Will this deal make Montgomery County whole from all that it’s owed by the city of Amsterdam? Definitely not.
Did Amsterdam catch a break for its financial mismanagement and budgetary incompetence? For sure.
Is this the deal they should have made to resolve the $1.2 million debt owed by Amsterdam to the county? Absolutely.
After months of legal wrangling and negotiation, the Amsterdam City Council this week approved a plan to repay Montgomery County the $1.2 million it owes in county taxes that the city collected but never turned over dating back years.
Under the repayment agreement, the county will collect its debt by reducing the amount it returns to the city in annual sales tax revenue each year for the next 20 years. The county will take out 1% interest in top of the balance owed.
There are certainly other ways this could have been handled. The county could have played hardball and demanded the city repay the money owed up front.
The only way the state’s most financially stressed city could have accomplished that would have been by adding to the amount of money it borrowed from the state under a recent deficit finance bond.
While the county would have recovered its money immediately, the city would have added to its debt load, at a slightly higher interest rate. In the long-term, that would have hurt the city, and by extension, the county.
So how does this deal benefit county taxpayers?
For starters, it ensures the county will get its money back, albeit over the next two decades. But still, it’s guaranteed.
The county won’t have to rely on Amsterdam to come up with the payment each year from its budget.
By being at the top of the sales tax food chain, the county is able to take its repayment money first, before it turns over any sales tax revenue to the city.
Counting on Amsterdam to have $74,000 lying around in its budget each year for the next 20 is a risky proposition. This deal removes that risk, ensuring the county gets what it’s owed each year.
The city also owes the county about $514,000 in unpaid taxes. But because of poor record-keeping, the chances of the county recovering that money through litigation are slim. Best let it go.
The deal represents cooperation and compromise not often seen among governments.
Amsterdam is a vital part of Montgomery County’s history and economy, and it’s in the best interests of the county and all the communities in it that Amsterdam is on sound financial footing.
This deal will ensure the county is repaid without excessively burdening Amsterdam any more than necessary.
Kudos to officials on both sides for finding a fair way to put this matter to rest.