‘Perfect storm’ nudges Saratoga County property tax up
Several factors come together to cut ‘rainy day fund’ by millions
SARATOGA COUNTY For a quarter century, if you asked a typical Saratoga County official to describe why people should move here, you’d hear something about the quality of life, the arts and culture, and the scenic beauty.
They’d almost certainly also mention “the lowest taxes in New York state.”
That last part might still be true, but property tax rates have increased for two years in a row, which hasn’t happened in at least 30 years.
The $2.15 per $1,000 average property tax rate in 2011 was bumped up 3.5 percent in 2012, and another 1.5 percent this year, as residents are learning as their annual tax bills come due. The rate is now $2.29 — still far lower than other local counties, and rising only after a string of years in which rates were cut.
“Why don’t you point out that eight years ago the property tax rate was $2.50 per $1,000?” asked Board of Supervisors Chairman Alan R. Grattidge, R-Charlton.
The property tax increases are a symptom of the strains the county budget has seen in recent years, including the depletion of the “rainy day fund” intended to protect county finances from the year-to-year bumps in the road.
“It was just a combination of all the factors. It was what they call the perfect storm,” said Edinburg Supervisor Jean Raymond, the county’s most-senior elected official with 25 years on the Board of Supervisors.
Among measures taken in the last two years: the county’s 1,300-person work force has been under a hiring freeze, and the county has scaled back on annual road and bridge repair projects and equipment purchases. Most controversially, the board is looking at selling the county nursing home in Ballston Spa and the unused county landfill in Northumberland.
The budget surplus — that “rainy day fund” — ran in the range of $30 million for decades, but is now dangerously depleted as money has been drawn down to cover deficits.
Another factor is that in 2011, local state legislators refused to introduce a bill supervisors sought seeking to increase the sales tax from 7 percent to 8 percent as an alternative to hiking property taxes and making spending cuts.
So how did the county end up on such rocky shoals?
Given the impact of the Great Recession and a decade-plus record of costs exceeding revenue at the Maplewood Manor nursing home, the crisis in the county’s finances may have been inevitable, despite the county’s 75-year population growth cycle bringing in new taxpaying residents every year.
The long period of property tax stability dates from 1982, the year a 3 percent county sales tax took effect. The county was one of the last in the state to seek its own sales tax, and the debate was divisive, with business leaders opposing it, even when county officials said the alternatives to new sales tax revenue included service cuts like ending the sheriff’s road patrol.
Under the traditions at the time, once supervisors approved the controversial measure the state Legislature and governor rubber-stamped the new tax as a matter of “home rule.”
The effect of the new revenue collected from a sales tax on everything from clothing to restaurant meals was immediate. In 1983, the county’s average tax rate was cut from $7.76 per $1,000 to just over $5 per $1,000, and by 1986 it had been cut to below $3 per $1,000.
The sales tax was bringing in so much new revenue that the county in the 1980s and 1990s was able to spend $8 million on a new jail, $5 million on a new public works complex and $10 million on a landfill that never opened, paying cash for each of them and not raising property taxes.
It wasn’t that county spending and the amount collected by taxes weren’t growing each year. In 1983, the county budget totaled $59 million, and the tax levy was $12 million.
Thirty years later, the current budget totals $300 million in spending, and $52 million is being raised by property taxes.
But the tax rate could remain the same because new homes and businesses, along with the appreciation of existing property, was expanding the county’s tax base every year. Today, the tax base totals $22.6 billion.
County officials would complain regularly about the costs imposed by the state without reimbursement, from Medicaid to payments to community colleges that educate county residents, but taxes didn’t need to go up to cover those costs.
“There was something like 28 years sales tax revenue increased year over year, and 28 years in a row the tax base increased year over year,” Grattidge said.
That’s how things went along until the preparation of the 2011 budget, in late 2010.
The sales tax projection for 2011 was overestimated by $7 million or $8 million. The approved 2011 budget anticipated sales tax revenue would grow post-recession about 7 percent — and the real figure turned out to be closer to 2 percent.
“At the same time, for the first time in 28 years, the tax base did not grow,” Grattidge said.
Also at the same time, an early retirement incentive program the county offered in 2010 brought with it a one-time unbudgeted bill of about $3.5 million.
“Everyone says about early retirement and how much you save, but initially there’s a one-time bill,” Raymond said. “That wasn’t budgeted for.”
Meanwhile, the revenue shortfall at Maplewood Manor has been at least $9 million each year since 2008, according to the county administrator’s office — and those losses were covered from the county general fund.
“We went from a $20 million fund balance to a $5 million fund balance in just one year,” Grattidge said.
In addition, public employee pension contribution mandates by the state have grown by double digits each of the last three years, and health care insurance premiums have risen from $15 million to $25 million in the last eight years.
With the plans to sell Maplewood Manor and also sell or lease the landfill to a private operator who will pay the county, officials believe things are stabilizing.
As of Jan. 1, the county’s remaining surplus was about $7 million. The guidelines set by the state Comptroller’s Office would recommend a county with a budget the size of Saratoga’s have a surplus in the $12 million to $24 million range.
The goal now is to begin to build the surplus again, against the next time the economy hits a bump in the road.
The changes being planned for 2013 “are decisive and needed steps that will eliminate the structural deficit that has plagued Saratoga County and will allow us to meet the fiscal challenges that all counties will continue to face in the coming years,” County Administrator Spencer Hellwig said in his October budget message.
There’s optimism that the tax rate would rise in 2014, but no guarantees.
“My goal is that we won’t need to continue to increase property taxes, but some of these programs are out of our control,” said Grattidge.