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Sales tax drop puts strain on county finances

DAN GUZEWICH
Posted 3/1/16

Oneida County’s sales tax revenue came in nearly $3.9 million below the amount budgeted in 2015. In fact, last year’s tally didn’t even match 2014’s total.The downturn has County Executive …

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Sales tax drop puts strain on county finances

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Oneida County’s sales tax revenue came in nearly $3.9 million below the amount budgeted in 2015. In fact, last year’s tally didn’t even match 2014’s total.

The downturn has County Executive Anthony J. Picente Jr. weighing the impact on not only last year’s final budget numbers, but future effects too. Sales tax is the county’s largest revenue source.

The county had budgeted $96.5 million in sales tax for 2015, but the final count of $92.6 million is about 4 percent short of the target. Thanks mainly to lower-than-anticipated sales tax, the county could finish the year with a deficit once the final accounting for 2015 is done, ending a string of several consecutive cash surpluses. During the year it had become evident to county officials that sales tax collections were running behind. Any deficit will be covered by using money from the county’s reserves to balance expenses and revenue.

“It’s not terribly surprising. We’ve been tracking it,” said the county executive of the shortfall. “We knew there was going to be a variance of between $2 million and $4 million.”

These numbers do not include sales tax money that went to the cities, towns and villages.

This is the second consecutive year that the amount of sales tax retained by the county shows a gap between what was collected and what was projected.

Last year’s shortfall was not just an Oneida County problem. For all of 2015 compared to 2014, 30 counties around the state experienced negative growth in sales tax receipts, according to the New York State Association of Counties. While not in a unique circumstance, it is still worrisome to Picente, and he’s preparing a response.

“In the next month, as the books are closed for 2015, we will see the full impact such a loss has on our final budget for 2015 and outline a fiscal plan to address the shortfall and projection for 2016,” he said.

Picente said it is unlikely that this year’s sales tax target can be met. ​The dollar gap between the 2015 actual and 2016 budgeted sales tax amount is $5.44 million.

“Without any adjustment, negative variance coupled with the budgeted sales tax amount for 2016 at $98,080,000 would require a nearly 6 percent increase in 2016 sales tax collections,” he said. “This growth rate is highly unlikely and therefore, significant budgetary actions will need to be taken from this point forward to reduce such impact.”

Picente adds that the situation is “further impacted” by the Board of Legislators’ 1.4 percent reduction in the amount of money to be raised through property taxes this year — against the county executive’s recommendation. He had proposed keeping the tax levy at the same level as 2014. Furthermore, the state tax cap is limiting tax levies to near zero growth without overrides.

The combined sales tax rate in Oneida County is 8.75 percent: 4 percent state and 4.75 percent county. Oneida County has one of the highest sale tax rates in the state.

Why the shortfall?

Picente quickly points to two factors that affected sales tax last year: the downward trend of gas prices throughout 2015 and the growing popularity of Internet sales.

The county executive says decreasing gas prices are good news for consumers, but for local governments that depend on the sales taxes generated from motor fuel sales, the lower costs are a hit to the budget.

According to the New York State Association of Counties, counties collected more than $200 million less in taxes from fuel sales last year than they collected in 2014.

A 1992 Supreme Court ruling said that states cannot require mail-order businesses and, by extension, online retailers to collect sales tax unless they have a physical presence in the state. “We lose a great deal of sales tax due to the Internet,” said Picente. “It’s a hard area to police.”

As for the the strength of the local retail market, Picente says that’s hard to evaluate.There have been some store closings in the past year, but there have been openings too.

The county official said he’s not heard anything indicating that big-ticket purchases like cars are down locally. For full year 2015, U.S. sales hit a record of 17.47 million vehicles, breaking the mark of 17.41 million vehicles in 2000, according to Autodata Corp. Low gasoline prices, easy credit and moderate economic growth boosted the industry.

Picente does not blame the 2013 Oneida Indian Nation settlement for last year’s downturn. He said the effect of the agreement was a factor in 2014 when it was implemented. Two years ago the collection of state and county sales tax, and the occupancy tax on hotel rooms, at the nation’s Turning Stone Resort Casino in Verona and other properties ended. While sales tax and other levies are still charged by the Oneidas, the tribe keeps the money for governmental operations, under the compact.

Also, the agreement gives the county a new revenue stream. The county receives a 25 percent share of the slot machine revenue the Oneidas now share with the state as a result of the deal. The 2015 amount was approximately $12.5 million — a figure that more than offsets the sales tax loss, says Picente.

Municipalities affected

Cities, villages and towns in the county all have a direct stake in county sales tax collections because this revenue is shared with them under formulas.

Among the three cities, only Rome saw an sales tax revenue gain last year, an increase of $18,870 from $2,314,131 in 2014 to $2,333,001 last year. Working in the city’s favor in 2015 may have been the first full year of operations at the Runnings store in west Rome.

Meanwhile, Utica and Sherrill experienced small declines: Utica’s sales tax dropped $33,720 to $3,210,445 while Sherrill’s decreased $42,765 to $806,384.

Sales tax totals for both the the towns and villages declined last year.

The combined tally for the towns was $26,004,981, a decrease of $447,669 from 2014.

For the villages, the 2015 total was $4,524,134, a decline of $133,380 from the previous year.

New distribution breakdown?

The sales tax downturn has renewed Picente’s desire to revisit the sharing of sales tax among the municipalities.  It is his belief that the county, cities and larger towns are deserving of additional sales tax because of the higher level of services they provide.

The county executive says he has talked with the Rome and Utica mayors about sales tax.

“We’re looking at different scenarios at how we can restructure this,” he said.

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