property-taxes – Local Government Matters

Who Butters our Bread?

Who pays the highest property taxes in the village?

I ask this question not in order to point fingers at any particular institution, but in order that our administration might confer recognition and perhaps better support for this sector of our community. Currently, this sector labors under the most onerous local tax burden, which might discourage further investments.

Two facts determine the property-tax burden within the village. The first is whether a property belongs on the tax-exempt roll (tax roll 8) or not. Institutions that are on tax roll 8, like hospitals, colleges & public schools and churches, pay no property taxes (and their property values tend to be asymmetrically high). The second fact is the property’s assessed value. If the property is not on tax roll 8, its owner will be required to pay her share of the village-board’s mandated tax levy. Currently, our tax rate is about $18 for each thousand dollars of assessed value. If the property, for example, is assessed at $100,000 its owner must pay $1,800 in property taxes. If the property is worth 10 times as much, one million dollars, its local property tax will be $18,000. Everyone who owns property in the village and is not operating a tax-exempt business, pays the same tax rate of $18 per thousand dollars of assessed value (barring a few tax exemptions for some).

So then the question of who pays the highest property tax in the village turns into the question of which property within the village has the highest assessed value? Is it the Price Chopper Plaza? No. Is it a bank or a car dealership? No. When you ask around, I find it surprising how laws get enacted and local tax-rates set, without this being common knowledge. In fact, the highest property tax is paid not by a commerce business at all, but an apartment complex. In fact, in the top ten most valued properties within the village, there are several apartment complexes, as well as a commercial enterprise, a tourism enterprise, and, surprisingly, a green energy enterprise.

The point I hope to stress here, is that we should all have the good sense to know who butters our bread. As I have discussed in an earlier blog post, when the village switched to an EDU-based water and sewer fee system, the tax burden on apartment owners increased disproportionately. Why? Because each apartment in the complex now pays a hefty water and sewer rent, whether the apartment is occupied or empty. So apartment complex owners pay both higher property taxes since apartment complexes are expensive and then in addition they pay a greater fixed share of the water and sewer tax fees.

We need apartments. My husband moved into Meadow East in 1987 upon arriving in Potsdam, before we found our house. Now, we would like to downsize again, to a high-end apartment. But as has been pointed out to me by several friends, and I now discover for myself, there are no high-end apartment complexes in the village-most apartment complexes are in the tax-exempt category that may not accept individuals in higher income brackets. Others are geared towards students or temporary laborers, whether nurses or teaching associates. At this time there is nary an option for retiring boomers who prefer to live in town. Creating a more tax-friendly environment for apartment complex owners strikes me as an important objective for the village.

Squaring the Budget?

The village of Potsdam is currently in the middle of its 193rd fiscal year! Yes you read that correctly: our village was incorporated in 1831 so we have nearly 200 budgets under our belt!

Village budgets start anew every June 1, so our current fiscal year ends May 31, 2025. Before looking at the design of next year’s budget, which will itemize where all our municipal dollars are spent, first a brief overview on how many tax dollars businesses and residents contribute to maintain village operations.

Property owners in the village paid $17.48 per thousand dollars in property value in 2024. For example, if the Assessor listed a residential home’s assessed value at $100,000, then that owner owed $1,748.00 in village taxes. If a property’s assessed value is twice that, or $200,000, then the owner paid twice as much, or nearly $3,500 in village property-taxes.

It is worth keeping in mind that commercial enterprises, including apartment owners, pay exactly the same village property-tax rate as residential (“R1”) owners. This is significant since businesses are always assessed at much higher valuations: For example, my neighbor’s $150,000 home sits on 0.9 acres of land and contributes $2600 in taxes (rounding a bit). The new Stewart’s Shop on Market St. sits on a smaller 0.7 acres, but it has a market value of nearly $1,000,000 and so pays closer to $17,000 in village taxes. Germaine to the current discussion: If this business, with the same assessed value, had been located in neighboring Canton, it would have paid $10.75 per thousand, or around $10,000 in Canton village taxes. The difference, of around $7,000 is “real” money, being equivalent to nearly 500 NY minimum-wage hours of labor. (Note, interestingly, that when businesses shutter for whatever reason, the owner continues to pay the same amount of village taxes lest the County assumes ownership of that property.)

As the current and following blog posts will follow the development of the next village budget, we need to ask whether the village property-tax is all the tax that residents pay towards village government? No! Residents also pay a fee for water and sewer services. How much? That depends on how much water customers use (there is one water meter per customer), but let’s assume that a customer uses 120 gallons per day. (This amount of water consumption is referred to as 1 EDU or Equivalent Dwelling Unit). A one-family home then would pay $742.85 annually towards municipal water and sewer services. Businesses that use a lot of water, whether a car wash or a laundromat or a college dormitory, may pay 10 or 100 times this amount. (Yes, non-profits also pay water and sewer fees.)

So for example, if my $150,000 home uses about 120 gallons of water per day, I must pay the village nearly $3,400 in village combined taxes. Next I will try to summarize what operations and services these dollars enable, before posing the question: would it make sense to activate a different tax rate for commercial vs non-commercial enterprises?

Mixed Blessings

St Lawrence County is big: it has 2,680 square miles! It is one and a half times bigger than the next biggest county, Essex, and it is more than three times the size of the average county-size of 820 square miles. Is this a blessing?

Consider that St Lawrence County (SLC) maintains 573 miles of county roads, as opposed to a smaller county like Westchester which maintains only 160 miles of roadway. Meanwhile the primary revenue source for county road maintenance are county property taxes: the more property value per county, the lower and the more reasonable the tax rates. The total property value in SLC is $7 billion according to the 2023 NYS Office of the State Comptroller’s office, while Westchester’s is $210 billion. So while SLC has 3.5 times more roads to maintain than Westchester, we have have 30 times lower property value, which seems unfair.

Meanwhile, the net revenue of most institutions is closely tied to population density. Shopkeepers rely on customers to make financial ends meet. Nonprofits likewise rely on net usage to either charge or receive funding to continue operations. Here too, SLC is at a disadvantage, as it has the sixth lowest population density (40 people per square mile) compared to, say, Westchester, with a population nearly 60 times bigger. Nonprofits like ReachOut of SLC or Hospice of SLC face the daunting task of providing services over hundreds of miles, from Massena to Gouverneur to Star Lake every day, with minimal employees as state funding decreases with number of people served. K-12 schools and emergency first responders face similar battles for survival in SLC.

Certainly I consider it a blessing that we can drive our kayaks to remote isolated lakes and waterways and hike pristine mountain passes. But I would feel better were the population of St Lawrence County increasing rather than decreasing, and were the pool of people ready to assist the many essential services in our county bigger.

The Role of Village Trustees?

While the Potsdam Village Board of Trustees busied itself with Ives Park projects and parking matters, I wondered what the village’s department heads considered high priority projects? Thanks to “Village Department Head Surveys” completed last year as part of the 2023-2033 Comprehensive Planning Process, residents can learn which tasks our department heads consider vital for the village. I report here primarily on the most cost-heavy items.

The head of the Hydro Plant lists as the first item: Sell the west dam. The west hydrodam was meant to cost $3.5m and to begin operations in 2009 for 30 years. Instead it required $5.5m in loans, began operations in 2015, and ran for merely 5 years. The two municipal hydrodams together require around $120,000/year to operate and maintain. In addition, there are the debt payments: the West dam debt payment is $265,000 annually, until 2029. The East dam debt payment is $115,000 annually, until 2046. The operating east dam meanwhile generated $136,201 in credit last fiscal year, leaving an annual deficit of $455,544 that continues to be paid from the tax-payer’s General Fund.

The head of the Water Treatment Plant (WTP) lists 13 capital projects and equipment needs required to ensure the continued operation of the WTP, to the rising purification standards set by State and federal laws…and to prevent the roof from leaking (The water treatment plant on Raymond St dates from 1983 so is over 40 years old). I understand that this update/upgrade will be as expensive as the sewer plant update of 2020.

The head of Planning & Development states “Village infrastructure will be the single largest challenge for the next decade and beyond. Water and sewer lines, the cross town canal, underwater sewer lines and new federal standards for drinking water/waste water will only add to the cost and complexity of the Village’s systems…The Village needs to focus its efforts on infrastructure, preparing engineering studies so that it is prepared to annually apply for funding…An engineering study for the tail race wall at Evans & White needs to be commissioned. The wall is in poor condition and may be undermined given water bubbling up under pressure from Evan’s parking lot…”

The head of the Recreation Department writes that the expansion and remodeling of Pine Street Arena is a high priority goal.

The head of the Sewer Department (aka the Waste Water Treatment Plant or WWTP) does not report urgent needs at that plant thanks to the complete recent rebuild of the WWTP, a rebuild that required a $12m loan that will be paid off in 2051. (While there are no operation issues here, the head of the WWTP points to the fact that one high-expense item at any waste water treatment plant is power consumption, and that technology exists to extract energy from the heat and gasses generated during waste water treatment. Incorporating such technology at our WWTP would reduce expenses and waste.)

Between the water treatment plant on Raymond St. and the sewer plant on Lower Cherry St. run about 30 miles of underground water and sewer piping as well as the various ditches and channels that constitute our storm-drain system, all of which is purview of the Department of Public Works or DPW. While maintaining streets, picking up brush, clearing fallen trees and snow etc, DPW also monitors the operation of all sewer and water mains as well as the cross town canal. DPW also deals with random challenges and crises, from beaver-dam breaks that inundate properties on the western shores of the Raquette river, to tiled fields to the east that direct massive inflows of stormwater into our cross town canal drainage system. In addition, two cross-river sewer lines “have reached the end of their useful lives and need to be replaced” according to a 2022 Engineering Report entitled Inflow and Infiltration Study prepared for the Village of Potsdam by the firm EDR. This report additionally details how and where leaks enter the sewer lines during rainstorms, and quantifies which below-ground pipes must be lined. The challenges DPW is tasked to resolve, in other words, are many, diverse and complex, and may not have obvious resolutions in some cases.

The heads of other departments (Police; Clerk/Registrar; Treasurer/Administrator; Fire; Safety/Code Enforcement; Museum) either had not yet filed survey reports or did not report urgent and high-cost Capital Outlay/Equipment needs.

Infrastructure repairs and construction bear high costs: The EDR Inflow and Infiltration Report, for example, quoted a cost of $9.3m to replace the aging cross-river sewer pipes and to line all leaking underground sewer pipes. For context, the current tax rate in the village is $17.48 per thousand dollars of property value. If the Board had been tasked to raise an additional $1m from property taxes this fiscal year, we would have had to raise the tax rate to $21.97 per thousand dollars of property value. For a home worth $150,000, that would have represented an increase from $2,622 to $3,296, an additional 673 dollars.

Department heads run their respective departments efficiently and effectively. They will continue to work with the Administration to ensure the continued operation of every aspect of infrastructure and services, and will resolve each issue/crisis as it arises. Getting Trustees up to speed on the many gnarly issues that each department faces would benefit everyone-so that realistic budgets for the next budget year as well as upcoming budget years may be developed. But reports such as these Department Head Surveys are not generally distributed to Trustees: it took weeks, if not months of repeated requests to obtain copies of these reports. Likewise, it was by chance that this Trustee obtained a copy of the 2022 EDR Engineering Report that provides hugely helpful insights into the why, where and how costly is the inflow/infiltration problem facing the sewer lines, a report that should have been front and center in the hands of every Trustee.

Why is it so difficult to share information? Is it unwise for residents to be aware that the wall abutting Evans & White is crumbling and may give way? Why should Trustees not read a village-funded EDR Engineering Report-while we were yes asked to approve a seemingly competing “Raquette River Utility Crossing Project”? It is deeply frustrating that the Village Board of Trustees are informed of developments only after all groundwork is complete, all pertinent decisions have been made, and all boundary conditions laid down – Trustees are requested to approve only the final budgeting. The frustration arises as many questions appear not to be asked and many angles appear not to be considered, increasing the likelihood of unproductive and costly dead-ends, like the West Dam. Does the administration believe that questions and open discussions imperil rather than strengthen the chances of a projects’s success?

How Much Village Land is Taxable?

The village boundary was once a square 2 miles by 2 miles, encompassing 2,560 acres. Additional lots have been incorporated: Clarkson University added 415 acres around the water tower trail. The Price Chopper, Lowe’s and the Mayfield apartment lots added another 131 acres around outer Market St. The airfield beyond Hatch Rd. added a further 256 acres. So the village boundary currently encompasses a bit over 3,100 acres.

How much of this land is in private hands and taxable?

The river removes 316 acres from development.

What other properties are tax-exempt? Clarkson University’s 640 acres. NY State’s 240 acres of the SUNY Potsdam campus. The Potsdam village municipality owns the 80 acres of the 3 Potsdam Central School District schools. Potsdam village altogether owns 313 acres (a large fraction of that being the airport). The Town of Potsdam owns about 15 acres of village land. Rochester Regional Health, between its Canton Potsdam Hospital Leroy St campus as well as its Lawrence Ave campus, owns 36 acres.

Other nonprofits with significant landholdings include Bayside Cemetery Association, with over over 71 acres, the Potsdam Housing Authority with 18.7 acres at Evergreen Park on the Racquette Rd and the Midtown Apartments with 2.6 acres. Mayfield Apartments sit on 13 acres. Other nonprofits with smaller holdings include The Church of Latter Day Saints with nearly 4 acres, our two Baptist churches with a bit over 8 acres and Trinity on Fall Island with 3.2 acres. NYSUT occupies 2 acres. When you sum the land owned by these various nonprofits, it totals to nearly 1,450 acres.

How many acres do our roadways occupy? Analyses indicate that roads take up between 18-30% of urban land. If we assume a low 15% of land to be taken up by roads on the original 2 by 2 square miles, this subtracts another 384 acres from development.

How many acres of land remain that are taxable? Of the 3100 acres, no more than 954 acres are currently taxable. Or slightly less than 31%.

If we prefer to look at the actual value of the lots, rather than acreage: The total assessed value of taxable lots (tax rolls 1, 5, 6 and 7) in FY23 came to $223 million. The total assessed value of all nonprofits came to $459M. So the fraction of the total assessed value that contributes to the tax base is 223/(223+459)=33%. That this fraction is slightly larger than the acreage fraction is perhaps due to the fact that roadways are not assigned assessed values.

These numbers, while stable, are not fixed. The 5-member village board of Trustees can vote to classify and re-classify the Property Class Code of every parcel in the municipality. Places of worship may be established, federal, state or county-supported low-income housing can be created, hospital and university campuses may expand and the town/village line may occasionally be redrawn (as for the Airport Diner recently).

Nonprofits provide valuable and laudable services that appeal to visitors and residents alike. Without our famous landmarks, Potsdam would be a very different place. But the nonprofits, in turn, require a robust tax base to finance the departments of public works, police, civic center, recreation, as well as debt payments, salaries, health insurance and retirement benefits for current and former employees and their dependents. Given that our municipality can obtain no tax revenue from more than 2100 of our 3100 acres, should the administration continue to cede parcels to the nonprofit sector? The annual ask (appropriations) of the village’s General Fund went from $6.5 million in fiscal year 2022 to $7.5 million in 2024, a 15% increase. Sales tax revenue has also increased, but not enough to keep our tax rate level. Is it therefore in the residents’ interest to cede land via sale (as we did with a portion of Cottage St) or via permanent easement of residential land (as was just done with the 2 acre lot at the end of Clough St)? Unless a reliable alternative revenue source for the General Fund is identified, I would advise caution in relinquishing more land to the wholly exempt section of our tax rolls.