Sales tax formula hurts Orleans County’s 4 villages

By Tom Rivers, Editor Posted 26 December 2013 at 12:00 am

County uses formula to direct sales tax away from municipalities that need it most

Photos by Tom Rivers

Downtown Medina may be a center for commerce, collecting lots of sales tax, but little of that comes back to Medina or any of the villages that are population and business centers.

Orleans County’s four villages, which are desperately in need of revenue, won’t be getting any help from the county with added sales tax. In fact, the county’s sales tax formula will take money away from the villages next year.

That means the villages will likely have to hike property taxes or find more ways to cut costs or reduce services.

The county has budgeted to take in nearly $15 million in sales tax next year. It shares $1,366,671 with the 10 towns and four villages. The county keeps nearly $14 million for itself or about 92 percent of the total haul.

The county has frozen the village and town share since 2001. Since that time the sales tax has soared due to the rising gas prices and other cost of living increases, as well as an invasion of chain stores, including a Walmart Supercenter in Albion.

The county won’t give more to the towns and villages, saying the county needs the money for mandated programs from the state, such as Medicaid. The county will often gripe about the state not increasing reimbursements, but the county hasn’t increased the share to the villages and towns for 13 years now.

When the villages and town make some noise about the unfairness of the frozen rate, the county typically responds by threatening to keep all of the sales tax, cutting the villages and towns entirely. Rather than have an open dialogue about the issue, the county is a bully when it comes to sales tax.

Other counties share far more with their local municipalities. Genesee, for example, does a 50-50 split. That’s the main reason why their town and village tax rates are so much lower, and so much more attractive to businesses and families. Many of the towns don’t collect any property taxes because of all the sales tax they receive based on the generous formula.

Genesee and Orleans have almost the same county tax rates. Genesee will tax its residents $10.04 per $1,000 of assessed property while it’s a $10.11-rate in Orleans in 2014. The Orleans County tax rate isn’t out of line compared to most counties.

It’s our village tax rates, which range from about $14 in Holley to nearly $17 in Albion and Medina, that are far out of whack to most other villages in the state. Lyndonville’s rate at $10.43 is less because it doesn’t have a police department. (The village does contract for police protection.)

The County Legislature meets in the County Clerks Building, another tax exempt property in the village of Albion. The county unfairly uses taxable value to determine sales tax shares to villages and towns.

It would be easy to blame the local village officials for the high tax rates, but it’s really the fault of the county for sharing so little of the sales tax.

And it keeps getting worse for the villages. The county bases the villages’ revenue share based on taxable value. The villages with their shrinking assessments continue to see their amount go down while the towns get more.

In 2013, the four villages collectively received $404,666 in sales tax, which is a paltry amount for all of the services the villages provide with street, police, cemetery, water and sewer duties. The village amount is less than 3 percent of the entire sales tax that comes into the county. But the villages are doing far more than 3 percent of the work by local governments.

The new distribution for 2014, approved Monday by Legislature, cuts the villages down to $400,681. Albion assumes most of that loss with its share down from $180,457 to $176,423.

This formula makes no sense. The revenue share should be based solely on population because people spend money, generating sales tax. To tie it to assessed value isn’t fair, especially for the village of Albion which has so much exempt property with churches and county government buildings.

If the county is adamant it will use property values for the formula, the exempt properties should be assigned values that factor into the formula. The County Courthouse, for example, doesn’t give the village of Albion a boost in the formula. But if it’s value, let’s say $40 million, was factored in the equation, the village would do far better with the formula.

Add up all the churches and municipal buildings, and suddenly the villages are worth a lot more and should get more.

There is a bias against the villages by the County Legislature. The Legislature has historically been made up of legislators who previously served on Town Boards. Few village mayors or trustees have served on the Legislature.

The legislators bring an anti-village mentality that they pick up at the town level. For the first time in several years, there will be legislator who actually lives in a village on the Legislature.

Fred Miller, an Albion resident and former village trustee, said he wants to be a voice for the villages. He will be outnumbered 6 to 1 by other legislators with a “town” mentality. I’m not optimistic fairness will prevail.

If the county wanted to throw the villages and towns a tiny life-line, the Legislature wouldn’t cap their share. The county should establish a 90-10 revenue sharing split to start with, rather than the current 92 to 8 percent. That 2 percent difference would sprinkle another $300,000 to the towns and villages, with some of that going to the depleted village coffers.

If the county made that move it would raise the county tax rates by 18 cents. If the villages and towns used some of that small increase for public improvements, it could draw more dollars into the county, leading to more sales tax with the county getting 9 out of every 10 dollars. Ultimately, the county wouldn’t be losing sales tax money by giving the towns and villages a little more.

If the sales tax wasn’t capped, itwould provide incentive for the villages and towns to invest in themselves with downtown, parks and other community development improvement projects.

Right now, the villages and towns pay all the costs for these projects. If a canal project, for example, brings in tourists and spending in the community, that added sales tax all goes in the county coffers.

I propose the county “freeze” its share the next 13 years and give any of the increase to the towns and villages, with the share among them to be divvied based on population. After 13 years, the county could start to receive more, but only if the towns and villages are up to 25 percent of the total haul.

The villages are at a crisis point. Medina is seriously looking at dissolving and having the towns of Shelby and Ridgeway step in and assume the village functions.

If the villages don’t get more revenue, I think you’ll see some eliminate police and other services. The county, in that scenario, would be expected to add deputies to fill the gap.

All of this could be avoided if the county would amend its sales tax formula, and be a partner with the villages as they fight for survival.