This is a test.
Nobody told incoming Kingston Mayor Steve Noble he would face a test of leadership barely a month into a four-year term. Hello, sales tax crisis.
How Noble handles this controversy, and how it turns out, will be a significant marker of his new mayoralty. Almost everyone in the county has a stake in this one.
Elected at 33 and with limited administrative experience — he ran an environmental education bureau for the city which was instrumental in securing grants — Steve Noble on New Year’s Day found himself in charge of a $41 million operation with 300-plus employees and some 23,000 constituents. As Noble was dusting off the shelves in the mayor’s office, county officials were plotting to drain more than $1.5 million from a city budget only precariously balanced the month before. The plan is also to sock the towns for a third of their sales tax revenues.
Noble’s less-than-overwhelming election margin over a weak Republican opponent gave pause. Some had concern about his ability to handle the day-to-day operation of city government.
The sales tax crisis puts the young mayor and his administration in direct conflict with the largest governmental organization in Ulster County. So far, Noble’s response to what I would describe as “ambush politics” has been measured, even mature, given the nature of these kinds of ego-driven, intra-governmental conflicts in recent years.
Noble has not cried out in anguish. He has not pointed fingers or called people names. Offered tempting bait by the media, he doesn’t bite. “Do you think you can stand up to Mike Hein?” a reporter asked him at his press conference last week.
“This isn’t about Mike Hein and me. It’s about fairness,” Noble replied.
“He’s pretty polished,” observed Corporation Counsel Kevin Bryant afterward. Bryant, named by Noble to his position in mid-January, is, like Noble, new to his job. He’ll be one of the mayor’s key advisors going forward. Some of the relevant research Noble had done undoubtedly came from the legal department.
Hein’s ultimatums notwithstanding, the city holds some high cards, which apparently the mayor intends to keep close to his vest. He didn’t volunteer his best card, for instance; he had to be asked. “If you can’t reach agreement with the county, will you invoke the city’s rights of pre-emption?” a reporter asked.
“We will look at pre-emption and determine which formula works best for city residents,” Noble responded.
Risks and rewards
With every town and the city in Ulster County facing a cut in sales tax revenue, everybody should be following this debate. Pre-emption, i.e. the city reasserting its right to levy a 2 percent sales tax within its own borders, is the city’s ace in the hole. Hein can bluster all he wants about cutting the city’s flow, but everyone suffers if Kingston chooses to become the captain of its own sales tax ship.
At present, the numbers work like this: The 11.5 percent of sales tax revenue the county turns over to the city under their 2011 contract will produce an estimated $12.5 million this year. Were the city to re-institute its own 2 percent sales tax it instituted in 1968, it would have to generate some $630 million in taxable economic activity to collect $12.5 million. Fifty years ago, Kingston might have approached half a billion dollars in retail sales (adjusted for inflation). Things have changed.
Pre-emption would force the county to institute a 3 percent sales tax outside the city, rather than the 4 percent it now collects countywide. As we learned during the so-called Cahill sales tax crisis a few years ago, 1 percent on the county sales tax was worth about $26 million, and that included collections in the city.
Is Hein prepared to risk perhaps $30 million in revenue to claw back maybe $2 million a year from the city and towns? Property taxes would go off the charts.
It is said Hein has the votes in the legislature. Fifteen, I’m told. Should four of those legislators, on behalf of their constituents, demand the executive back down, 16 would be needed to override a veto.
Though I don’t think it will come to that. This county executive is nothing if not relentless. Ask railroad people. Based on his state-of-the-county address last week at Ulster County Community College, it would appear the sales tax clawback was but an opening salvo against the towns and city. In that speech, Hein, after extolling the triumphs of county government during his seven-year tenure, declared the present system of independent towns and the city “unsustainable” and in danger of imminent collapse.
Hein’s new order, if it ever comes to that, would of course be run by the executive. Is Ulster County ready for that?
Imagine if Hein had floated that one during the last campaign.
In the end, this may come down to personalities: the veteran man-in-charge county executive and the quick-learning newbie mayor. That the mayor did not retreat in the face of aggression and has handled this situation like a mature adult could be instructive.
But aggression should not go unpunished, if only to deter future such forays. Hein deserves at least the opportunity to save face. Rather than gouging cash-strapped towns and the city, why not offer a small increase in sales tax revenue-sharing? Doesn’t Hein the Merciful (the Commodus character from Gladiator) have a nice ring to it?
One of the points advanced by the mayor at his Feb. 12 press conference was that Kingston, the county seat, provides myriad services for county residents, including the county government. Noble counted 12 county buildings protected by city emergency forces and serviced by the DPW. Former alderman Charlie Landi, in a separate study, came up with another 22 vacant parcels owned by the county. Overall, those 34 properties are assessed at some $53 million, according to the city. Other than water and sewer charges, all are tax-free. Landi, a Democrat, suggests the county make an effort to put its vacant properties back on the tax rolls. Amen to that.
While politics may be the art of the possible, nobody is seriously talking (again) about merging Kingston with the Town of Ulster. Former mayor T.R. Gallo gave it serious lip service decades ago. There was even a name for the new entity: Gallopolis. Wags began referring to then-Ulster supervisor Frank Sottile as potentially “the 14th alderman.”
Current Town Supervisor Jim Quigley speculates that his shrinking base of constituents might trade autonomy for property tax relief. A formal merger between the city and town would produce sales tax revenues in the tens of millions if dollars, virtually wiping out property taxes in each jurisdiction.
Ben Franklin said it better: “Those who would give up liberty, to purchase a little temporary safety, (Ben’s punctuation in a 1755 letter to a friend), deserve neither liberty nor safety.” The problem, in other words, is not at town hall.
It seems the county and city had settled into a contended groove on sales-tax sharing before Hein threw in the recent monkey wrench. Former mayor Jim Sottile quietly agreed twice to a renewal of the current formula. “We’re doing OK, as is, and it goes up a little more every year,” he told me.
Under one of those what-ifs, suppose Sottile had asked for and gotten another half-point in 2011. City coffers would have been enriched by at least $500,000 a year for his successor over the next four years. That pays for lots of dump trucks, fire trucks, police cars and cops, with money left over for sewer repairs.