State Comptroller's Office Says Southampton Village Indeed Pierced Tax Cap

The New York State comptroller’s office agrees with Southampton Village’s new external auditing firm: Prior village administrations pierced the state’s tax cap in several years, despite having reported that the village’s annual tax levy was under the limit.

When it was revealed for the first time at a Village Board work session last month that the village had pierced the cap a number of times, past village officials insisted it was not the case. They said the village had never pierced the cap.

Now that the comptroller’s office has weighed in, the claims made by the current administration and auditing firm PKF O’Connor Davies hold true.

“Our tax cap coordinator did a review of the village’s tax cap and contacted the village regarding this issue,” Matt Ryan, deputy press secretary for Comptroller Tom DiNapoli, wrote on Thursday, May 12, in response to an inquiry from The Press. “After looking over the information provided, our office agreed with the auditors’ conclusions.”

Ryan explains that the village’s most common error appeared to be failing to include “omitted taxes” in the levy total.

Omitted taxes are property tax adjustments that are billed in a subsequent year. According to the comptroller’s real property tax cap FAQ section on its website, this may happen when a property that was exempt from property taxes changes hands and loses its exempt status, and the new owner is responsible to pay pro-rated taxes.

The FAQ states that such taxes “should be included in the total levy for the upcoming fiscal year, as there is no exclusion in the tax cap legislation for the taxes attributable to the prior fiscal year.”

A review of the village’s annual tax levies reported to the state and the actual village tax warrants showed that in several years the omitted or “pro rata” taxes were tacked on top of the tax levy that was approved in the Village Board’s adopted budget. As a result, the village’s levy breached the tax cap.

A village board may adopt a budget that pierces the tax cap if the board holds a public hearing first and adopts legislation allowing itself to do so. The Southampton Village Board adopted such legislation annually for years as a precaution and then repealed it after adopting budgets that supposedly did not breach the cap. However, the act of breaching the cap rendered those repeal resolutions ineffective, so the cap was ultimately pierced legally.

If there was no such legislation in place, the village would be responsible for setting aside any tax money collected in excess of the cap in a reserve to be returned to the taxpayers the next year through a tax levy reduction.

“The final effect of the last such reserve that would have been needed would have been on the 2020-21 tax cap form,” Ryan wrote. “Therefore, as of today, any corrective actions would be a moot point. Moreover, since the village did have proper overrides in place, there was no corrective action needed.”

Ryan also noted that the comptroller’s office spoke with Village Administrator Charlene Kagel-Betts and did a quick review of the village’s 2022-23 tax cap calculation. “The village’s omitted taxes were not included in the 2021-22 or 2022-23 levy amounts; we recommended to Charlene that she re-submit with this correction,” Ryan wrote. “The village is within its levy limit for 2022-23 (with or without the correction).”