Local Taxation for Services Not Provided to Sub-Units of Local Government PDF Print E-mail
The Mandate: Towns encompass all territory within New York State except for cities and Indian reservations.  As a result, every individual (except for those living in a city or on an Indian reservation) lives in a town. A village is a municipal corporation within a town, and its residents are residents and taxpayers of both the town and the village is which the town is located.  Of the 932 towns in New York State, 421 of them contain at least one village.  

As a general rule, town services are to be financed by taxes levied on the whole town, including village residents within the town, unless state statute requires or permits an expenditure to be paid from taxes levied only on the unincorporated area outside of the village.  Consequently, village taxpayers must pay for all town services -- regardless of whether they receive or benefit from such services -- unless a statute requires or permits otherwise.  

A classic example of this mandate, and one that garners significant attention, concerns village taxpayer liability as it relates to the town highway budget.   Highway Law § 141 prescribes that a town's highway budget consist of four items:
  •  Item #1 – repair and improvement of town highways;
  •  Item #2 – repair and construction of bridges having a span of five feet or more;
  •  Item #3 – purchase, repair and custody of road machinery; and
  •  Item #4 – removal of obstructions caused by snow and other miscellaneous purposes.

Pursuant to Highway Law § 277, property owners in a village are exempt from the levy and collection of town taxes for Item #1. However, all town residents, including the residents of a village, are responsible for the expenses associated with Item #2. With respect to Items #3 and #4, the town board has the option to finance those expenses as part-town charges. Not surprisingly, town boards frequently impose these charges town-wide even when the town does not provide snow removal or highway services within the villages.    Additionally, if village taxpayers are exempt from paying for the repair and improvement of town highways, it only seems logical that they should also be exempt from paying for the purchase and maintenance of road machinery and the cost of snow removal on those same town highways.

This issue has been further highlighted by the increased attention on village dissolution.  Studies of villages considering dissolution have projected, in many cases, an increase in the town residents’ tax burden, due in large part to the fact that village residents would no longer have to pay town taxes for services which they do not receive, thereby eliminating this “subsidy” funded by village taxpayers. 

While this is predominantly a village issue, city residents are also subjected to this inequity when, through county taxes, they pay for county sheriff and highway services that are not provided inside city boundaries.

The Cost: New York's property taxpayers are already subject to one of the highest local tax burdens in the nation. Requiring village and city residents to pay for services they do not receive results in a duplication of taxes and unfairly adds to that burden.

The Solution: Support legislation prohibiting town and county governments from taxing property owners within sub-units of local government for services not provided to such property owners.