Sales tax deal reached

Michael Hein

Michael Hein

The city-county sales-tax agreement negotiated by Kingston mayor Steve Noble and Ulster County executive Mike Hein is, compared to its counterparts over the past 40 years, a complex document with numerous moving parts. But the haggling may not be over.

“I’m very confused,” said Rochester town supervisor Carl Chipman, head of the town supervisors/mayors association. “It seems we’ll be getting a hell of a lot less than we actually received before.”

The towns were not party to the two months of closed-door negotiations between the city and the county. The state comptroller and the state department of taxation and finance approved the pact after a three-week review.


Chipman has asked the county for “a complete mathematical breakdown” of the contract and its impact on all parties. Since the towns “were not at the table” (neither were any county legislators or city aldermen), he said, the towns were “totally dependent on their legislators that represent them to represent the towns’ interest in these negotiations.”

Alderman-at-large Jim Noble, the mayor’s uncle, expressed dismay at the proposed settlement. “It holds us hostage,” he said. “It could cost us $5 million, which would be devastating. That has to change.”

The contract maintains the split percentages of 11.5 percent for the city of Kingston and 3 percent shared among the county’s 20 towns, but also institutes a “growth freeze” on those shares in the later stages of the five year agreement, and puts a further onus on the city-and-town shares should the one percent extension tax that must be renewed by the state every two years, not get state approval.

Assemblyman Kevin Cahill, a Noble ally, said the mayor and his negotiating team “made a pretty good deal, considering they were up against a seasoned, experienced opponent.” Noble took office January 1.

Noble said the Common Council’s finance committee would review the proposal at its May 18 meeting, followed by a special meeting of the council the next night. “Will they reject it?” he said. “I’m not sure.”

Complicated? Convoluted? Ambiguous?

County comptroller Elliot Auerbach said he and his staff reviewed what he called a “complicated and convoluted document” three times. “This thing reads like the Magna Carta compared to previous agreements. It doesn’t have to be this way,” he said.

Auerbach, a Democrat, called the proposal “a masterpiece for the county,” but agreed with council president Noble that Kingston could see some “dramatic changes” in the out-years of the five-year agreement.

On the upside, he predicts the county’s willingness to absorb Kingston’s mass-transit system could be a benefit to the city “if sales-tax receipts decline.”

Auerbach also expressed concern about the renewal of a “timeliness clause” in the proposed agreement which requires the county to turn over respective shares of sales-tax receipts to the city and towns within a week to ten days of receipt from the state.

Auerbach said his office would continue to review the proposed contract and would issue definitive opinions at an early date.

Ulster town supervisor Jim Quigley is also asking the county, through the supervisors’ association, to renew language that requires negotiations on the extender to begin in June, “so we don’t get into a situation like we had this time,” he said, referring to the eight-week lapse in the contract. Quigley called the proposed contract “ambiguous” and “punitive” in terms of its impact on the city and the towns. Among the contract’s various provisions is a “growth freeze” on city revenues.

Last winter, the common council gave Noble authority to seek a five-year status-quo renewal under current terms. That’s not what he negotiated. The mayor acknowledged that his “compromise” with the county will result in the city and towns receiving something less under the proposed contract.


Long festering

The county takes the position that having granted the city and towns some $30 million a year in safety net and election expenses as agreed to under the 2014 one-percent sales-tax extender, it needs money “to offset critical county expenses,” according to the joint release.

Under the proposal the two sales taxes that the county is allowed to impose by the state (the state takes four percent of the overall eight percent), a three percent more or less permanent imposition, and the one percent county extender (the so-called “Cahill sales tax”), are treated separately. The one percent, called a surtax, must be renewed by the state every two years.

The previous agreement between the parties, negotiated in 2001 and twice renewed, expired on February 29. It called for the city to receive an 11.5 percent share of all sales- tax revenues, projected at $12.7 million in revenue in 2016, and for the 20 towns to share three percent of gross revenues, worth $3.3 million.

An example of the language in the document made public on Tuesday reads thus:

“For the sales tax period March 1, 2016 through Feb. 28, 2017, the city shall receive 11.5 percent of the total net collections and the towns three percent of total net collection. Of these total net collections, 40 percent of the total net collections will be allocated and disbursed to the city and the towns from the additional one percent of total net collections and the remaining 60 percent shall be allocated from the three percent total net collections with the county retaining the balance for county purposes.”

The agreement lists Noble and legislative chairman Ken Ronk as the contract signers, though Ronk said the final word on the county side will rest with Hein. “The executive negotiates contracts, which we adopt as resolutions,” Ronk explained. “The executive signs or vetoes all resolutions.”


Though Ronk didn’t have a timeline for legislative approval, he expects passage next month. “This thing has festered long enough, and I really want to get it done before somebody changes their mind,” he said. Ronk said a May 17 vote by the legislature was likely unless a special session is required. Ronk said he believes a majority of the 23-member legislature will approve the contract as submitted by the executive. The state requires a final document by June 1.


One percent extension liability

The contract projects a growth rate of $750,000 a year on the $16 million the county currently distributes to the city and towns. The 2.1 percent projected growth compares to a slightly less than the two percent overall sales-tax growth detailed in a state comptroller’s report over the 2010-16 period (projected).

The press release issued by Noble and Hein gives considerable attention to the renewable one percent tax and the consequences should it be delayed. At (2016) projections, the one percent sales tax would be worth $27.5 million or about $2.3 million a month.

The statement reads: “Following 2017, the county will begin receiving sales-tax growth from the city of Kingston’s portion of sales-tax receipts to help offset critical county expenses. This will be accomplished through a city sales-tax ‘growth freeze.’ The total value for the growth section is estimated at $750,000 over the term of the agreement. In addition, in the event that the county’s authority to levy the existing one percent sales-tax is not renewed by the state, the city and towns will share that impact with the county in a 40/60 split. This creative agreement provides for the city’s sales-tax distribution to remain at 11.5 percent and the towns at 3 percent.”

A battle over the one-percent extension was waged between assemblyman Cahill and Hein in 2013, with Cahill insisting that as a condition of his support for state passage, the county assume the cost of safety-net expenses and election over a three-year phase-in. Hein said his administration had already been committed to that goal. The two-month delay in Albany’s approving the sales-tax extender cost the county some $5 million in revenue according to Hein, and about $3 million in revenue according to the county comptroller.

Cahill said that regardless of the contract, the state by law will retain jurisdiction over the one-percent extension. Said Quigley, “It means our liability [the city and towns] will be a lot greater if somehow there’s a problem between Mr. Hein and Mr. Cahill.”