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Posted on: March 15, 2022

City’s Share of County Sales Tax to Increase Under New 10-Year Agreement

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The cities of Poughkeepsie and Beacon and Dutchess County have reached a new 10-year agreement governing the distribution of sales tax by the county to cities and towns. 

The agreement was recently approved by the Beacon City Council and was approved by the Poughkeepsie Common Council on Monday, March 21. The new agreement is still subject to approval by the Dutchess County Legislature and ratification by the Office of the New York State Comptroller.  The agreement will replace an expiring agreement which took effect in 2013.

Sales Tax PowerPoint Presentation to Common Council, March 14, 2022

Mayor Rob Rolison said, “This agreement recognizes the symbiotic relationship our local governments have with Dutchess County, and it provides for the equitable and fair distribution of sales tax revenue between us all. It also balances a number of issues critical to the City of Poughkeepsie, including the fact that we are the seat of County government and have been designated by the Office of the State Comptroller as one of the most fiscally stressed municipalities in the State.” 

The Mayor continued, “I want to thank County Executive Marc Molinaro and Beacon Mayor Lee Kyriacou for their partnership and collaboration. What we have achieved will have a positive impact Countywide. The agreement is also an important component of the Deficit Reduction Plan the city implemented back in 2017. With the approval of this agreement by the legislative bodies, we will enter the final phase of our multi-year plan to retire the city’s fund balance deficit – a deficit that reached as much as $13.2 million as of the end of 2015, and which currently stands at about $8 million.”

County Executive Marc Molinaro said, “I am grateful we were able to get together with the cities and reach this agreement, one that will benefit the cities, towns, villages and county. Providing the City of Poughkeepsie with immediate deficit reduction aid also is imperative, and replacing an expiring agreement provided a unique opportunity for the county to offer assistance. The city has worked diligently to pull itself out of a substantial deficit, and a financially stronger city makes for a stronger Dutchess County as well. We look forward to seeing final approval; the agreement will be a stabilizing force for the decade ahead.”

City officials noted that the new agreement will increase sales tax revenue to the city by approximately $2.4 million beginning in 2023. The agreement provides an immediate $3 million payment and includes increases in percentage distributions to the cities over the next 10 years.

City Administrator Marc Nelson said, “The agreement is structured to have an immediate impact on the finances of the city. Our resolve to eradicate the city’s fund balance deficit is key to reinstating the City of Poughkeepsie’s investment grade bond rating. Moving the city above that line and continuing to improve our credit rating in coming years will save city taxpayers millions of dollars in future debt service costs. The central themes of deficit reduction and an improving bond rating are foundational to good governance. Our expectation is that inflationary and supply-chain pressures will continue for the foreseeable future, pushing interest rates higher. In that environment, the impact of a sub-prime bond rating would have an even greater negative impact on the city than it has while interest rates have been at historic lows.” 

City Finance Commissioner Dr. Brian Martinez said, “Historically, sales tax revenues are one fifth or more of the city’s General Fund revenues, making these negotiations extremely important to the future of the City of Poughkeepsie. Based on changes in consumer behavior due to internet sales, it’s not unreasonable to expect continued growth in sales tax revenues during the coming years. In the first year of the new agreement, the City of Poughkeepsie will receive an increase of $2.4 million. The city’s 2023 share is 5.41 percent. This is a 20 percent increase compared to our current 4.5 percent share. The new agreement guarantees that percentage increases in gross sales taxes from the state will be equally applied to the cities, towns and county. So a 4 percent increase in next year’s revenue from the state would equate to hundreds of thousands in new revenue in every year where there is growth in sales tax revenues.”

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