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Comptroller warns about sales tax revenues

Comptroller warns about sales tax revenues

The state comptroller’s office is cautioning counties about relying too much on sales tax revenue in

The state comptroller’s office is cautioning counties about relying too much on sales tax revenue in a slowing economy.

The warning came even as the first half of the year showed local counties having radically different sales tax results.

Some large counties had significant growth, while Fulton County’s revenue declined and Montgomery County saw sales tax growth of less than 2 percent, according to figures from the state Department of Taxation and Finance.

State Comptroller Thomas P. DiNapoli said counties in the last decade have become more reliant on the local sales tax. It is now the largest source of revenue for many communities, bringing in more money than property taxes.

The local tax, on top of the 4 percent state sales tax, is 4 percent in every local county except Saratoga, where it is 3 percent. Those revenues are generally shared with towns, cities and villages, and are also a major source of funding for them.

Relying on sales tax raises concerns, DiNapoli said.

“Sales tax revenues are economically sensitive,” DiNapoli said in a report on statewide sales tax trends. “The economic downturn will likely have a significant impact on sales tax revenues.”

However, for the first six months of the year, Schenectady, Saratoga, and Rensselaer counties were up by double-digit percentages, and Albany County up by 9 percent, according to state numbers.

Albany County spokesman Kerri Battle said the county’s own figures show a slower growth rate, and that more than half the 2008 revenue came after April 17, when federal tax returns were due.

County officials think that revenue is tied to consumers spending the one-time federal government economic stimulus checks.

Albany County — home to Crossgates Mall, Colonie Center and other shopping destinations — receives the most sales tax income of any county in the region. Battle said it brought in $70.9 million for the first half of the year.

The comptroller’s office said comparisons from 2007 to 2008 need to note that Schenectady, Saratoga and Albany all imposed caps on the tax on gasoline in 2006 which they then repealed in 2007, causing a revenue increase.

DiNapoli’s office said increased revenue from sales tax on gasoline and other energy sources because of their higher prices may be providing a temporary boost.

“But the increased energy costs — including home heating — will likely force consumers to reprioritize other spending, and sales of automobiles and other durable goods that make up a large part of a county’s sales tax revenues will likely decline,” DiNapoli said.

The comptroller’s report noted that results vary by region, and the Mohawk Valley — including Montgomery and Fulton counties — had the weakest performance of any region in the first quarter.

The wide variances from county to county are hard to explain, said Saratoga County Administrator David A. Wickerham, the county budget officer.

Saratoga’s revenue was almost flat last year, but is growing at nearly double-digit percentage rate this year.

“The whole thing is pretty frightening,” Wickerham said. “We really don’t know what’s going on. We rely on the state to collect the money and provide it to us. If we don’t have an understanding what’s going on, I’m concerned.”

Wickerham said that the revenue should have grown last year, and the increased payments now may be because the state now recognizes that.

Corrections and adjustments are constantly made for past periods and affect comparisons, Saratoga County Treasurer Samuel J. Pitcheralle noted in a memo sent to local municipal treasurers and finance officers.

County-level officials generally said it’s too soon to begin making predictions about how much sales tax revenue to plan for in their 2009 budgets.

“I think the comptroller was right to caution the counties,” Wickerham said.

In Saratoga’s case, the summer tourism season along with Christmas means the second half of the year generates the most sales tax, Wickerham said.

DiNapoli said counties with a heavy reliance on the sales tax on gasoline sales may need to be especially cautious, if people start driving less due to high prices.

In the Capital Region, Montgomery County in 2007 received 15.9 percent of its sales tax from gasoline sales — a situation local officials link to having two state Thruway rest areas and a large truck stop in Fultonville. Only Genesee County has a greater reliance on fuel sales for its sales tax revenue.

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