Many local governments in NYS, Long Island plan to bust 2% cap on property tax hikes

ALBANY — Local governments,  school and fire districts across New York and Long Island are increasingly looking to raise property taxes above the state’s 2% cap as fiscal pressures and costs continue to rise.

Statewide, 45% of cities, 35.5% of villages, and 28.6% of towns said they planned to override their tax cap for fiscal 2026, according to a report by state Comptroller Thomas DiNapoli. Additionally, nearly one-fourth of New York’s counties, 31.5% of fire districts and 4.9% of schools indicated they planned to do so as well, according to the report released Aug. 20.

On Long Island, a total of 75  cities, towns, villages and fire and school districts said they planned to override their tax levy cap in fiscal 2026, a 13.6% increase from 66 in fiscal 2022, according to data from the comptroller’s office.

The number has soared in recent years with local government leaders citing the high rate of inflation and rising costs such as for healthcare, pensions and utility and oil prices. At the same time, sales tax growth has been moderate and pandemic-related federal aid has dwindled, according to the comptroller’s office.

"Local governments and school districts are facing higher costs for fuel and providing essential services as inflation persists, making it more difficult as they develop their budgets," DiNapoli said in an email statement to Newsday. "My office has seen a notable increase in towns and villages considering an override of the property tax cap, particularly on Long Island."

The comptroller’s report only accounts for those intending to pierce the cap, and the start and end date of the fiscal year varies by entity.

There’s no real consequence for municipalities to overriding the cap, other than backlash from taxpayers because of rising taxes. The state in the past has provided financial incentives in the form of tax credits to homeowners if their municipality stayed within the levy limit. Certain state reimbursement programs are also tied to staying within the cap.

Local government groups are calling on the state to make changes to the cap, increase aid to municipalities and reduce unfunded mandates that push costs on to municipalities.

"It’s a complex problem," Chris Koetzle, executive director of the New York Association of Towns, told Newsday. "It requires a lot of bold action by the legislature and the governor’s office to restructure, to modernize, to cut costs for local governments."

For mostly residential villages such as North Haven, property taxes are the main source of revenue.

Village Mayor Chris Fiore told Newsday that officials have tried to cut costs, use reserves and be creative where possible, but with the rising cost of emergency and fire services, employee healthcare, pensions and fuel, a 2% increase wasn’t going to cut it.

The village’s more than $2.7 million budget for 2026-27 pierced the cap for a second year in a row.

"To hell with the state cap. We’re just gonna have to break it, otherwise we’re not doing the right thing for our constituents and our municipality," he said. "You've gotta keep the village running."

Piercing the cap

The state-imposed cap limits the amount local governments and schools can raise through their property tax levy to 2% or the rate of inflation, whichever is lower. It’s a complicated calculation, with some exceptions, so the actual tax increases may be higher than 2%.

"The tax cap was designed to keep the cost of government from rising faster than the cost of everything else, and it’s still doing that," said Ken Girardin, a fellow at the Manhattan Institute, a fiscally conservative think tank.

But inflation has been above 2% for more than five years, keeping the cap at 2%. 

Many local governments are having to pierce the cap to make ends meet because of the higher costs, many of which are outside of their control, said Barbara Van Epps, executive director of the New York State Conference of Mayors. "They have to do it in order to provide essential services."

Costs include fuel, which is up because of the U.S. war with Iran. And the $277 billion state budget passed in May included pension sweeteners for public workers hired after 2012 — the bulk of which, $440 million annually, will be borne by local governments and school districts.

Cities have led the increase in overrides, according to the comptroller’s report. Nearly half planned to override the cap in fiscal 2025, up from 13.1% in 2022. It had slightly decreased to 45% in fiscal 2026.

Municipalities need at least 60% of their governing board to approve an override. For school districts, it's a more difficult and riskier process because they need approval from 60% of voters. If the vote fails, schools risk having to adopt a contingency budget that keeps spending flat. As a result, school districts are less likely to pierce the cap. 

Push for change

Some local government leaders say the tax cap should be repealed, but acknowledge it’s not likely given how popular the cap is among voters.

In a 2019 Siena University poll, 64% of voters said making the tax cap permanent would be good for the state.

Putting the cap in place was only half the job, Girardin said. State lawmakers were supposed to tackle the state’s long-standing unfunded mandate problems, such as costs associated with labor contracts and pensions, which leave local officials with less discretion than they should have, he said.

"Until members of the Senate and the Assembly start making serious proposals to fix those cost drivers, property taxes are going to keep rising in real terms," Girardin said.

There are tweaks to the tax cap formula that could be made, such as addressing how business, industrial development and payment in lieu of tax agreements factor into the cap, according to local government groups.

There’s also a push to create a better state aid formula for municipalities, as the current aid program was flat for more than a decade until recent years, Van Epps said.

"If you want to make New York more affordable, the best way to do that is to give us aid ... to pay for essential services without having to balance our budgets on the backs of taxpayers," she said.

The state budget included more than $1 billion to help local governments outside of New York City with rising costs.

Meanwhile, villages such as Port Jefferson are trying to stay within the cap, but it’s meant difficult choices and sacrifices, Mayor Lauren Sheprow said.

"When salaries, health insurance, materials and construction costs are all rising well above 2%, the math simply doesn’t work indefinitely," she told Newsday. "At some point, staying under the cap means cutting services, deferring necessary infrastructure or making short-term decisions that ultimately cost taxpayers more."