ITHACA, NY – A City Council committee voted unanimously Wednesday to lift the local tax levy limit established by New York State law.

This decision by the City Council, which has been routine for years, raised concerns among council members because the cost of living in the Ithaca area is very high.

Proponents of the repeal, which appeared to include a majority of the City Council on Wednesday, stressed that agreeing to raise the cap does not necessarily mean the city will exceed the 2% cap on the state tax increase. Pro-repeal councilors said it would give the city more flexibility in drafting the 2025 budget later this year and avoid potential cuts to staff and services.

The City Council committee voted 10-0 – Councilman Kris Haines-Sharpe was absent from the meeting – to send the local tax repeal bill to a final vote in September, when the City Council appears poised to approve the measure.

State law prohibits municipalities from increasing their tax collections by more than 2% or the rate of inflation (whichever is lower) unless 60% of the councils vote for a local law removing the tax collection limit.

Tax collection is the total amount of money a local government collects through property taxes. Tax collection is the City of Ithaca’s largest source of revenue, accounting for approximately 30% of the $101.2 million city budget for 2024.

City Manager Deb Mohlenhoff, who is tasked with preparing a budget proposal for the City Council, said she isn’t sure what tax levy she will propose until she has some final numbers in September.

Mohlenhoff said she would try to keep the increase at 2 percent, as state law normally requires, and she had heard instructions from the council to be as “frugal” as possible in preparing the budget.

However, since there is no flexibility to raise the cap, “we will probably have to make incredibly difficult decisions with regard to staff reductions,” Mohlenhoff said.

“I don’t want to scare our incredibly understaffed, very dedicated employees, and we’ve just worked very hard to get them a base salary,” Mohlenhoff said.

Councilwoman Margaret Fabrizio argued that the council should not allow the city to exceed the tax collection cap set by the state in order to set a cap on what the city could spend in the 2025 budget.

She said the city has “far more ideas and needs than money,” and that limiting spending would show residents that officials are listening to widespread complaints about the affordability of public funds in Ithaca. It would also send a message to department heads at City Hall to “stay on the ball and create more efficiencies, set priorities more carefully, and put nonessential projects on hold.”

The city’s budget has swelled significantly in the inflationary post-pandemic period. In the last two years alone, Fabrizio said, city spending has increased by about $17 million.

Since 2019, the city’s budget has grown by about 32%, from $76.4 million to $101.2 million in 2024, outpacing inflation. Between July 2019 and July 2024, the Consumer Price Index, a measure of rising costs, rose by about 22.5%.

A series of labor contracts signed in 2023 after contentious negotiations with unions representing city employees have contributed to the city’s increased spending. Workers and union leaders demonstrated and mocked city officials during public hearings of City Council meetings for allowing their wages to fall well below market levels in 2022.

The city completed five collective bargaining agreements in 2023 that included raises for police officers, firefighters, public works employees and rank-and-file City Hall employees. The council also approved significant raises for city department heads in August that will take effect in September.

Fabrizio said that, given the rising costs, she would speak out against repealing the resolution. She wanted to prevent the city council from having an “easy way out” of raising more money through property taxes during the debate on the 2025 city budget later this year.

That position ultimately failed to convince the majority of council members when it came to a vote on Wednesday, and Fabrizio ultimately voted to put the bill to the full council for a vote as well. However, some council members were concerned about exceeding the tax collection cap.

Councilman Patrick Kuehl initially said he had not yet decided whether or not to lift the cap on tax collection, but the prospect of service cuts or eliminating funds for city employees dissuaded him.

Kuehl feared that the possibility of exceeding the tax collection cap could create the impression that the city council is “not committed to responsible fiscal policy” and risks starting the budget process “on the wrong foot.”

Councilman Ducson Nguyen, who has served on the council since 2016 and is now the body’s ranking member, said he is “fundamentally opposed” to the state’s tax cap. Nguyen said for every person who complains to him about taxes, “there are three to five” who want to see more city services.

The balance between tax cuts and the provision of city services became a central issue in the discussion about raising the tax cap for council members.

Mayor Robert Cantelmo said he would “absolutely not support the austerity measures.” He said life was “at a very expensive time,” but added: “I think the people who are going to suffer first when we think about cuts are the people who need these services the most.”

He expressed concern that without the ability to raise the tax collection cap, the city council could find itself in a dead end and be forced to cut city staff or services.

Councilwoman Tiffany Kumar called staff cuts a “worst-case scenario” she wanted to avoid before asking the question. With that procedural motion, she ended the discussion and forced the council to vote on repealing the tax levy.