January 31, 2003
Governor Pataki approves Council-supported railroad property tax reform
Governor Pataki has signed into law a measure that will reform property taxes on railroads with the goal of encouraging construction of new rail lines across the state and fostering job creation, especially upstate. The measure was approved by lawmakers last June.
The law is intended to:
- Simplify and modernize the method of assessing rail properties for local taxation and exempt all newly constructed and renovated properties from property taxation for ten years from the date of completion.
- Phase in a tax reduction of approximately 45 percent over seven years for transportation properties currently owned by railroad companies.
- Ensure that the rail companies commit additional resources to make substantial enhancements in freight and passenger services, including greater safety, expanded access, and higher speed.
- Establish a transition aid program, which will provide a total of $70 million over 10 years to local governments to offset their revenue loss, beginning with $4.7 million in 2003-04.
"We fought for this initiative because we know how important it is to our efforts to continue spurring economic growth and job creation in upstate New York," Governor Pataki said.
"This is another step in the ongoing effort to keep New York's recovery on track," said Business Council President Daniel B. Walsh. "Governor Pataki has repeatedly emphasized the connection between low taxes and prosperity, and his decision to approve this tax cut reinforces his commitment not to return to the unwise high-tax, low-growth New York of the past. This legislation will also provide for greater enhancements in freight and passenger rail infrastructure and economic development."
The Governor had proposed railroad property tax reform in each of the last two years. In budget negotiations in 2001 and 2002, agreement on the measure seemed near, especially after initial opposition by municipalities fearing the loss of revenues were addressed by provisions for increases state aid to offset any revenue shortfalls.
Walsh also credited Senate Majority Leader Joseph Bruno, Assembly Speaker Sheldon Silver, and the primary sponsors of the bill, retired Sen. Ronald Stafford and Assembly Majority Leader Paul Tokasz.
"This will benefit not only the rail industry, but also manufacturers, which depend significantly on rail freight to receive and ship goods and commodoties," he added.
Reducing property taxes on railroads has been a top Council priority for three years. A February 2002 research report by The Council's research affiliate, The Public Policy Institute, outlined a strong case for reforming these taxes.
The report, On The Wrong Track, showed that heavy property taxes on railroads in New York, with costs up to 26 times those in neighboring states, have helped drain high-paying railroad jobs from the state and impose higher transportation costs on manufacturers and other shippers.
Railroad property taxes on one major railroad, CSX Transportation Systems, are more than seven times as high as those the company pays in Massachusetts, and 26 times those in New Jersey, on the basis of tax paid per mile of track, the Institute report showed.
Property taxes go up when companies invest in new rail or other improvements, and go down when tracks are removed. The heavy tax burden is one reason trackage in New York has been cut in half and the state has lost more than 11,000 high-paying railroad jobs since 1981, according to the Institute.