OMB Director Solomon: Pied-à-terre tax and pension restructuring
Solomon explains the pied-à-terre tax on luxury non-primary residences over $5 million generating $500 million annually, and the pension restructuring proposal extending payments to 2037 with flat level dollar payments, generating $652 million in FY26 and $1.64 billion in FY27 with no impact on retiree benefits.
It has long been understood that the property tax system is inequitable.
This reality manifests itself in many ways, including the regressive way that the luxury market is taxed.
The pied-à-terre tax will
remedy some of that inequity for high-value homes over $5 million and will generate $500 million in recurring tax revenue that will support much-needed city services across the five boroughs.
The enacted state budget also authorized the restructuring
of unfunded pension liabilities in the city's retirement systems, subject to approval by the trustees of each retirement system to ensure that we are making predictable and even payments over time.
The restructuring proposal allows a short five-year extension to a 22-year payment schedule that began in 2010, which required employer contributions to pay down
unfunded actuarial liabilities as calculated by the Office of the Actuary.
The original amortization schedule was back-ended with annual payments beginning at roughly $4 billion and climbing to about $7.2 billion at the end of the amortization period in 2032 when the cost would plummet to zero.
There is a better way to finance long-term obligations.
Flat dollar, level payments, and that is what the pension restructuring proposal accomplishes.
Instead of completing payments in 2032, we will get there in 2037 with no impact.
I underscore no impact on retiree benefits.
Smoothing the pension payments over time will generate $652 million.
and savings this fiscal year, $1.64 billion in fiscal 27, and roughly $1.6 billion annually in the remaining out years of the plan.
And our retirement systems will remain fundamentally sound.
The average funded ratio for the five retirement systems is 86%, higher than the 79%.
National average.
This reasonable funding policy and the multi-year savings it will produce will ensure that New Yorkers have a local government that is more financially stable while ensuring a continued pathway to a 100% funded ratio for the city's retirement systems.
And I thank the council for including this proposal in its preliminary budget response.