neighborhoods and grows the economy.