Authorizes the Ballston Spa Central School District to establish a semiconductor manufacturing tax stabilization reserve fund

Summary of specific provisions

This measure enables the Board of Education of the Ballston Spa Central School District to establish a tax stabilization reserve fund to lessen or prevent increases in the District's real property tax levy resulting from decreases in the amount of, or termination of, the payments in lieu of taxes receivable by the District over the years of a PILOT agreement with Global Foundries. Such fund may only be established upon approval of a majority of the voters of the District on a separate ballot proposition conducted in accordance with the provisions of Article 41 of the Education Law.

The Board may determine that there shall be paid into the Fund all or any portion of the amount by which the PILOT payments to the District for each fiscal year is greater than the amount of such payments for the previous fiscal year, provided that no payment into the fund causes the total balance of the fund to exceed the amount approved in the District referendum.

In any fiscal year in which the PILOT payments to the District are less than the amount of such payments received in the preceding fiscal year, or where the District does not anticipate any payment, the Board may authorize withdrawal from the Fund in an amount not to exceed the difference in payments between the two years. Additionally, moneys may be withdrawn for any other lawful purpose, subject to voter approval pursuant to the provisions of Article 41 of the Education Law.

Finally, the measure provides that, when computing the District's tax levy limit for a school year, the PILOT payments received shall be decreased by any amount paid into the Fund for the prior school year and increased by any amount withdrawn from the Fund in the prior school year. Similarly, in any year that a portion of the PILOT payments are added or removed from the Fund, that change will be reflected in the tax levy limit calculation.

Justification

The Global Foundries semiconductor manufacturing facility has proven to be a significant economic contributor to the Capital Region generally, and the Towns of Malta, Ballston and Stillwater specifically. Due to its disproportionate impact on local taxing jurisdictions, the facility has entered into PILOT agreements with each taxing jurisdiction. The largest impact, by far, is on the tax base of the Ballston Spa Central School District.

The PILOT Agreement reflects the very nature of the semiconductor industry, resulting in the establishment of a payment schedule for the District which has a steep upward trajectory until 2016, followed by a steady, and comparatively rapid, annual decrease in PILOT payments. While this clearly represents a significant short-term benefit for the District's taxpayers, it is the fiduciary duty of the School Board to develop a strategy for long-term fiscal stability as the PILOT runs its course. The most well-established vehicle for executing this type of fiscal discipline is the creation of a tax stabilization reserve fund. However, a special fund of this nature can only be established by the Legislature.

There is significant precedent for this approach. Chapter 202 of the Laws of 2001 established a nuclear energy facility tax stabilization fund for the taxing communities in Westchester, Onondaga and Oswego counties where the PILOT payments of nuclear power plants can dominate the tax base. As a result of this enabling legislation, the Hendrick Hudson School District (Westchester County) immediately established a tax stabilization reserve fund to help manage the PILOT payments over time. In a 2013 audit of that school district, the State Comptroller reviewed their use of the fund and concluded:

"District officials have taken appropriate actions to manage the District's financial condition. They recognized the need to be proactive in budget development and expenditure controls We commend District officials for their progressive involvement in managing the District's financial condition. As a result, the District's financial position has remained strong "

The PILOT payments of the semiconductor manufacturing facility have the same, if not greater impact on the Ballston Spa CSD as Indian Point has on the Hendrick Hudson CSD. The School Board in Ballston Spa is looking for the same opportunity to exercise sound fiduciary oversight as was provided to the several communities hosting nuclear facilities. The existence of the two-percent tax cap makes it even more imperative that sound fiscal policy be employed here. Moreover, the establishment of a tax stabilization fund in this case, unlike that in Hendrick Hudson, will be subject to a voter referendum. Failure to act will subject the district taxpayers to potentially devastating fiscal uncertainty.

Prior legislative history

New bill

Fiscal implications

None to the State, while providing stability for the taxpayers of the Ballston Spa Central School District

Effective date

This act shall take effect immediately, and shall be deemed to have been in full force and effect on and after May 19, 2014.