For the past year, the question of whether sales tax revenue is fairly and sensibly distributed among Chemung County, the City of Elmira and the rest of Chemung County’s municipalities has been discussed extensively.
The reason sales tax distribution has been such a hot issue is twofold.
First, the “Financial Restructuring Plan”, enacted by Chemung County’s Legislature in 2013 to allow the county to take a progressively greater share of sales tax revenue from its municipalities, expires at the end of November. This means Chemung County’ s executive and its fifteen legislators have an opportunity make changes to the plan later this year if they feel it is necessary.
Second, and perhaps more importantly, there are an unprecedented number of people running for office in Chemung County in 2018, many of whom have been outspoken about the need to adjust the sales tax plan, as it has resulted in fiscal hardship to many municipalities. This, coupled with numerous municipal officials who have been equally outspoken about the plan’s shortcomings, has resulted in significant attention from the public as we seek to understand how, if at all, the plan can be improved.
Indeed, in a blog post I published on New Year’s Day entitled “Key fiscal issues in Chemung County to watch in 2018“, sales tax distribution is identified as a critical topic for this year:
Sales Tax Redistribution, Shared Services and the CGR Report
In 2013 the Chemung County Legislature voted to approve a controversial measure called the “Chemung County Financial Restructuring Plan” to redistribute the way sales tax revenue is allocated in Chemung County.
Prior to 2013, county government received 50% of all sales tax revenue, and the remainder was split among the City of Elmira and the remaining local towns and villages. However, the redistribution plan allowed an increasing percentage of the money collected through sales tax to go to Chemung County, with a equal reduction in revenue left for the other municipalities. This is a link to a powerpoint presentation given by Chemung County Administration to the Legislature prior to a vote on the the measure: Sales Tax and Financial Restructuring Plan.
The redistribution plan was met with strong opposition by the City of Elmira as well as a group of local leaders called the Rural Association of Mayors and Supervisors (“RAMS”.) Together they argued that taking sales tax revenue would cause local municipalities to raise taxes, cut services – or both – as the graph (below) shows how much they each stood to lose.
A link to a Star Gazette article from 2014 outlining various positions on the matter can be found here.
(On December 15, 2017) I wrote a blog post about the negative affect of sales tax redistribution on the City of Elmira and other local municipalities, found here. Notably, the City of Elmira recently proposed a 17% tax increase, both the Village and Town of Horseheads levied taxes in 2017 for the first time in more than 30 years, the Village of Van Etten voted (in December, 2017) to dissolve, and most other local municipalities face critical decisions of how to continue to cope with dwindling resources.
On the other hand, Chemung County Deputy Executive Mike Krusen argues that any detriment to the City of Elmira or other municipalities is offset by shared services arrangements the County has brought about in recent years. Specifically, at a December press conference where Elmira’s 2018 proposed budget was announced, Krusen stated that “the relief the county provided the city exceeds what the city lost in sales tax” because “the sales tax formula changes were exceeded by shared services and savings in health insurance costs.” A Star Gazette article describing the press conference is found here.
A report expected to be released in early 2018 from the Center for Governmental Research (“CGR”) will hopefully provide meaningful economic feedback and metrics by which to evaluate the impacts of both the 2013 sales tax redistribution plan and shared services arrangements developed during that time, helping local leaders and the public figure out how to ease some of the growing fiscal burden currently faced by many local municipalities. An article describing the process using CGR can be found here.
Graph from 2013 showing the plan’s estimated impact on Chemung County’s municipalities
The CGR report, released in January, 2018, included a list of concerns from municipal officials about the impact reduced sales tax revenue from the county has had on them since the plan was enacted:
When the report was presented to the community, it was accompanied by a letter from Deputy County Executive Mike Krusen to County Executive Tom Santulli and County Legislative Chairperson Donna Draxler.
The letter stated that despite the concerns in the CGR report set forth above, the county did not intend to make any changes to the sales tax plan until at least 2019 in order to allow for further studies of the current plan’s efficacy. Specifically, it stated:
“Since 2018 marks the last scheduled sales tax formula adjustment and the full impact of these modifications need further observation and monitoring it would not be prudent to consider any further adjustments to the County sales tax formula that is current law. There should be an extended period for additional review of impacts to municipal services, property taxes and reserve accounts to determine the full impact of formula adjustments.
This review function can best be accomplished through the development of a Council of Government structure that creates a financial review sub-committee. The review committee support function can be housed in the County Treasurer’s office. Such expanded responsibilities should be funded by the County with agreed upon financial metrics jointly developed by all municipalities and reported out by the year end after the proceeding years fiscal results have been evaluated. The first report would be available in the fall of 2018 covering results from 2017 and 2018 the last year of the formula adjustments would be reported in the fall of 2019.”
In an article published in the Star Gazette just after the CGR report and letter were released entitled “Chemung County sales tax shift working, Elmira still sinking“, Santulli stated:
“CGR took a snapshot of how we are doing today. The health of governments is the story, except the City of Elmira, Towns and villages have fund balances that are more than adequate. This is a positive and to their credit.”
In other words, as of the start of 2018, the position of the Chemung County Executive’s Office was clear: the sales tax plan is working, and changes – if any – will not be made until at least 2019.
Many municipal officials have been outspoken about the need to change the plan for years:
*In 2016, Town of Horseheads Supervisor Mike Edwards attributed the town’s new tax levy directly to the sales tax plan, as shown here.
*Southport Town Supervisor David Sheen, now a candidate for Chemung County Deputy County Executive, announced that plans for infrastructure projects and buildings are on hold, and Southport taxes will likely go up in coming years as a direct result of the way sales tax revenue is distributed, as shown here.
*The Town of Chemung laid off its entire highway department earlier this year, a move Chemung Town Supervisor George Richter stated was made necessary in part because of the lack of sales tax revenue, shown here.
*Elmira Mayor Dan Mandell along with Elmira Manager Mike Collins has been adamant that despite offsets from shared service agreements with the county, the sales tax plan has had a significant negative impact on the city’s finances, as shown here.
Similarly, several candidates for county office have echoed the call for an adjustment to the sales tax plan. Aside from my New Year’s Day post cited above, I have discussed this issue in detail in blog posts shown here, here, here, here, here, here, here and here and in an Op-Ed to the Star Gazette, shown here.
Jerome Emanuel, a candidate for Chemung County Executive, states on his website’s platform page that “…sales tax redistribution…has caused the local governments to levy higher taxes. The county did this to avoid raising county taxes”, shown here.
Likewise, Sheriff Chris Moss, also a candidate for Chemung County Executive, lists sales tax redistribution of sales tax as his top platform item, stating here that:
“The reallocation of county sales tax revenue that occurred over a 4 year period has had a detrimental effect on local municipalities, while the County has touted a 0% property tax increase over the past 13 years. I will restore the sales tax revenue formula to its original percentages for certain municipalities and partially restoration to others.
Municipalities that have paid Police or Fire Departments (City of Elmira, Village of Horseheads, Village of Elmira Heights and the Town of Elmira) will be restored to their original allocation immediately, sales tax reallocation for all other municipalities will be restored by 50% over a (4) year period.
One of the original cornerstones upon which county government was created was to establish law and order, Chemung County needs to adopt a policy whereupon local municipalities can effectively provide and or maintain these crucial services.”
Finally, Tony Pucci, a candidate for legislature in the First District, addressed the issue in a Star Gazette Op-Ed, shown here, and many other legislative candidates have made sales tax redistribution issue cornerstones of their campaigns.
Despite all of these concerns, the Chemung County’ Executive Office’s position on the matter has not appeared to change – until now.
Indeed, at an April 9, 2018, meeting of the legislature, Santulli offered extensive remarks about the positive fiscal health of Chemung County’s municipalities aside from the City of Elmira, and proposed a quasi-Council of Governments that would be inconsistent with a reallocation of sales tax revenue. Santulli’s full remakrs can be viewed below:
Then, on July 12, 2018, Krusen published an Op-Ed in the Star Gazette entitled “Facts about Chemung County’s Tax Plan” wherein he stated:
“The (sales tax) plan has been effective in that it has provided greater financial stability to the county and lowered excessive municipal fund balances. Our governments continue to work more cooperatively and have held the line on spending. Much credit goes to our local government leaders for answering the call to be even more resourceful with taxpayer monies.
While the decision has not pleased everyone, it is clear that this plan has increased cooperation and has created greater opportunity to work together and provide public services more efficiently. Now that is a plan we should all be able to get behind.”
The foregoing was laid out to explain why a recent development from the county is so interesting – even perplexing.
According to a Facebook post by Moss published yesterday and shown below, the Chemung County Executive’s Office is pushing for the legislature to vote in favor of a new sales tax plan in early September:
If the facts in Moss’ post are accurate, it begs many important questions:
*Why has the Chemung County Executive’s Office been so adamant that the current sales tax plan is working, if it now wants to make sudden changes that will remain in effect for five years?
*Why was this new approach laid out in a private partisan caucus following the legislature’s meeting rather than on the record so that the public could be involved in a discussion of an issue that has already evoked so much interest?
*Why would a vote as important as this happen days before the primary and just months before the general election?
*How would the new plan work in conjunction with recent proposal by the Chemung County Executive’s Office for a quasi-Council of Governments (COG), as the proposed COG plan calls for limits on reserves yet the new sales tax plan would allow those reserves to potentially grow?
*Why has the county decided against the approach it set forth in the letter accompanying the CGR report wherein it would wait until 2019 before making changes to the plan?
*Why does the new approach call for the municipalities (aside from the City of Elmira) to only have a 3.4% increase in their sales tax allocation? Have any new studies regarding sales tax distribution been done since the CGR report was completed that provide rationale for these numbers?
A far better plan would be for the Chemung County to extend the current sales tax plan out for at least six months, or even a year, to see who is elected in November and let them decide how to best address this matter. In the end, this new approach may prove to be a fine, workable solution. But, pushing something through right now is highly questionable given everything laid forth above.
Christina Sonsire is an attorney in Elmira and a candidate for Chemung County Legislature