With a little more than a month until a revenue-sharing agreement is set to expire, a county lawmaker, with the backing of County Executive Mike Hein, is pushing a plan that would funnel more sales tax revenue to county coffers — at the expense of the City of Kingston and Ulster’s other municipalities.
But city and town officials say the revision would blow big holes in municipal budgets that would require major service cuts — or huge tax increases — to close.
Ulster County has levied a sales tax since the 1970s. Currently, the tax stands at 8 percent. The state takes 4 percent and up until the early 1990s, Ulster County took the other 4 percent. Revenue sharing introduced in the 1990s granted the county 88 percent of the revenue stream, while the City of Kingston received 10 percent. The remaining 2 percent was shared among the county’s 20 towns. In 2001, Mayor T.R. Gallo and county lawmakers hammered out a new deal which increased the city’s portion of the sales tax money to 11.5 percent and the towns’ share to 3 percent.
But the new proposal by legislator and Ways and Means Committee Chairman Richard Gerentine would restore the previous formula, clawing back 1.5 percent of Kingston’s sales tax revenue and 1 percent from the towns.
Gerentine (R-Marlborough) said this week the take-back was warranted by the county’s takeover of expenses for the Safety Net welfare program. For decades, Ulster was the only one of New York’s 62 counties to impose costs of the state-mandated welfare program on the municipalities where recipients lived. As a result, communities like Kingston and Wawarsing, with a higher proportion of Safety Net clients, shouldered the greatest share of the welfare payments.
In 2013, Assemblyman Kevin Cahill (D-Kingston) used a required state signoff on Ulster’s 1.5 percent county sales tax add-on as leverage to force the county to assume all Safety Net costs immediately, rather than via phased-in timetable preferred by Hein and the county legislature. The county also assumed costs associated with municipal elections that previously went on town tax bills. Since 2013, the county has spent $22 million on Safety Net and election bills previously footed by Kingston and the towns. Over the next four years, county officials estimate another $32 million in welfare and election costs.
Gerentine and other backers of the new plan argue that giving the county a greater share of sales tax revenue to make up for the added fiscal impact of welfare costs and elections is simply a matter of fairness, and revenue following expenses.
“We gave them extra [sales tax] money in the past for Safety Net costs,” said Gerentine. “[The county] took those over so now I think we have to sit down and re-evaluate everything.”
Donaldson disagrees
Legislator Dave Donaldson, the dean of the city’s delegation to the county legislature, called attempts to link Safety Net expenses with the 2001 deal that boosted the sales tax share for Kingston and the towns “pure bullshit” and “revisionist history.”
“That was not a part of the negotiations whatsoever,” said Donaldson, who was in the legislature when the 2001 revenue-sharing deal was approved. “There was no mention of it and there’s no paper trail to show otherwise.”
Former mayor James Sottile said this week he was present — as Common Council president — when T.R. Gallo negotiated the 2001 deal. Sottile said Safety Net was never mentioned. Instead, according to Sottile, county lawmakers agreed to let Kingston and the towns have more only after Gallo threatened to invoke Kingston’s power, as an incorporated city, to impose its own sales tax and deny the county any portion of the proceeds.
“It had nothing to do with Safety Net, it was that we knew what the numbers were and the county knew that they would be devastated if we went with a city sales tax,” said Sottile. “That’s the simple truth.”
On Wednesday, one day after Gerentine’s presentation before the county legislature, Kingston Mayor Steve Noble confirmed that the city has begun negotiations with the county. Noble called the sales tax talks “one of the most important negotiations we will enter into,” and noted that the sales tax is the city’s second largest source of revenue behind property taxes. City Comptroller John Tuey said 2016’s sales tax projection is $12.6 million. If Gerentine’s proposed 1.5 percent clawback goes through, it will cost the city about $1.1 million.
“We have to keep the interests of the taxpayers first,” said Noble. “And if that was to go through all at once, you’re looking at a 10 percent tax increase to close the gap. That’s unsustainable.”
A $50 million threat?
The city retains its trump card — the imposition of a Kingston-only sales tax. But the value of that play has likely declined, along with the shift in retail from Kingston’s business districts to big-box stores beyond city limits. Common Council President James Noble said that he did not know how much sales tax revenue the city could generate on its own, but that it would likely not match the current funding under the county sales tax formula. Nevertheless, Jim Noble said, a pre-emptive city sales tax would have a far more devastating impact on the county budget.
“They would probably lose $50 million,” said Noble. “We don’t want to do that to the county, but we can’t just lay down either.”
James Noble also objected to the last-minute nature of the county’s gambit. The current agreement expires on Feb. 29. He said Mayor Noble had been called into a meeting with County Executive Mike Hein last week, presented with a series of charts and graphs and informed that the county intended to take back 1.5 percent of the sales tax.
“It’s like they just called him into an office and said, ‘Here, sign this,’” said Noble. “But 45 days doesn’t give us enough time to get things together and get all the information for ourselves instead of relying on what the county’s telling us.”
Hein has so far stayed out of the fray, at least publicly, declaring that the revenue-sharing agreement would need to be worked out between the Kingston’s Common Council and the county legislature. But Donaldson said he believed Hein and Gerentine were working in concert in the effort to secure added revenue for the county budget. Donaldson invoked the 2013 standoff between Hein and Cahill over the sales tax extension, which ended only after the county lost a portion of sales tax revenue for a full fiscal quarter.
“The county has a lot to lose here,” said Donaldson, who urged city leaders to stand firm on maintaining the current revenue-sharing scheme. “If Mike Hein wants to play chicken with the city over the sales tax, that’s not a game I want to be part of.”
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