In response to a property tax cap passed by the New York’s Senate on Monday, the Ithaca Common Council convened a special meeting to discuss possible responses, including renegotiating Cornell’s voluntary payment to the city.
Councilmembers worried that the new cap, which would prevent the city from raising property taxes by more than two percent, would add additional strain to the city’s already strained budget. The city could face a deficit of $3.5 million for 2012, according to the meeting’s agenda.
In response to the budget crisis, councilmembers discussed restructuring the city government to make it more efficient, cutting extraneous services and finding additional sources of revenue.
One of these potential sources of revenue may come from Cornell, which provides a yearly subsidy to the city.
Cornell counts as a property tax-exempt entity of the city, but still pays an annual sum under a Memorandum of Understanding between the University and Ithaca — an agreement written in 1995 and amended in 2003, The Sun reported in an article in February.
MOUs are common in cities that host large universities such as Cornell, since these institutions use the city’s transportation and other resources but are exempt from property taxes, Common Council Alderperson Svante Myrick ’09 (D-4th Ward) told The Sun in February.
The exact amount Cornell pays to the city each year is calated based on the consumer price index from the previous year, said Council Alderperson Joel Zumoff M.S. ’70 (D-3rd Ward) on Monday. Since CPI is used to measure inflation in a particular region, Cornell’s contribution to the city varies depending on the value of the U.S. dollar.
Zumoff explained that Cornell’s payment would be better pegged to a CPI more relevant to the Ithaca area, since the national CPI does not necessarily reflect fiscal realities of the Ithaca region, Cornell’s contribution should be calculated based on a more relevant CPI.
Because the CPI was -0.04 in 2009, the University paid $1,187,000 in 2010, less than the year before, Ithaca Controller Steven Thayer said.
According to Thayer, if Cornell was not tax-exempt, the University would be paying roughly $24 million to the city.
According to the agenda, “the city will likely face the most difficult budgetary challenges that it has seen in decades.” This refers to the tax cap, “possible reductions in state aid” and “expected increase in pension and health insurance costs” as major problems.
Mayor Carolyn Peterson said she hopes the city takes “a strategic approach to the budget” rather than impose a blanket cut. Various city councilmembers suggested combining the responsibilities of some departments and even possibly creating a new position, a “city manager” or “administrator.”
City councilmembers also voiced their continued support for the city’s youth services. Common Council Alderperson Maria Coles (D-1st Ward) described a budget cut for youth services as “a major pothole in our social fabric.”
The councilmembers repeatedly came back to the point of what services are actually legally required. In addition, New York state officials started performing “risk assessments” Monday, “interviewing department heads and staff members to get a feel about the operations of the city,” Thayer said. These risk assessments are not full-blown audits, but rather are samplings and will determine if proper audits are needed, he said.
These assessments by the councilmembers are part of the information gathering the city is still performing to help determine what should actually be cut.
Councilmember Eddie Rooker ’10 (D-4th Ward) called for the council “to be strategic” and to “move forward as quickly as possible.”
“The worst thing we can do at a time like this is to stagnate,” Rooker said.
Zumoff said increasing costs for state mandates — services such as Medicare that the state requires Ithaca to provide but for which it provides little money — also make the budget cuts more difficult.
The tax cap will make budget constraints even tighter. The recession has negatively affected the city, as it did much of the United States, but the councilmembers hope to make the city more self-sufficient and efficient in the future.
“It’s not like we’ve been riding high on the hog for the last 10 years. It’s like we’ve been cutting and cutting and cutting and now we’re being asked to make a really big cut,” Cogan said.
The council is meeting again on Wednesday for one of its regularly scheduled meetings.