Investigation into town budgeting practices suggested in New Paltz

The period of relative quiet and apparent harmony among members of New Paltz’s two elected boards seems to be at an end, with trustees signing on to a memo that suggests an investigation into town budgeting practices might be an appropriate next step. This was in response to council members linking a decision to unilaterally end a sales-tax-sharing agreement to why town property taxes are expected to be increased by 5.63% for 2023. 

Sales tax is, per state law, shared with county and city governments only. The fact that three percent of the local share is distributed to the other municipalities in this county is essentially a form a largess, since there’s no law requiring it. That agreement, between county and Kingston officials, was supplemented in New Paltz by another agreement, most recently reaffirmed in 2017. In that joint resolution, it was pointed out that even though more than five percent of sales tax in the county is collected in New Paltz, less than a tenth of one percent of the county total is returned to the community. The resolution lays out the understanding that the entire New Paltz share of sales tax, as small as it is, would be used for town-wide expenses; further clauses establish that this should be revisited before 2019, and “that in the event that no subsequent action is taken with respect to this resolution, same shall continue until such time as an alternate tax revenue sharing policy is adopted.” 

In July, an “alternate tax revenue sharing policy” was adopted unilaterally by village trustees. Specifically, they opted to take the village portion directly. There was no public discussion about the decision when it was made. When town council members began discussing the 2023 budget on October 20, the framing was that if the new budget doesn’t come in under the tax cap, it’s because of the end of this longstanding practice. That’s because in a town with a village inside of it, town taxes have to be split into two funds, to account for the fact that some town services aren’t needed inside the village line. For example, village residents don’t pay for the plowing of town roads, because they pay village taxes for the plowing of village roads. The sales tax will now be split based on the percentage of assessed property value that’s inside of the village, and town officials believe that this means that it can only be used to pay for expenses outside of the village. 

Mayor Tim Rogers takes a different view, which is captured in the memo that trustees signed onto at their October 26 meeting. The mayor’s read on the law is that the way this money is split in Saugerties is perfectly acceptable. As explained in the memo, most of the sales-tax funds sent to the town can be used town-wide. In Rogers’ example, if next year’s New Paltz share is $250,000 and $57,500 is taken for village purposes — based on the shared of assessed value — then that would leave $192,500 for everyone else. “It would be expected” that from that, $57,500 would be shunted to the B fund to “support services in the town,” leaving $135,000 that could be retained in the town-wide A fund. 

Supervisor Neil Bettez isn’t convinced that the law makes this possible, but concedes that it might. If that were the case — which the town’s external auditor feels is not true — that election would have had to have been made by September 1. Lacking that, the supervisor sees this one of several budget challenges this year. This one will not be an issue in the future, but others — such as rising pension and health care costs — are ongoing. 

Village officials also questioned the math, wondering why the preliminary budget shows $94,000 in sales tax revenue, all in the B fund. Adding that to the $57,500 village officials anticipate receiving, results in $151,500, far short of the $250,000 in the 2022 town budget. There’s also mention of the fact that $319,800 was actually received in 2021. The reason for that high number is that the revenue for that year exceeded the county budget projection, which for the first time triggered a relatively new clause in the city-county agreement that called for a conversation about how to share that bounty. The county executive and the city mayor chose to share four percent of what came in that year with local municipalities, instead of three. Nevertheless, the question that was raised at the October 26 meeting is why not even the more conservative $100,000 doesn’t show up in the town budget. 

Reached later, Bettez said that numbers in the budget are the best estimate of what to expect, and that this figures shows a belief that the banner sales tax year of 2021 is not likely soon to be repeated given the economic headwinds in this country. Part of the text of state tax law §1262 reads: “Where any village has elected to be paid directly as provided in this subdivision, the amount to be paid to such village shall be determined by the ratio that the full valuation of real property in the village or portion thereof within the town in which such village is located bears to the full valuation of real property in the entire town. If a village wholly or partially within a town has so elected to be paid directly, but the town in which such village is located has not so elected, the amount allocated to the town in which such village is wholly or partially situated shall be applied to reduce county taxes and general town taxes in the area of the town outside such village or villages.” 

That’s the basis for the position that the money must go into the B fund, which as it’s structured now, doesn’t really need anything extra. In Saugerties, the town court is paid through the B fund because there is a village court, and in Ellenville there is both a village court and a village police department. Shifting police costs to the B fund, for example, would mean that they no longer patrol in the village; no town official has gone on the record suggesting that or any similar approach. 

Rogers did send an email to council members asking for their arithmetic, and also extended an invitation to meet jointly to discuss the issue. The question of joint meetings was the first public crack in the unity shown with these two boards. When Rogers and Bettez came into office, bimonthly joint meetings were agreed to, but council members eventually announced that they really only wanted to meet jointly when there was something on the agenda that required action by members of both boards. This specific invitation was rejected, with the implication being that it should have been discussed before the decision was made, back in July. No specific calculations were provided, either. 

Trustees expressed frustration about what Rogers called a “misinformation campaign” about how municipal finance works, and the impacts of this decision. They pointed to the fact that some council members spoke about the advantage of having water revenue, despite the fact that this money must also be segregated. Dan Torres explained after the town council meeting that this was in the context of viewing budgets “holistically.” It may be perfectly legitimate to blur that accounting line when, for example, public works employees repair a water main leak, and pay for that overtime from water revenue. 

In contrast, Bettez expressed a preference for having private discussions rather than making it the focus of a continuing and very public debate. “It becomes about winning the argument, and not solving the problem.” 

Alex Wojcik, the deputy mayor, thinks that it would be worth it to have the state comptroller take a look to make sure this village approach is “above board.” However, the wording in the memo is that trustees “believe” state officials might want to look at the next town budget and the last town council meeting, suggesting that it’s the behavior of town officials which should scrutinized. Rogers has since asserted that the memo has only been circulated to town and village officials, and also forwarded to the supervisor of Saugerties and this reporter.