New York counties' increasing reliance on sales tax collections makes them vulnerable as the economy falters, according to a report yesterday by the state comptroller's office.
"The economic downturn will likely have a significant impact on sales tax revenues," Comptroller Thomas DiNapoli said in a press release. "Counties - especially those that rely heavily on the sales tax - should forecast revenues conservatively. The economic roller-coaster ride is far from over, and if counties want to avoid fiscal calamity, they should recognize the impact fluctuations in sales tax revenues can have on their budgets."
Language in the report went further, cautioning counties to take into account the "inevitable decline" in sales tax growth.
Growth in sales tax collections is uneven across the state, ranging from a 19.8% increase in PutnamCounty and a decrease of 13.1% in ChautauquaCounty in the first quarter of 2008 compared to the same period last year. Overall growth in the state during this time period - not including the five counties of New York City, which were not part of the report - was 4.8%.
The level of growth was higher than might be expected given the national downturn in the economy and considering that the increase from fiscal 2006 to fiscal 2007 was 3.24%, according to the comptroller's report. It said the growth can be explained in part by local sales tax increases in some counties and a weak dollar that brought Canadians into counties along the border to go shopping.
New York counties' reliance on sales taxes has increased over the past 10 years to the point that those revenues are now larger than property tax revenues, the report said. Citing projections from the state division of budget, it said sales tax growth from fiscal 2007 to fiscal 2008 is expected to increase by 2.9%.
Sales taxes have risen to 26.9% of total county revenue in 2006 from 21.3% in 1996. State law prohibits local sales taxes that are greater than 3%. However, all but six of the state's 57 counties, not including New York City, have exceptions that permit higher rates.