Life on the Board III - Taxes

Time for taxes (and just scratching the surface) -

From our constituents, we hear more about taxes than almost anything. Sometimes we'll get notes and calls about high-visibility issues, but these come and go. Taxes are forever.

It's my personal opinion that complaining about taxes is one of those tropes that people use as social cartilage – a common stereotype, based on pretty much nothing, that you talk about when you can't thing of anything else, like how bad institutional food is, or how politicians are all crooks, how busy you are, or how we really needed that rain.

So the first thing to do when confronted by someone unhappy about how high taxes are is to challenge them to educate themselves. Ask them to go back to their tax bills – municipal and school – add the totals, and then divide the County tax by the total. That'll show the percentage of their tax burden that is County tax. I did that for my bill, here in center city Oneonta, and the County share came to 11%. I assume it's a pretty typical bill. If the county raised property taxes 2% for 2020, it would cost me about $10 more.

Another strategy with someone unhappy about taxes is to ask where they think Otsego County falls, in regard to tax rate, compared with all the other counties in NYS. I've included that comparison in the attachment to this e-mail

The truth is, Otsego County has the lowest tax rate among all Counties in New York State.

There are actually two ways to figure tax rates, as shown on the attached spreadsheet. Otsego County is the lowest in the state on one measure, and third lowest on the other.

One of the reasons that this is so is that Otsego County is unusual in a particular way: whereas most Counties (I think I'm right on this) collect more property taxes than sales taxes (the two major revenue sources for Counties), Otsego County, with our robust tourist economy, collects three time more in sales tax than property tax. This has a very significant impact on our fiscal functioning. All County Board members are secretly rooting for higher gasoline prices, so balancing the budget will be easier (just to be clear in this litigious society, this is a joke)..

Another piece of the puzzle: the NYS 2% tax cap. NYS provides incentives for Counties to keep their annual property tax increase below 2%, and there are penalties for exceeding it. Actually, up until this year, it's been a slightly different figure (but all under 2%) for each County (based on inflation and other things – but this is getting too deep into the weeds). This year, for the first time in years, Otsego County can go all the way to a 2% increase for 2020.

So – let's see what a 2% increase in the tax levy gives us for the 2020 budget. 2018's tax levy (don't have 2019's in front of me) was $11,407,756. Two percent of that is $228,155. That seems like a lot of money, but that won't even pay for the contractual raises for our Union employees. So although the tax hike each year gets a lot of play in the media, it's a very small part of constructing the Budget.

Going back to our unusual sales/property tax ratio, when property taxes are (relatively) low, then 2% of a low number is a low number.  Counties with a higher tax rate get a lot more benefit from a 2% rate hike.  Also - and this is grist for another mill - our lower taxes are partially a result of some ruthless cost-cutting during the recession that cut some departments in half (Health, Highway).  We are very slowly (the only way we can do it) increasing staffing in some areas, but there are departments that just aren't getting their work done because of low staff levels.

And add to that: we probably won't do the full 2% tax increase for 2020, because there is a political price to pay for a headline that reads “County Board Applies Maximum Tax Hike Possible.” It's much better to see “County Board Restricts Tax Hike to Below Maximum” or, even better, as we did I think two years ago, “No Tax Increase for Otsego County Property Owners.”(Remember, at 2% we're talking about ten bucks for the average property owner. But headlines can make policy.).

So that's all on taxes right now. The attachment shows the County's revenue and expense pie charts in the first two slides, and the fifth slide is the state-wide comparison of County tax rates. The rest are interesting data-sets, which you may find useful or not.

Cheers til next time -

PS: The Budget is an extremely complicated document, except for the line items for each Department, and I am avoiding using numbers for the most part and being general rather than specific because it's never that simple and I have never understood all of the accounting-level ins and outs. I've attached a copy of the 2018 budget. Good luck!

PPS:  I couldn't figure out how to include the documents mentioned in this blog post.  Please let me know if you'd like copies and I'll get them to you right away.