QUEENSBURY — To defend the town’s slight tax decrease for next year, Supervisor John Strough this week gave a presentation warning that the town could run out of money by 2022.
Using a spreadsheet, he projected the town’s expenses and revenues through 2022. But he included a 2 percent decrease in sales tax from 2020 to 2022.
The trouble began when he based the reduction on inaccurate sales tax figures.
He cited the budgeted amount of sales tax for 2018, which was far less than the actual amount received.
He then projected forward from that incorrect number. His final estimate for 2022 called for $8.28 million in sales tax revenue, after three years at what he called a 2 percent decrease each year.
But his numbers are far off. Using the actual numbers for 2017 and the projected 2018 figure, for which the town has received all but the last quarter’s payment, Strough’s projection is actually calling for an 11.7 percent cut.
Warren County Treasurer Mike Swan sees no indication of such a drastic decrease in sales tax revenue.
Even in the 2009 recession, sales tax was only down about 9 percent, and it rose quickly afterward. From 2009 to January 2017, sales tax revenue rose 17.5 percent.
Swan expects sales tax revenue to keep increasing.
“On our multi-year plan, we’re predicting a 1.5 percent increase every year for the next five years,” Swan said.
He said he has not seen any indications that a decrease is coming. In fact, the second quarter revenue this year was up 6.8 percent for Queensbury, and the third-quarter payment was up 5.8 percent.
If the total revenue for the year is up 5 percent, as Swan projects, Queensbury is estimated to receive $9.38 million this year.
Strough warned that if the town’s sales tax revenue fell to $8.28 million, the town would run out of savings and have severe cash-flow problems. That means the town would have trouble paying its monthly bills, including payroll.
“Not where you want to be. Not a healthy fiscal condition,” Strough said.
He said economic downturns are “inevitable” and urged the Town Board to prepare.
“We want to put Queensbury in a healthy position,” he said.
But Swan said there’s no reason to believe sales tax revenue will fall so abruptly.
Strough’s presentation suggests that Strough himself doesn’t think the revenue will fall as much as he projects. His presentation also called for a new highway garage that would cost upward of $4 million.
The town has already set aside $2.3 million for the garage, but he projected the need for a $2 million bond to cover the full cost. That bond, he estimated, would cost the town $200,000 a year. It wasn’t clear what he based that figure on, but Washington County is scheduled to pay about $200,000 a year for a $2.74 million loan, which suggests Strough is assuming that interest rates rise significantly in the next year or that the garage will require a bond of more than $2 million.
He said his “dream garage” would cost $5.5 million but that town officials were trying to pare down the plan to $3 million.
But if he thinks the town will run out of money in a few years, a new highway garage seems unlikely. He included it in his cost projection anyway.
After the presentation Monday, he and resident Travis Whitehead sparred over whether the town needs to tax residents at its 2019 tax rate of $0.521 per $1,000 of assessed property. That’s a 3.34 percent cut from the 2018 tax rate.
Strough argued that anything more than the 3.34 percent cut would be irresponsible because of his predicted sales tax revenue collapse. The Town Board approved the cut Monday and unanimously approved the 2019 budget.
Whitehead noted that the town has recently finished every year with more than $1 million in surplus. According to town audits, that’s because sales tax revenue is higher than budgeted every year and expenses are less than budgeted.
“Clearly the budget has been too high,” Whitehead said.
He urged the board to amend the budget and put in the correct sales tax figures. The budget estimates that the town will get $8.6 million this year, when it is estimated to get $9.38 million. A 2 percent increase next year would be $9.57 million, but Whitehead suggested the board simply budget $9.3 million — the same as what the town is expected to get this year. That would be a $500,000 increase in the budgeted amount.
Then, instead of collecting $2 million in taxes, the town could collect $1.5 million. That would reduce the tax rate by 35 percent. But based on Swan’s expectations for sales tax, the town would still get $140,000 more than budgeted.
“Let’s just ease off the gas a bit,” Whitehead said, calling his proposal “very conservative.”
Strough said that could leave the town in ruin. He noted the town gets its sales tax revenue four times a year, with the last payment being made in January.
“We have $1.5 million in bills in January. And you need cash. You don’t have it on hand to pay your bills,” he said.
According to his presentation, about $2 million of the town’s unrestricted fund balance is receivables — money the town knows it will get but hasn’t received yet. Another $2.7 million is in cash, according to his presentation.
“If you make a drastic cut in taxes and then you have a fiscal problem ... then you’d have to raise taxes and that will put you over the tax cap,” Strough said.
Whitehead had the last word.
“You are not in bad shape,” he said.