sales tax

Sources say the legislation necessary to implement a new 40-year sales tax sharing agreement between Genesee County and the City of Batavia has been delivered to the desk of Gov. Andrew Cuomo.

He now has 10 days to sign it or veto it or let the deadline pass (known as a pocket veto).

The bill incrementally shifts sales tax revenue previously shared with towns and villages with that revenue targeted to pay off bonds for a proposed $60 to $65 million jail and for water infrastructure projects.

As The Batavian reported exclusively two days ago, with the bill lingering in Albany, unsigned, the county was in danger of going without a sales tax agreement in 2020 and that County legislators felt it necessary to suspend the planning process for the new jail.

If the bill is signed, there will be a sales tax sharing agreement in 2020 and jail funding can be secured.

The state's Corrections Commission is requiring Genesee County to replace its substandard jail.

Previously: Plans for new $65 million jail put on hold while governor dawdles on sales tax legislation

Many months of effort by Genesee County to replace its aging, legally out-of-compliance jail came to a standstill Wednesday night when the County Legislature, by consent, agreed to hold off on new jail plans until Gov. Andrew Cuomo signs sales tax agreement legislation that is necessary for the county to fund the jail.

The jail could cost as much as $65 million, which is money the county must borrow (through bonds) and the county won't be able to get those bonds without the 40-year sales tax agreement that will generate the revenue to pay back the loans.

The county and the city hammered out the agreement over the course of months of negotiations about how to divide the local portion of sales tax collected in the county and both elected bodies approved the agreement. The necessary legislation then went to the Assembly and Senate and was approved.

The bill now sits on the Senate president's desk awaiting a request by Gov. Cuomo to see it.  

He hasn't requested it and nobody knows why. It might be that there are 500 other bills on the Senate president's desk awaiting Cuomo's request, but nobody is sure if that's really the issue. Attempts by local officials to get an answer from any source, including the governor's office, have gone unanswered.

Meanwhile, the city and county don't have a sales tax agreement in place for 2020 and if they're going to have an agreement, absent the governor signing the 40-year-agreement bill, they must act fast.

The two municipalities could agree to extend the current agreement by a year or even extend it for 10 years. Either option could be approved on the State Comptroller's signature, without new legislation, but either option would also delay building a new jail by either length of time.

Once the governor requests the bill, he has 10 days to sign it or veto it, or he could do nothing, which is called a pocket veto. He could also let it sit on the Senate president's desk until Dec. 31, which is also a pocket veto.

If the bill isn't approved before Dec. 31, the whole process of approving a sales tax agreement would need to start from the beginning next year.

Neither the county, of course, nor the city, can wait until Dec. 31 to see if the governor will sign the bill. They need to approve a new sales tax agreement, if this one isn't approved, within weeks so there is time to get it approved by the comptroller's office and have it in place for 2020.

If there's no sales tax agreement, the county and city will not be able to fund normal government operations typically covered by sales tax revenue.

Chairman Robert Bausch is drafting a letter to the corrections commissioners informing them of the bind the county is in and asking if they can intervene with the governor's office.

County Manager Jay Gsell said the commission has been patient with the county over its current substandard jail on the premise that the county has been working toward building a new facility. 

Sheriff William Sheron said that a letter from the county might help extend that patience and at least put the commissioners on notice of the issue the county is facing.

Wednesday's meeting was initially called for the entire legislature to discuss jail plans and decide what would be included in the jail -- such as how many beds and pods construction contractors would be asked to bid on.

Some of that discussion took place, with an apparent agreement being reached on a four-pod jail with 184 beds. That would give jail staff the most flexibility in maintaining order and keeping different types of jail inmates, based on mental health issues and other factors, in appropriate housing.

After that discussion, Bausch brought up the sales tax issue and said he didn't see how the county could authorize the architect to start designing the facility because once the design is done, without a sales tax agreement, the county wouldn't be able to put the project out to bid because it couldn't get the project bonded.

"That would be pretty embarrassing for the county," he said.

It was pretty clear at a gathering of local leaders at County Building #2 on Thursday night that few elected officials in Genesee County's towns and villages are happy with the county's plan for how it will share sales tax revenue.

It was also clear that the county has few options.

The current plan is for the county to cap the amount of sales tax revenue it annually sends to towns at villages at 2018 levels for 40 years.  

Sales tax revenue has been a significant portion of revenue for local jurisdictions -- it's 51 percent of the Town of Le Roy's revenue, for example -- enabling local officials to hold down property taxes.

Now those officials fear the economic impact of seeing sales tax revenue shrink relative to rising costs and what it will mean for property owners in their jurisdictions.

"This agreement is a burden on the towns and villages," said Michael Plitt from the Town of Darien. "It will mean towns have to impose higher property taxes or cut services."

From the county's perspective -- as shared by Bob Bausch (top photo), chair of the County Legislature -- the county has few alternatives.

• The state is forcing the county to build a new jail, which will cost local taxpayers $50 million, or more, plus interest, over 40 years;
• The state is imposing new requirements, called "Raise the Age," for how criminal defendants ages 16 and 17, are handled by law enforcement, the courts, and corrections, which will cost the county $2 million to $3 million a year -- a cost the state says it will reimburse the county for but only if the county stays under the property tax cap;
• The county is facing $75 million in expense to replace aging bridges and culverts.

The county's proposal for sharing sales tax revenue capped at the 2018 rate is an explicit attempt to keep more sales tax to help pay for the new jail.

Bausch pointed out that 80 percent of every property tax dollar collected locally goes to cover state-mandated expenses. Legislator Andrew Young added that the county has only two revenue streams -- property tax and sales tax; and with property tax, the levy is capped so the county doesn't have the option to raise property tax to pay for the jail, that leaves sales tax as the only option.

Young also pointed out that Genesee County is the most generous county in the state for sales tax with towns and villages. Maybe if its share was more in the middle of the pack over the past 10 years, the county wouldn't be in the situation it's in now.

One of the chief objections to the plan for town and village leaders is that the agreement would last 40 years.

Rob LaPoint, deputy supervisor in the Town of Pavilion, calculated inflation going back to 1977 and pointed out that a dollar 40 years ago is worth 25 cents now, at that rate, the county will gain $625 million over 40 years.

"You could build 10 jails for that," LaPoint said.

Both Bausch and Young indicated the county is willing to adjust the 40-year time frame. Young said he favors 15 years.

"If it is a 15-year agreement in place, I know I won't be around, at least I hope not," Young said. "The Legislature in 15 years might decide to take more money."

The county isn't obligated under state law to share any sales tax revenue with the towns and villages. Bausch pointed out that the county could make the amount to share an annual budget decision.

Bausch said without an agreement, he couldn't obligate future legislatures to any particular amount of revenue share.

Some in the audience expressed concern that the City is getting a better deal than the towns and villages. While the amount of new sales tax revenue that will flow to the City will be restricted under its agreement with the county, it is not capped.

The City has more leverage because it can legally override the county sales tax and impose its own sales tax, something the villages and towns can't do.

However, Steve Barbeau pointed out that the City doesn't have that much leverage because most of the sales tax in the county is generated by businesses outside of City limits. 

Legislator Marianne Clattenberg said the City has much higher expenses than the towns and villages. It has its own police department and fire department but it is also the site of most of the tax-exempt property in the county, including the jail, the courthouse, the Old Courthouse, and County Building #1, yet the city must protect those buildings with its police and fire departments and plow the roads that lead to them without collecting the property tax to pay for those services.

David Hagelberger, supervisor for the Town of Darien, wanted to know why the county didn't deal with the jail issue sooner. Bausch said the county wasn't was aware of the looming issues with the jail, but that while it owned the County Nursing home, losing $2 million to $3 million, it really didn't have the ability to deal with the jail or roads and bridges.

While Hagelberger shared many of the same concerns about the length and nature of the agreement and burden it will create for local jurisdictions he also said, "the jail is really all of our problems" and that one way or another everybody in the county was going to have to help pay for it.

Also unique to Genesee County in New York is the county's responsibility for all of the roads and bridges in the towns and villages, which ends up being a cost savings for local jurisdictions, something Carol Glor, supervisor for the Town of Oakfield, said she appreciated.

"We just got two new bridges in Oakfield that are worth well over $2 million," Glor said. "There is no way we could have taken on that expense in our budget."

Acting on Interim City Manager Matt Worth’s analogy that the City will benefit from “a thinner piece of a larger pie,” the Batavia City Council on Monday night agreed to set a special business meeting to vote on a new sales tax agreement with Genesee County.

A revised sales tax arrangement with the county is necessary since the current 10-year pact – which gives the City 16 percent of the county’s 50 percent share of the 8 percent sales tax -- expires at the end of this year.

County legislators, looking at future big ticket items such as bridge replacements and a new county jail, balked at extending the existing agreement, setting the stage for negotiations between the two entities.

The proposed deal calls for the City to receive its current 16 percent of the county’s share through this year, with provisions for that amount to grow in future years by a maximum of 2 percent per year.

“This allows the City to increase in growth by up to 2 percent a year until the City’s portion of the pie becomes 14 percent,” Worth said. “So we go from 16 percent to 14 percent as that pie gets larger and larger.

At that point, once that floor of 14 percent hits, all the restrictions go off and there’s no more restriction of 2 percent growth. So if the sales tax goes up by 5 percent, and we’re at 14 percent, the City gets a 5-percent increase as well.”

In any event, the City’s share will be no less than 14 percent for the remainder of the 40-year contract, Worth said.

“The 14-percent floor is an additional safety net for the City to share in good years above 2 percent, once that threshold is reached,” he said, noting that historically sales tax goes up by 2.5 percent annually.

The County Legislature is expected to vote on the matter on Wednesday of this week, while City Council scheduled a business meeting to address the agreement in conjunction with its conference meeting on Sept. 24. From there, it goes to the state comptroller’s office for approval. If approved, it would go into effect on Jan. 1.

The new agreement, unlike the current one, does not include wording about allocations to Genesee County towns and villages because, according to Worth, the towns have no taxing authority and are not a “sign-on” to the contract.

“It is my understanding that the comptroller was not comfortable with the towns being referenced in the agreement, and that the county will have separate agreements with the towns and villages,” he said.

Responding to questions from Council Member Adam Tabelski and Interim City Manager Worth, Council President Eugene Jankowski said the new agreement should be a “stabilizing” factor in annual budget preparation.

“We’ve been in a holding pattern for the last couple years, not knowing if the agreement would go through,” Jankowski said. “We’re in a better position now.”

In other action, Council:

-- Voted to send a resolution calling for the rezoning of the St. Anthony’s Church area on Liberty Street from residential to commercial to the City Planning & Development Committee.

City Church, which purchased the former Catholic church in 2016, filed a petition to reclassify the campus to allow for some activities (dance school, art school, community education classes, etc.) that could be considered a business activity and a non-conforming use in an R-3 district.

Should the planning board approve, a public hearing will be scheduled.

-- Approved the placement of 10 bicycle racks and six trash cans in downtown locations per a request from the Batavia Business Improvement District.

-- Voted in favor of two resolutions pertaining to the Ellicott Station project coordinated by Savarino Companies of Buffalo.

One grants a stormwater easement due to the fact that a major city storm sewer lies within the boundary of the project; and the other distributes a National Grid Urban Center/Commercial District Revitalization Grant in the amount of $250,000 to enhance the Ellicott Trail Project, which will run along the southern boundary of the Ellicott Station site.

-- Voted to submit an application for Transportation Improvement Program funds for the rehabilitation of four city streets – Harvester Avenue, Jackson Street, Bank Street and Richmond Avenue – that qualify under federal guidelines.

The County and City have reached a new 40-year agreement to share the distribution of local sales tax, pending approvals by the NYS Comptroller's Office, the County Legislature and the City Council.

The agreement establishes a formula for sharing from 14 to 16 percent of local sales tax with the city.

The towns and villages in the county will be bound by the agreement but do not get a vote on the plan.

County Manager Jay Gsell said the other municipalities will receive a share calculated similar to the city's share but based on what they receive in 2018.

If approved, the new agreement takes effect Jan. 1.

Currently, the county collects a 4-percent sales tax. That would continue under this agreement. The state collects 4 percent, making the local sales tax 8 percent.

The Batavia City Council will be asked to vote on the new agreement at Monday's meeting. The Count Legislature will vote next Monday.

Gsell said he expects to hear by tomorrow if the attorneys in the Comptroller's Office will recommend approval to their boss, Tom DiNapoli. Gsell said if the attorneys recommend approval, DiNapoli will likely approve the agreement.

The City and County have been negotiating the new agreement for more than a year. A committee that included city and county staff leadership and elected officials from both bodies participated in the discussions.

While towns and villages don't get to participate directly in the agreement, the City and County need to work out a deal because, under state law, the City has the ability to levy its own sales tax.

As part of the agreement, the City agrees not to institute its own sales tax.

Shortly after midnight, the New York State Assembly passed an omnibus bill that clears up a logjam of legislative initiatives legislators had been wrangling over and which threatened funding for municipal governments, including Genesee County, the City of Batavia and the towns and villages.

This morning County Manager Jay Gsell said the passage of the bill was a good start.

It still needs to pass the Senate, which is expected to return to session today to take up the bill.

Local governments were in danger of losing as much as $8 million in revenue without an extension of a portion of sales tax charged in the county. The state charges a 4-percent sales tax. The county has permanent authority to charge 3 percent, but the next 1 percent must be periodically renewed by state legislation. Typically, it's been automatically renewed every two years, but this year it was held up when the extender legislation was wrapped into legislation to also extend mayoral authority over schools in New York City.

The omnibus bill extends the sales tax for three years.

It also authorizes the naming of a new multibillion-dollar bridge spanning the Hudson River after Gov. Mario M. Cuomo, father of Gov. Andrew Cuomo. 

The bill also provides $50 million in relief for victims of Lake Ontario flooding.

In response to our request, Assemblyman Steve Hawley provided the following statement on the issue of extending the 1-percent addition to local sales tax:

“At this point, we know very little about whether the Legislature plans to congruently pass local tax extenders. The Senate has already passed the Genesee County 1% tax extender that will be in effect until November 30, 2019, as well as the Orleans County tax extender.

"But the issue is that Assembly leadership chose to pass all local tax bills in one omnibus bill this year, instead of separately as they have done in almost all years past. Genesee and Orleans counties will be looking at approximate $9.3 million and $3.8 million revenue shortfalls, respectively.

"Essentially, the Assembly is holding tax extenders hostage, claiming that they have already fulfilled their obligation to counties. We are not sure at this point whether tax extenders will be addressed in Wednesday’s special legislative session, but it is time to put politics aside and compromise in order to avoid a major fiscal deficit in Genesee and Orleans counties,” said Assemblyman Steve Hawley (R,C,I-Batavia).

Previously: Inaction in Albany could deliver $8 million revenue blow to local governments

Local governments in Genesee County stand to lose $8 million in sales tax revenue for 2018 because the State Legislature has failed to pass legislation that would allow the county to collect an extra 1 percent in sales tax.

Every two years, the Senate and Assembly must pass legislation that allows Genesee County, along with 52 other counties in the state, to collect that extra 1 percent.

This session, that didn't happen, because of a tussle in Albany over extending mayoral control of New York City schools. The sales tax extension, along with extensions related to mortgage tax and bed tax, got caught in the crossfire.

County Manager Jay Gsell informed members of the County Legislature yesterday of the bad news, but this morning he said he was feeling hopeful after Gov. Andrew Cuomo ordered legislators to return to Albany for an extraordinary session.

The governor has the authority to order senators and assembly members to return to session, but he can't require them to take up the agenda he requests. It is Cuomo's wish, however, that legislators take up the NYC schools issue.

The hang up over the legislation appears to be in the Senate. This morning, we requested a comment from Sen. Micheal Ranzenhofer and have yet to receive a response.

In New York, the state has an across-the-board 4 percent sales tax. In the 1980s, the State Legislature allowed counties to impose a local 3 percent sales tax, in part, according to Gsell, to offset the new Medicaid mandate. Counties then had the option to tack on another 1 percent sales tax, but that tax must be reauthorized every two years.

Until this year, that reauthorization has been pretty much automatic.

In Genesee County, under current agreements, the county keeps half of the 4 percent in local sales tax, and the other half is divided between the city, villages and towns.

Prior to this morning's announcement by the governor, it didn't look like the Legislature would take up the extension issue until the fall, which Gsell said would be too late for the county's 2018 budgeting timeline, with a requirement for a completed budget by Thanksgiving for the County Legislature to approve.

UPDATE 11:58 a.m.: Daniel Aikin, spokesman for Sen. Ranzenhofer, provided this statement:

The New York State Senate approved legislation to extend Genesee County's sales tax on June 8th. It passed by a vote of 58 to 3. The existing sales tax extension expires November 30th of this year. The bill was delivered to the New York State Assembly on June 8th. Weeks later, the Assembly still has not taken action on the bill.

Unfortunately, the New York City dominated State Assembly failed to act, causing an unnecessary and avoidable budget issue for municipalities. If the State Assembly does not pass this legislation, then the budgets of cities, towns, and villages across Genesee County will be negatively impacted. Senator Ranzenhofer is hopeful that the State Assembly will take action before it is too late.

City and county officials are largely in agreement on how sales tax should be distributed among the various local governments that have been part of a sharing agreement for nearly two decades, City Manager Jason Molino said last night.

The current agreement is about to expire and there are still details to be worked out, however, plus time is needed to draft new legal agreements before elected officials can approve a new plan, so the City Council is being asked to approve a temporary extension to the current agreement.

The County Legislature will also need to approve a temporary extension.

There is a working group of top managers with city and county working on the details, not only of the sales tax sharing agreement but also agreements dealing with water distribution and use of the city's wastewater treatment facility. The deals have previously been interconnected because of the mutual interest of all parties cooperating on these initiatives, Molino said.

"It is in everybody’s self-interest to have an agreed upon agreement in place for sales tax distribution," Molino said. "No one benefits from these agreements going away. There is a form and fashion they have to take with new terms and conditions, but it’s in everyone’s best interest to work out a distribution that is equal and fair to everyone."

Currently, there is an 8 percent sales tax in Genesee County. Of that, 4 percent is mandated by the state and so the money goes to the state. The county keeps 2 percent; of the remaining 2 percent, the city gets about 1/3 of it and the other 2/3 is divided among the county's town and village governments.

The city's share comes to about $6 million annually.

Work on a new agreement started in the fall. The temporary extension, once approved by both City and County, will keep it in place through December 2018.

Genesee County will likely close the financial books on 2011 with an unexpected revenue surplus and County Treasurer Scott German is recommending the legislature roll the money over into its reserves.

The extra money will likely come from a windfall of $997,000 in sales tax revenue that came in above budgeted expectations.

At Wednesday's Ways and Means Committee meeting, Legislator Ray Cianfrini asked if the 2012 budget could be amended so some of this unexpected revenue could be directed at programs cut in 2012, such as Meals on Wheels, which is being forced to reduce delivery days.

In an interview Thursday, German said the legislature could do that, but his recommendation is that the money be held in reserve.

Reserves, he said, should be used for emergency expenditures, such as a bridge falling down, and not to fund programs legislators already decided already to cut.

"Under the tax cap, the legislators still had room to raise taxes if they wanted to fund those programs," German said. "The fact the sales tax came in better than anticipated, that's not a good justification to fund a program."

The treasurer said he anticipates the county will close its books on 2011 -- which happens in March -- with $13.2 million in revenue, up from the anticipated $12.2 million.

Total sales tax for the county -- which is shared among the county and various municipal agencies -- was $35.2 million, beating the 2008 record of $34.3 million.

Higher gas prices and the three-week close-out sale at Lowe's were probably the main contributing factors to the strong sales tax numbers, German said.

Is the local economy improving?

"I would hope that would be the case, but that would be speculation," German said. "I would hope business is getting better."

This information comes from Assemblyman Steve Hawley's office.

Assemblyman Steve Hawley recently applauded the return of the sales tax exemption on clothing and footwear.

In 2010, Assemblyman Hawley voted against a measure to enforce a 4 percent sales tax on clothing and footwear under $110.

As of April 1, clothing and footwear under $55 will be tax free until the exemption is extended in 2012 to include items under $110.

“I voted against this regressive tax last year because it served only to push consumers across state lines when they could have otherwise supported small businesses right here in our own community,” Hawley said. “Increasing taxes on clothing hurt those who could least afford it, like working families who are trying to feed and clothe their children.

"I encourage all Western New Yorkers to take advantage of this fee’s sunset by frequenting the locally owned and operated clothing stores that help build the regional economy.”

Genesee County Treasurer Scott D. German said today that he got a pleasant surprise this week: Sales tax revenue for the 2nd quarter was up 6.74 percent.

"I thought sales tax would be down due to the economic conditions across the country," German said.

Plus, the monthly payments throughout Q2 were down as much as 19 percent. The shortfall, and then some, was made up in the July 14th payment.

Only Genesee and Niagara counties saw sales tax revenues increase in New York, German said.

For the year, the county is up 3.55% compared to last year, or $544,000 before distribution.

The county retains 50 percent of local sales tax revenue, while the City of Batavia gets 16 percent and the towns and villages share the remaining 34 percent.

Yesterday, when asked about the good news, County Manager Jay Gsell said caution is in order.

"The rest of the state is still seeing negative dollars from 2008 and 2009 and our economy has usually been delayed in experiencing spending downturns that the rest of the state is facing," Gsell said in an e-mail. "This is just a snapshot of a wait and see 'game' with shoppers and NYS and its own cash flow/performance."

Batavia City Manager Jason Molino is also taking a cautious look at current disbursements.

"Considering sales tax payments fluctuate drastically from payment to payment and quarter to quarter, it is best to wait and see what the next quarter's results are," Molino said. "The current status of sales tax could change with one NYS adjustment, as it has done in the past."