Facing an estimated $40 million budget gap in 2013, Dutchess County Executive Marc Molinaro has proposed a 15 percent cut in county sales tax revenues that go to the cities, towns and villages. The cut will be the result of a proposed $25 million hard cap in total sales tax revenue being shared — a cap that will not increase in the future.
For Red Hook, Rhinebeck and Milan, that translates into fewer dollars for already-tight budgets, which has local officials worried.
According to Molinaro, the county collected approximately $150 million in sales tax last year, about $30 million of which went to the cities, towns and villages. Sales tax revenues have been slow to rebound following the 2008 financial crisis and the recession.
Currently, the sales tax monies shared by the county are distributed under an agreement with the two cities, 20 towns and eight villages of Dutchess County. That split would not change, what will change is the amount being shared.
The agreement, negotiated in the early 1980’s when the county sales tax was instituted and replaced a 1 percent sales tax in the city of Poughkeepsie, greatly benefits the cities of Poughkeepsie and Beacon who gave up their right to institute their own sales tax in exchange for a greater share of the county tax.
“Over the course of time, [Poughkeepsie] went from collecting about what they would have gotten if they had their own sales tax, to today, collecting about eight times what they would get if they had their own sales tax,” said Molinaro. “They would collect about $1.5 million [with their own sales tax]… they [now] get about $11 million.”
As a result, the towns and villages receive a much smaller share than what they contribute to the sales tax pool.