Wilson, Cohen, McLaughlin Raise Red Flag on Secretive ‘DiNapoli Tax’

eHezi Archives 5 Comments

"If You Care About Your Property Taxes, Weigh In Now"

WHITE PLAINS, NY, July 28, 2010 — Westchester County residents, the highest taxed people in America, will face even higher property taxes if a secretive pension borrowing scheme is passed by the New York State Legislature as part of this year's budget process, assert state comptroller candidate Harry J. Wilson (R) (pictured RIGHT) and state senate candidates Bob Cohen (R-37) (pictured LEFT) and Liam McLaughlin (R-35) (pictured CENTER)  in todays warning to the public. 

“The secretive borrowing scheme, the brainchild of unelected state comptroller Thomas P. DiNapoli (D), would allow the state to borrow money from the state pension fund to make constitutionally required payments to that very same fund, with interest,” postulate Wilson, Cohen, and McLaughlin. “The plan attempts to hide the massive underperformance of the pension fund, relative to its 8% target return. That underperformance will lead to dramatically higher taxes in Westchester County and statewide, and Mr. DiNapoli's borrowing plan compounds the problem. Under New York State law, state and local governments are required to make up any shortfalls in the state pension fund, and that money is typically raised at the local level through property or other tax hikes," continued the candidates

"This plan is sheer madness, and the people of New York State need to be told about it," said Mr. Wilson, a Scarsdale resident and a nationally recognized corporate restructuring expert. "What Mr. DiNapoli is proposing is akin to using a home equity line to make a mortgage payment. It is Albany fiscal gimmickry at its worst, and, as usual, the taxpayers of New York State are being left in the dark by the Albany politicians."

"Westchester County families are struggling with the highest property taxes in America, and this 'DiNapoli Tax' is simply unacceptable," Mr. Cohen said. "This is an election year gimmick that will make Westchester's property tax crisis even worse.  State Senator Suzi Oppenheimer (D) has said not a single word about this, just as she has passively allowed our property tax load to grow unbearable over the past two and a half decades." 

"Record-high property taxes in Westchester are at an emergency level, yet Andrea Stewart-Cousins and Tom DiNapoli are about to raise them even higher," Mr. McLaughlin, a C.P.A. and a former Yonkers Council Majority Leader, said. "What's worse, this DiNapoli Tax is coming under the cover of darkness – they don't want Westchester taxpayers to know they are about to get socked again. Ms. Stewart-Cousins has an obligation to her constituents to stop the DiNapoli Tax." 

"Based on the best available information, Mr Wilson said he estimates that under the DiNapoli scheme:”

“1. In just the first six years, the State will borrow over $4.5 billion, and local governments will be able to borrow in excess of $6 billion, totaling roughly $11 billion in actual or potential borrowing. Because the most recent version of the plan is an indefinite program, this massive borrowing will only grow in later years;

“2.  The associated interest expense, assuming the midpoint of the publicly stated range, or 5%, will be in excess of $3 billion for the state and local municipalities combined;

“3.  Over the next six years, the pension contributions of state and local governments will roughly triple — even assuming heroic but unlikely performance in the markets. For the average New York household, their share of these pension contribution costs will increase from just over $500 per household to over $1,800 per household – a $1,300 DiNapoli tax for every household outside New York City.

“4.  It has been reported that these scenarios are based on the State Comptroller's expectation that pension returns going forward will mirror returns from the period after the 1987 market crash. If those reports are correct, based on the current portfolio mix of the pension fund, the Dow Jones Industrial Average would have to hit 80,000 by 2022. If, instead, the Fund is basing its projections on its current, but also overly aggressive, 8% return assumption, then the Dow would have to hit nearly 30,000 by 2022. Both of these return scenarios dramatically exceed recent history and the expectations of professional investors. This enormous disparity highlights how important the Comptroller's assumptions are to the policy debate, and he should provide transparency so that voters can evaluate exactly what he is proposing.

“5. Mr. DiNapoli's sole defense is that his plan is a "smoothing" plan that creates reserve accounts in good times. Yet two facts underscore why this defense is misleading:

a)  Under Mr. DiNapoli's own projections, these reserve accounts don't come into being for at least 15 years, and possibly much longer;

b)  In the only other time in New York State history that such a plan was tried, Alan Hevesi's "one-time-only" plan also created reserve accounts but borrowed a tiny fraction of the amount available here. Those planned reserve accounts never came into use, yet New Yorkers still owe 60% of the original borrowing and pay nearly $100 million per year to pay off that borrowing. As unsuccessful as the Hevesi plan was, Mr. DiNapoli incredibly is seeking to expand it by 20 times or more – creating the largest Ponzi scheme in New York State history,” concluded Mr Wilson.

 "'The DiNapoli Tax' can be stopped in its tracks if the taxpayers of New York State demand it," Mr. Wilson continued. "That's why I am so pleased that Liam McLaughlin and Bob Cohen are here today to alert their constituents to this secretive plan.  Every time Albany kicks the can down the road like this, it makes our taxes go up and our situation grow worse." 

Mr. Wilson further said that, "given the lack of transparency provided by the comptroller on key assumptions surrounding this pension borrowing plan, we are limited in our ability to exhaustively analyze it, but based on our best estimates and the best available information, we believe the Comptroller is walking New York State into a fiscal disaster. We first raised this issue well over a month ago, and the Comptroller has yet to come clean with New Yorkers on his assumptions. We await him living up to his responsibilities to taxpayers.”

Continuing, Mr Wilson said, "I also challenge Mr. DiNapoli to show us other scenarios his office has run so we can see what happens to the Pension Fund if returns don't mirror the best span the Fund has had,"
Mr. Wilson continued. "For example, what happens if the Fund experiences returns similar to the last 10 years? Where is the responsible analysis, honest accounting and prudent management of our State Pension Fund?  It's Mr. DiNapoli's job to do these analyses, but he is either asleep at the switch or hiding the truth about this plan from the public."

Mr. Wilson said the unelected incumbent state comptroller, who first proposed the controversial Pension borrowing scheme in May 2009, needs to explain this questionable borrowing plan to the public.  

Mr. Wilson specifically urged him to make clear exactly:

· How much will be borrowed over the next 6 years, both by the state government and by local governments?

· How much interest expense will that borrowing cost NY taxpayers?

· How large will the contribution levels be in future years?

· How much worse will these problems be under more realistic market scenarios?

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eHeziWilson, Cohen, McLaughlin Raise Red Flag on Secretive ‘DiNapoli Tax’

Comments 5

  1. Harry Wilson is a rock star and New York would be lucky to get this guy. He’s kind of a progressive’s Republican if I can say that.
    In his latest “white paper” which I downloaded off his web site and read ( all 50+ pages ) he spells this out quite clearly.
    As for him saying the same thing yesterday, what’s your point? Buffalo is a different media market. He’s trying to get the word out. He’s running for office, remember?
    Also since this was posted Wilson’s “scare tactic” has come true. Last week DiNapoli announced a shortfall in the fund – which means …higher taxes.
    Oh and as to your question ‘Who is Harry Wilson’ He’s the guy who’s going to beat Tom DiNapoli, that’s who.

  2. Westchester pays the highest taxes in the country. I’m Realtor® and what I see is people being forced OUT. The tax rates are now having a serious impact on home values which causes people to file for a tax reduction. This reduces the tax base which creates ANOTHER short-fall and the cycle begins again.
    This needs to end now. 8% return is absolutely unrealistic and those of use in private sector jobs have had to deal with that reality. The public sector acts as if it should be immune to such turbulence. They are WRONG. Since those of us footing the bill are not immune they should not be immune. The well is dry and if the public sector doesn’t start acting like its not their problem – they are going to be on the receiving end of a massive tax revolt – which will make the cuts that would be imposed now seem minor. Don’t think it can happen? Look no further than CA. The state budget has been hobbled for decades due to a tax revolt. You DON’T want that here. Revenue is necessary to keep infrastructure running. But if public unions keep pushing the envelope over and over and over again – that’s what they will get.

  3. There was not one of Spencer’s or Amicone’s budgets that McLaughlin did not like. Raising taxes year in year out. Now he wants to be a fiscal conservative. Please. You will be judged by your actions and I’m afraid Liam they are LAME.
    If you don’t like huge taxes then cut them. 10% paycut for all of the overpaid government workers. Get rid of the tall booths and put a 10 cent road tax on gasoline to pay for the roads. And all monies taken from toll roads should only be used for roads. Has anyone driven over any of the local bridges. $11 for a pothole ridden bridge. What a disgrace.
    How about tackling all of those government workers who do a 3 hour day and get paid for 8, just like in Yonkers? Whatcha gota say about that?

  4. Harry Wilson is a brilliant man with the knowlege to do the job unlike the unelected unqualified incumbent. Harry was a hedge fund guy who mad a fortune and retired at an early age.
    His expertise was recognized by, dare I say it, OBAMA who appointed him as the only Republican to head up the GM fix.
    Step off the party platform and take a look at who is running.

  5. He did the same press conference in Buffalo yesterday. Typical Rep scare tactics. Trying to say our expectations on rate of return are too high and will lead to tax increase. If he has a crystal ball I wish he would share it.

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