• New York: Appellate Court Determines 2 Percent Property Tax Cap Constitutional
  • September 1, 2016 | Authors: David D. Ebersole; David M. Kall; Susan Millradt McGlone
  • Law Firms: McDonald Hopkins LLC - Columbus Office; McDonald Hopkins LLC - Cleveland Office
  • A New York appellate court recently decided a lawsuit filed by the New York State United Teachers union seeking a declaration that the 2 percent tax cap on property taxes is unconstitutional. While the suit played out, the legislature created a real property tax freeze credit that was designed to provide a two-year income tax credit to eligible homeowners who had paid real property taxes to school and municipal jurisdictions. This triggered an amendment to the suit wherein the plaintiffs sought declaratory relief again, seeking to establish that the freeze was also unconstitutional on the grounds that it authorized "a wrongful expenditure, misappropriation, misapplication, or . . . illegal or unconstitutional disbursement of state funds.”

    In its May 5 opinion, the court dismissed the complaint, effectively concluding that neither the cap nor the freeze violated the state constitution.

    With respect to the property tax cap, the court recognized the constitution’s requirement that the legislature “provide for the maintenance and support of a system of free common schools, wherein all the children of this state may be educated.” The court further acknowledged that while the constitution obligates the state of New York "to offer all children the opportunity of a sound basic education,” it does not require that equal educational offerings be provided to every student. According to the court, to be successful, a plaintiff must at least allege that the state caused a deprivation of a sound basic education; gross educational inequities are not enough to give rise to a constitutional violation.

    The plaintiffs’ claim on this point failed because they did not allege a failure to provide a sound basic education. Nor did they allege that the challenged legislation impaired local financing ability to the extent that the state's duty to provide sufficient funding was called into question.

    As for the property tax freeze, the court pointed out that legislative acts enjoy a strong presumption of constitutionality, and that parties challenging them face the initial burden of demonstrating a statute's invalidity beyond a reasonable doubt.

    While the tax cap and freeze were intended to restrain “onerous property tax increases that were believed to be depressing economic activity,” citizens can vote to increase their taxes, thereby paying for additional enrichments and facilities. One result of this flexibility is a variation in services between districts, which the court deemed to be constitutionally permissible in light of the fact that there was no discrimination against a protected class.

    Finally, the plaintiffs alleged that certain provisions violated their right to vote and the right to free speech. These arguments failed as well, because the legislation had a rational connection to the government’s legitimate interest in restraining property taxes.