Simmering sales-tax issue close to ignition in New Paltz

As New Paltz Town Council members began publicly talking about the 2023 budget at their October 20 meeting, they did little to contain their frustration over what they see as a giant, fiscal hole punched in their spreadsheets by village trustees. A decision to pull the village portion of shared sales tax from the town books is being framed by town leaders as the only reason why they are likely to exceed the tax cap with the 2023 spending plan. However, Mayor Tim Rogers vehemently disagrees, pointing to communities like Saugerties where this revenue is not shared, and suggesting that the problem is subpar management of town funds. The mayor has invited council members to the November 9 Village Board meeting to discuss these divergent views. 

The distribution of sales tax is a complex issue. Gerry Benjamin, whose name graces the Benjamin Center on the SUNY campus, became intimately familiar with it while serving as majority leader and then chairman of the county legislature in the 1980s and ’90s. While leaders of towns and villages have arguments why those municipalities deserve a share of this revenue stream, Benjamin explained, those leaders are shut out according to state law. Sales taxes may only be levied by state, city and county governments. The Common Council in Kingston does not impose a local sales tax, and in return county officials agree to send a portion of the county tax to the city treasury. The fact that the county executive and city mayor distribute anything to town and village governments is a courtesy, not a legal requirement. Rogers has been outspoken in the belief that splitting three percent of the revenue among all the remaining municipalities is a pittance, and has said on numerous occasions that it’s unfair given the amount of the tax actually collected in New Paltz. While negotiations for a different split arise from time to time, changes that are hammered out are political and may not last beyond the terms of those who agreed to them. 

What’s happening locally is built upon that tax-sharing agreement, which allows for village leaders either to take a portion from that pot, or to have that money instead go to the appropriate town. In Ulster, each of the three villages is in just one town, which makes that kind of agreement a bit easier to manage. The mayors of Saugerties and Ellenville have long taken their own share, but in New Paltz that money had been going to town hall instead. That all changed in July, when without comment the trustees voted to take those funds directly as of 2023. 

How this impacts the town budget for next year is what’s currently being debated. The town budget has two broad kinds of funds, designated the “A” and “B” funds. The former is for town-wide services, including police, courts, assessor and youth programming. The latter is focused on those areas of the town not in the village, because village personnel provide similar services inside of that line: paving roads and issuing building permits, for example. When the whole tax enchilada went to the town, it was appropriately deposited in the “A” fund. With it split, it must instead be placed in the “B” fund. These two funds cannot be mingled, because they benefit two different groups of taxpayers. Supervisor Neil Bettez sees this new chunk of money into the “B” fund as unhelpful, because it can’t be used to pay court clerks or an assessor, or for any other town-wide expenses. Rogers points to Saugerties, suggesting that the budgeting practices in that town might shed some light on how to allocate funds in a more prudent fashion. 

Council members are looking at a tax increase of 5.63%, based on increases in fixed costs such as salaries and benefits. Contracts for some of the bargaining units are due for renegotiation, but given the soaring costs in the wider world, Bettez is not expecting to walk away without any pay increases at all. Even in the unlikely event that employees agree not to receive any cost-of-living raise, that would be a pyrrhic victory; employee retention is already a problem because higher salaries are offered elsewhere for the same work. For example, a court session was cancelled recently because there weren’t enough armed security officers available. 

Town council members feel that if they still had that projected $250,000 going into the “A” fund, then slipping in under the tax cap — two percent this year — might be achievable. As it is, getting it down to 5.63% required reining in attorney time for the police and stretching out anti-racism training over several years. Justice Rhett Weires asked about adding back a court clerk, because presently two are doing the work once done by three full-timers and a part-timer, and the justices are concerned about burnout. That does not appear to be in the cards for this year. 

At points in their discussion, council members switched back and forth between speaking about the two funds in a fashion that needed clarification. Bettez talked about how the sales-tax change would impact the highway budget, but much of that spending is outside of the village. The supervisor later explained that some highway expenses, such as the salaries for the superintendent and some other staff members, are in fact town-wide expenses even though paving tends not to be. Deputy supervisor Dan Torres spoke about the impacts on all town residents to lose this “A”-fund revenue stream, and then went on to say that unlike village government, there are no water fees that benefit the town. Just like town funds, water district money must be kept separate and cannot be mixed with general tax funds. Torres clarified by saying that “when reviewing impacts to services, it’s important to look at it holistically.” 

Dr. Benjamin has not reviewed the current fiscal situation of either government, and declined to comment on merits of those arguments for that reason. Benjamin did, however, note that Rogers is taking the position that the mayor is “far more prudent in demanding property tax from his constituency, and that it provides legitimacy for the claim” on the sales tax. The mayor also seems to be suggesting that if town officials don’t understand that the reduction in some funds being offset in other funds benefiting the same pool of taxpayers means that this is essentially a wash, then they may not be the best choice for overseeing this particular pot of money. 

Benjamin’s response to whether this kerfuffle is something of a tempest in a teapot was to say, “That’s my sense of it, yes.”