Schenectady County and the city of Schenectady have reached a new eight-year deal on the distribution of county sales tax revenue, one that actually pleases some long-time critics of the amount of sales tax the county shares with its towns and villages.
For the first time, the agreement will include a guaranteed annual increase for the local municipalities — though not until the fourth year of the agreement. It guarantees the 2019 level of payments to the towns and villages in the first three years, despite the hard hit that county sales tax revenue has taken this year due to the COVID-19 pandemic.
“Generally speaking, from what I could tell, I think this is a huge win [for] the towns,” said Glenville Town Supervisor Chris Koetzle, a Republican who has been a persistent critic of past sales tax agreements. “This is a big vindication for the Glenville Republican team that has been advocating for a bigger share and for an escalator clause to be included in the agreement.”
The tentative agreement was made public after business hours Friday evening, and is being rushed to approval — the County Legislature will take it up at a meeting Oct. 5, and the Schenectady City Council has scheduled it for a committee discussion Monday night. The full council could vote on the agreement Sept. 28.
While the current tax distribution agreement, which also ran for eight years, expires on Nov. 30, there is pressure for action now because the county, the city and the towns are all in the process of preparing their 2021 municipal budgets — budgets universally expected to see revenues hammered down because of the ongoing economic damage from the pandemic.
The sales tax is one of the largest sources of revenue — if not the largest — for local governments. In 2019, more than $105 million in sales tax revenue was collected in Schenectady County, according to the state comptroller’s office — but that is expected to be off by 10 percent or more this year.
County officials portrayed the tentative agreement as a good deal for all — one that ensures they will get at least as much revenue as they did in 2019, despite what has happened in 2020. They also highlighted shared services agreements they said have the county pick up expenses municipalities would otherwise need to pay.
“Schenectady County’s responsible financial planning have enabled us to keep their revenue stable while sales tax revenues have decreased due to COVID-19 restrictions,” County Legislature Chairman Anthony Jasenski, D-Rotterdam, said in a press release announcing the agreement.
Schenectady City Attorney Andrew Koldin called the agreement a “win-win for the city and the county.” In recent years, the sales tax has been worth around $13 million annually to the city.
Negotiations on the new agreement took place entirely between the county and city. The city has a legal right to receive close to half of the sales tax generated within the city because it already had a three percent sales tax in place before the county established its countywide sales tax in 1988.
The sales tax is now four percent, with one-half percent of that money, 70 percent of which goes to the Schenectady County Metroplex Development Authority, and the other 30 percent to the county’s towns and villages.
The towns and villages — Glenville, Niskayuna, Rotterdam, Princetown and Duanesburg, and the villages of Scotia and Delanson — were not party to the negotiations, though the county agreed to share nearly $7.8 million a year with them.
“The towns and villages have no legal right to enact a sales tax and accordingly have to right to negotiate with the County on the sales tax,” County Attorney Christopher Gardner said in a legislative memo. “Even though the county has no legal duty to provide revenue to the Towns and Villages, the Towns and Villages received $7,772,064 during each year of the prior agreement.”
That money is split among the towns and villages based on their property values. Separately, the towns and villages receive $3.9 million annually through the Metroplex portion of the sales tax, also split among them.
Under the agreement, the city will continue to receive the same percentage of total sales tax as it does now. However, an annual payment from the county to the city for services provided to the county will increase from $630,000 each year to $1 million.
For the towns, the agreement promises the same amount they receive now for the next three years, with a guaranteed two percent increase each year in years four through eight.
“In light of this severe reduction in sales tax revenue this year, the guarantee to the Towns and Villages … is generous,’ Gardner wrote. “There is no cut in sales tax to the Towns and Villages despite the dramatic reduction in revenue.”
Koetzle, whose town has received roughly $2.7 million every year since 2003 without any increase in that time, said the inclusion of an escalator clause — even if it won’t take effect for four years — is “a huge win [for] the towns.”
“Is it completely fair? No. But I think in general we did a good job of getting them to understand the issues facing the town,” Koetzle said. “A lot [of] work was put into it over the last four years, and I think it paid off.”
In Niskayuna, town Councilwoman Denise Murphy McGraw, who leads the Town Board’s Democratic majority, said she was relieved the town wouldn’t see its sales tax revenue cut next year, and she praised the county’s Democratic leadership for providing the assistance. The town will be guaranteed about $3.3 million annually.
“Due to the economic crisis brought on by the pandemic, the Niskayuna Town Board was extremely concerned about the sales tax revenue forthcoming from Schenectady County,” Murphy McGraw said. “Some assumed it would be slashed. To learn our share will be maintained at previous levels seems more than fair.”
County officials said the county-provided shared services that help local governments save money and are also part of the agreement include central emergency dispatching, a countywide hazardous materials response team, a centralized vehicle repair facility, a solar energy consortium that will reduce municipal electric bills, an intermunicipal street crimes and drug crimes task force, the county library system, and an $18 million police and fire radio system upgrade.