Sales Tax Drop Strains Ductchess

(Poughkeepsie) - Dutchess County Executive William R. Steinhaus said the current 2006 county budget as well as the operating budget presently being developed for 2007 are both suffering substantial holes due to a significant amount of lost sales tax revenue. The loss is causing a major structural imbalance in county finances.

Sales tax is the county’s largest revenue source. Sales tax revenues that flow to county and local town, village and city governments across New York State are a major component of income for municipal budgets and serve to balance property tax increases. In Dutchess County, a change in the law providing for the elimination of sales tax on clothing under $110 is largely responsible for the major decrease in revenue causing the large budget gap in both the 2006 operating budget and soon to be released 2007 county budget.

The current 2006 fiscal year is experiencing a multi-million dollar gap as a result of the lost sales tax revenue. Policy and legislative changes eliminating the sales tax on clothing that came after the adoption of the 2006 budget, plus a projected shrinkage due to softening of general sales tax income compared to what was estimated in the adopted budget, combine to form a projected loss estimated to be approximately 10-12 million dollars.

The 2007 county budget due for release on November 1 is still in the final stage of development. However, the anticipated 2007 loss in sales tax income estimated at 12-14 million dollars, when coupled with the 2006 loss, equals a daunting compounded funding hole in county finances of approximately 22-26 million dollars. Steinhaus said the loss also has had a domino impact to local governments. Recent 2007 budgets proposed by the cities of Poughkeepsie and Beacon already demonstrate the negative impact the lost sales tax revenues will have on finances of local municipalities in Dutchess County.

According to recent news reports, the City of Poughkeepsie’s 2007 budget proposed by Mayor Nancy Cozean includes an average tax increase of $175 for a residential property assessed at $255,000. The Mayor stated half of the tax levy increase can be attributed to the decrease in sales tax revenue as a direct result of the clothing sales tax exemption.

Beacon’s City Administrator Joseph Braun, in announcing Beacon’s proposed 2007 budget and accompanying 9% property tax increase, said the tax hike is “due to a reduction in our sales tax revenues, a rather substantial reduction as a result of the (Dutchess County) exemption on clothing” and he said it has “a major impact” on the city’s budget.

Further contributing to the lower sales tax income to the county, towns, cities and villages are the lower economic growth projections due to energy prices, higher interest costs, and the softening in the housing sector.

According to County Executive Steinhaus, “My administration works very hard to keep spending under control, and I believe we are quite successful considering the constant annual pressure of higher costs. While we are told by state officials we must pay for programs they create, I want to be sure county government can provide the services and quality of life amenities our families tell us are important to them in their daily lives.”

Residents want us to continue to develop our parks and trails systems, our open space and farmland preservation program, our support for healthy and active children, and our focus on housing, transportation, and everyday needs of our seniors, our veterans and our families. These are just some examples of my local priorities. Yet these are the challenges and difficult decisions we face each year – what are the programs we can fund and still remain affordable to our taxpayers.”

The County Executive’s proposed budget will be released November 1. The County Legislature is expected to begin review of the budget in early November and will adopt the budget in December.