By JIMMY LAWTON
CANTON – Gov. Andrew Cuomo’s recent approval of home rule legislation allows St. Lawrence County legislators to increase sales tax and move forward with a plan to stabilize tax rates.
Legislator and Financial Committee Chairman Fred Morrill said the county has created a five-year plan to ensure stability and a corrective action plan aimed at building back a depleted fund balance.
According to the plans, the county will increase sales tax by one percent and reduce property taxes by 14.2 percent in 2014.
Gov. Andrew Cuomo granted approval for the sales tax increase on July 31. The county legislature must officially approve the increase before it will take effect.
Over the next five years, the county will also raise the fund balance from $6.5 million to at least $10 million and reduce dependency on borrowed money.
The plan also calls for reducing waste, reducing spending and capping department budgets at about 2 percent.
St. Lawrence County Legislative Chair Jonathan Putney said the financial situation was already bad when he became a legislator. Budget issues at the county are the same faced by smaller municipalities and schools, but on a larger scale, he said.
“We control a lot of things, but we don’t control the economy,” Putney said.
Like most of the nation, St. Lawrence County was hit around the same time the economy began to sink in 2007. Sales tax revenues began to decline, pension and health insurance costs rose and legislators tried to stabilize property tax increases by allocating unexpended fund balance.
Stabilizing tax increases with the fund balance is common among taxing entities, but Morrill said the practice is not sustainable because the money runs out, and eventually it did.
“One of the things we did last fall was get rid of budget gimmicks like that,” he said. “To plan on using fund balance was very poor budgeting.”
In 2009, sales tax revenues came in 11 percent less than the county had predicted. The combination of higher costs and decreased revenues left the county in a tough position. Since 2009, Morrill said the county reduced its workforce by 15 percent, cutting roughly 150 positions.
He said the county also cut a variety of programs and delayed infrastructure projects. Bridges closed, economic development funding stopped flowing and home services to the elderly were cut.
Morrill said further financial burdens stemmed from slow payments from the state. He said late reimbursements combined with a low fund balance forced the county to borrow money just to pay the bills. In 2012 interest on those payments totaled $260,000.
Morrill said cuts to programs in the work force totaled about $15 million and in that same time period the county’s fund balance fell from $11.4 million to $1.7 million.
Morrill said the storm of problems culminated in the 2013 budget when then county raised taxes by about 14 percent and was still faulted by the state comptroller for keeping a dangerously low fund balance.
Raising the Sales Tax
Putney said he has pushed for long-term budget planning since he was elected to office, but only recently has the board accomplished that goal.
A major focus in the plan involves raising the fund balance from $6.5 million to at least $10 million in the next five years.
Morrill said a one percent sales tax increase plays a key role in that process.
For the past few years many of the county legislators sought to reduce the property tax burden by increasing the county’s share of the sales tax from 3 to 4 percent, but the action required support from the state legislators.
Despite reluctance from state representatives to support any tax increase, both the Assembly and the Senate recently passed home rule legislation that will allow the county to collect the new tax. Morrill said the county could collect about $1 million in revenue in the current fiscal year if the increase is implemented by December. That revenue would be used to build back the fund balance.
The sales tax will also allow the county to reduce property taxes by 14 percent in the 2014-2015 budget. Putney said that immediate reduction in property taxes is important.
“One of the reasons why the plan was created the way it was, was to ensure that the current board could provide that tax relief now. We are providing the tax relief up front because people need it,” he said.
Over the next five years, the sales tax will allow the county to add $2.5 million to the fund balance.
Growing fund balance
Morrill said increasing the fund balance will allow the county to spend less money.
He said slow payments from state reimbursements combined with the county’s depleted fund balance means the county often has to borrow money.
“We pay our bills and we pay our bills on time. If we pay our bills late, we are fined. That doesn’t happen to the state,” he said.
Morrill said he understands the state has to review all reimbursements before issuing checks, because they are spending public money. But that doesn’t make it easier on the county.
“I don’t think there was ever a meeting an Albany where they said ‘let’s pay the bills slow.’ I think it has just gotten worse because of layoffs and a lack of people to do the work.”
The result for the county is more than $200,000 in interest payments for the past two years. Morrill said increasing the fund balance to $10-$12 million will allow the county to stop borrowing money for government operations.
Putney said the county will also see a revenue increase from the Mohawk casino compact, after the governor and the tribe came to an agreement recently.
He said the county has lost $5 million in payments over the past three years. However, recent negotiation allowed the county to receive its first payment of $1.8 million.
Morrill said that money is not included in the current plan, because it only recently made headlines, but it may allow the county to further grow its fund balance.
Morrill said the county will ensure it stays under the state’s “2 percent” property tax cap, by making each department do the same.
He said there may be exceptions, but if one department is going to exceed that cap, that revenue will have to come from funds freed from another department that managed to say below the “2 percent” increase.
Morrill said it has been fairly common practice for many departments to spend their full budget, since any unexpended funds are rolled into the general fund at the end of the year, but that trend can’t continue in the current economic climate. He said it is a complicated issue because departments that are responsible may feel as if they are losing money or being punished for good behavior, but more recently department heads have become more conscious of the bigger picture.
“I think they are getting the message that the county is in difficult times. Many departments are now coming in under budget,” he said.
Morrill said this is evident because the county departments collectively under-spent their budgets by $2 million in 2012.
Morrill acknowledged that unexpected expenses and new equipment purchases can make this stringent budgeting tough to maintain.
To guard against those situations the plan includes a fund for “capital needs” totaling $6.1 millions in the five-year cycle.
Leaving a Legacy
While the plan only spans five years, Putney said an additional year will be added as the current year closes to maintain a constant look ahead.
Putney said the board makeup could change and there is no way to ensure future boards will continue the practice, but he plans to keep it alive as long as he is in office.
“With this long term multi-year budgeting we will be able to look down the road,” he said. “As far as future boards, people have the power. If people want representatives who are prepared for future financial circumstances they are going to decide that at the polls.”
Putney said the five-year plan will be a benefit to any newly elected board members, because they will get a better idea of the county’s economic future when they take office.
“There is no question that having this plan in place will be helpful to new board members,” he said.
For all of its good Putney acknowledged there is a lot of work to be done as the county moves forward. He said no amount of planning can stop another recession or guarantee the county’s fiscal future, but the five year plan is a good start.
“I think we are going to need to continue to look down the road at projected costs, health insurance pensions and reimbursement rates for the state,” he said. “Clearly we are going to oppose unfunded mandates, or partially funded mandates and we are going to work with our state representatives to fight them.”