Aid and Incentives for Municipalities (AIM) Program
The 2005-06 enacted State budget includes a new Aid and Incentives for Municipalities (AIM) Program to help minimize local property tax growth, promote effective local fiscal performance and provide new incentive funding to encourage local government consolidation and shared services. The main elements of AIM include:
- Streamlined Funding: The new AIM program simplifies State aid to local governments by combining five separate funding categories into a single $794 million “base grant” category that preserves funding for all cities, towns and villages at 2004-05 levels.
- Additional State Aid for Cities and Other Municipalities: In addition to the $794 million in base grant
funding, AIM provides a $57 million increase in State aid to local governments. Specifically:
- Cities outside the City of New York will receive a 12.75 percent increase that is conditioned upon compliance with multi-year financial planning and other fiscal accountability requirements discussed below ($52.5 million);
- Towns and villages will receive 3.75 percent in additional aid with a $500 minimum increase ($2.2 million); and
- A number of smaller municipalities will receive additional targeted funding identified in the AIM statute ($2.2 million).
Payment of the additional 12.75 percent AIM increase will be made on or before December 15, 2005 for cities with calendar fiscal years and on or before March 15, 2006 for all other cities. The 3.75 percent AIM increase for towns and villages will be paid in September consistent with the schedule used for 2004-05 unrestricted aid.
- New Fiscal Accountability Measures for Cities: As a condition of receiving the 12.75 percent AIM increase, cities will
be required to:
- Prepare Multi-Year Financial Plans. All cities receiving AIM increases are required to develop multi-year financial plans to promote long-term fiscal health and enhance sound financial management practices. These plans must cover at least three fiscal years (i.e., the current year and two subsequent years) and shall, at a minimum, contain the following elements: projected employment levels; projected annual expenditures for personal service, fringe benefits, non-personal service and debt service; estimated annual property tax revenues including a projection of property tax rates, the value of taxable real property and resulting tax levy; estimated annual sales tax and other annual non-property tax revenues; proposed use of one-time revenue sources, and estimated reserve fund amounts.
- Minimize Property Tax Growth. The 12.75 percent increase in aid must be used to minimize property tax rate growth in the current or next city fiscal year. There is a recognition that real property tax rate growth resulting from increases in non-discretionary spending (such as employee pensions and health insurance costs) may be unavoidable even after the application of the AIM revenue.
- Seek Cost Savings Initiatives. Cities must seek to achieve cost saving efficiencies within existing operations and through cooperative ventures with other municipalities (e.g., shared services, consolidations, mergers). These efforts must be documented as part of the city’s multi-year financial plan.
On or before March 31, 2006, the chief elected official of each city receiving additional funding under the AIM program must submit written certification to the Director of the Budget that such city has complied with the above conditions. In the event a city does not fulfill this certification requirement, the Director of the Budget is authorized to direct the Comptroller to withhold State aid payable to such city on or after April 1, 2006 up to the amount of the additional 12.75 percent AIM increase.
Finally, although State approval of city multi-year financial plans is not required, cities are encouraged to share informational copies of these plans with the Director of the Budget as well as the Office of the State Comptroller.
- New Grants to Encourage Shared Services and Consolidations: In addition to the $57 million State aid increase, the AIM
program encourages local cost saving efforts by providing $2.75 million for a new Shared Municipal Services Incentive
(SMSI) Award Program. SMSI will fund grants to two or more municipalities that engage in eligible activities including
consolidations, mergers or sharing of local government services.
All cities, towns, villages, counties and school districts will be eligible to apply to the Department of State for a SMSI award. Rules and regulations for the grant application and award process will be issued by the Department of State. Awards up to $100,000 per participating municipality will be available and will require a 10 percent local cash match. Eligible costs include legal and consultant services, feasibility studies, capital improvements and other necessary expenses. SMSI awards cannot be used for recurring expenses such as salaries.