New York Gov. Cuomo's Proposal for Sales Tax a Positive for State's Counties: Observers

New York Gov. Andrew Cuomo’s proposal to allow state counties to renew their sales tax rates without state legislature approval would be a financial positive for the counties, observers said.

Cuomo made the proposal as part of a fiscal 2014 budget he presented in late January. Currently, every two years state counties have to get approval from the state legislature to renew their sales tax rates.

“The current process creates unpredictability that makes it difficult for local officials to manage their budgets,” according to the governor’s budget brief.

Cuomo presented the elimination of the sales tax renewal requirement along with a new stable pension contribution option as two ways to “help municipal leaders meet the pressures of the prolonged economic downturn, constrained local revenues, and rising expenses,” according to the brief.

The New York State Association of Counties hailed the sales tax proposal as a means to improve “government efficiency and streamlin[e] state and local legislative operations.”

If passed, the proposal would be good for New York counties’ credit ratings, said a partner at Orrick, Herrington & Sutcliffe. It would allow counties to assure bond buyers that the counties will have adequate revenue levels over the long-term, he said.

The proposal is less likely to affect bonds’ structure, he said. This is because the state’s constitution requires all counties to pledge their full faith and credit for their bonds. The counties are legally barred from issuing simple sales tax revenue bonds, he said. As things stand, bond holders already have a claim on sales tax revenues, he said.

If the sales tax proposal passes, counties could hypothetically develop “double-barrel” bonds with an explicit claim against sales tax revenue, he said. These bonds would have the advantage of an explicit lien against sales tax revenues.

However, to issue these bonds counties would have to get state legislature approval.

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