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Economic challenges loom for Essex County in 2014

January 17, 2013

ELIZABETHTOWN - While most of the world is just getting acquainted with 2013, Essex County lawmakers are already thinking about 2014 and the big financial challenges it may bring.

The Essex County Board of Supervisors wrapped up a contentious budget season in December, adopting a 2013 spending plan that increased the tax levy by 1.1 percent, thus meeting the state's property tax cap. Early versions of the budget included double-digit tax increases that county Manager Dan Palmer said would balance the budget and preserve a dwindling fund balance reserve, but the board rejected his proposal, prompting him to announce his retirement out of frustration with the budget process.

But Palmer didn't retire. At the urging of several supervisors, he decided to remain on the job, and the board voted to reappoint him late last month.

Now county leaders say they're prepared to work together as talks on the 2014 budget are expected to begin in the weeks ahead.

Goodbye, hello

Earlier in the fall, Palmer and other county officials put together a three-year budget plan that would have increased the tax levy by 26 percent this year, 15 percent in 2014 and 3 percent in 2015. The plan aimed to balance the county's budget without depleting the fund balance, which Palmer often compares to a savings account.

But supervisors - including Jay's Randy Douglas, the board's chairman - weren't comfortable adopting a 26 percent tax hike, even though the county's property tax rate would have remained among the lowest in northern New York. When Palmer announced his retirement in early December, he said he couldn't support the continued use of fund balance to keep the tax levy artificially low.

Speaking this week, Palmer said supervisors like North Elba's Roby Politi asked him to reconsider his decision to retire.

Douglas said he didn't support Palmer's reappointment.

"I thought, to be honest with you, the county's integrity was at stake," Douglas said. "He had decided to leave, and I think we're all replaceable."

Fiscal concerns

2013 begins much like 2012 did: with Palmer in as county manager and Douglas likely to retain his post as chairman. But Douglas said this year begins with a new sense of urgency when it comes to preparing the next budget.

In past years, the board has spent the first few months of the year turning its attention to other matters. In early 2012, the focus was on the future of the Horace Nye Nursing Home, a synthetic drug concern and lobbying the state for relief from unfunded mandates. In contrast, Douglas said he plans to start 2013 by launching regular meetings with department heads in order to get a jump-start on the budget.

Speaking at a county board meeting in December, Treasurer Mike Diskin told supervisors he was concerned about the quality and quantity of services the county will be able to provide to residents going forward. He said at the time he was worried about the county's ability to meet future payroll and accounts-payable requirements.

"It appears that there will be a hole of nearly $8 million going into the budget time next year," Diskin said. Diskin told the News this week that he doesn't foresee any problems with cash flow this year, but if the county isn't careful about managing its finances, such problems could arise in 2014.

The budget also includes projected revenues from an upcoming property tax sale.

Douglas said he's confident the money will come through.

Douglas said the county is close to signing a contract of sale for the nursing home, and he thinks the county will recoup a significant amount of money through the tax sale.

Palmer said he's not worried about meeting revenue projections - he's concerned about expenses outpacing revenues. He said his biggest concern for the future is maintaining the county's fund balance.

"If you have a certain amount of debt - bills - within your own personal budget, and you were paying for a large percentage of those bills with your savings account, and if your savings account goes away - in other words if you deplete your savings account - then you're going to have trouble paying your bills," Palmer said. "And we're really no different than that."

Tax cap reform?

One of the big factors behind the county board's rejection of Palmer's proposal to increase taxes by double digits this year and next was the state's property tax cap. Many supervisors felt an obligation to adopt a budget that fell within the state's calculated levy limit.

Asked if the tax cap, which has only be in effect for two years, needs reform, Palmer and Douglas both said yes. Palmer said that to a certain extent, the tax cap has caused lawmakers to make budget decisions that are only temporary fixes.

"If you look at what's going on - and I'm not just talking about county governments, I'm talking about both schools and towns - they're essentially using their savings accounts, they're using whatever available fund balance they've got, to get back to that tax cap," Palmer said. "Ultimately, that's going to explode on everybody."

Palmer said the alternative to using fund balance is to lay off more workers, which results in fewer services.

"There's certain services that we are absolutely obligated to provide, and if we fail to do so, there's some consequences to be paid for that," he said.

Palmer added that the tax cap law doesn't recognize the actual amount of property taxes paid; it just caps the increase percentage. Essex County's tax rate of $2.47 per $1,000 of assessed property value is among the lowest in the region.

State Sen. Betty Little said the tax cap has caused problems for counties like Essex that have low tax rates and small fund balances. She said state lawmakers are listening to those concerns, but she added that taxpayers wanted a control on rising taxes.

"It is what the people wanted, and it is what really had to happen to keep New York state from being number one in taxes," Little said. "That is a deterrent for people, companies, to come here when they're bringing employees or moving people into the highest taxed state in the country."

Sales tax increase?

Essex County has been trying to increase its sales tax to 4 percent - the same as the state's - for years. The sales tax is currently 3.75 percent, and the additional quarter of a percent could bring in an additional $1.6 million annually to help plug the deficit, currently projected at $8 million, according to Diskin.

But Gov. Andrew Cuomo has sent a clear message to lawmakers at every level that tax increases and fee hikes won't gain any traction in Albany, and Essex County needs state approval if it wants to increase the sales tax.

"I think right now, under the governor's leadership, we are trying to keep New York from being that designated highest taxed state in the country," Little said. "And if you continue to allow all of these increases of taxes, not just in Essex County but in every county throughout the state, they add to the tax burden."

The New York State Association of Counties has been advocating for legislation that would let counties set their sales tax rate up to 4 percent. Anything above 4 percent would need to go through the state Legislature. Douglas said he supports that proposal.

Contact Chris Morris at 891-2600 ext. 25 or cmorris@



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