January 27, 2022

City, county tussle over tax collection fee

The city of Cortland imposed a fee on the county earlier this year for collecting county property taxes, which cost the county $123,000. In return, the county may collect that fee from city taxpayers to pay the city charge.

A public hearing tonight before the Cortland County Legislature meeting will seek comment on whether to create a local law to list the fee on the annual county/city property tax bills for city taxpayers. Legislators will then consider adopting the law.

“It’s to be transparent with what’s happening — if it passes,” said Karen Spafford, the director of county Real Property Tax Services.

The thought behind this law comes as the county is short around $123,000 in property taxes for this year from the city after the city implemented and told the county about the fee too late for the tax office to add it to this year’s bills.

The law was approved Oct. 15, 5-1, to go to the Legislature by the Budget and Finance Committee meeting. Legislator Ron Van Dee (D-Cortland) vote no and Linda Jones (R-Homer) was absent.

“We didn’t know about this fee until after the fact,” Spafford said, noting all the towns collect the county tax, too, and don’t charge a processing fee.

Calculations for tax bills are done once the county’s budget is approved and the levy is determined. Spafford then goes through the calculation process to determine what net levy each municipality must pay.

In January, the city decided to collect a 1.5% processing fee for the county tax payments and took that fee off the city’s share of the levy — leaving the county at a loss.

To make up the loss, the county may recover the $123,000 by adding it to the city’s share of the levy for 2020, raising the property tax bills for city taxpayers. Further, the 1.5% fee — if passed to- night would show up as a separate line on the city’s property tax bills for the
2020 budget and future years.

“I don’t know how they thought we were going to recover the shortage,” Spafford said.

Mayor Brian Tobin said the city’s decision to charge a 1.5% collection fee was “as a result of the redistribution of sales tax moneys.”

These changes come after the county entered a 10-year sales tax agreement from Jan. 1 to Dec. 21, 2028. The county takes $1.5 million off the top each year in sales tax revenue, keeps 54% of the remainder and sends 17.75% to the city and 28.25% to the other municipalities.

If the city and county continues the agreement for the final five years, the county would continue to take $1.5 million off the top. The county then would get 55% of the remaining sales tax distribution, the city 17.38% and towns and villages 27.62%.

In the previous agreement, the county kept $300,000 a year off the top for its emergency communication system, took 53.5% of the sales tax distribution, when the city got 17.62% and the towns and villages got 28.89%.

After a review, city officials determined that tax collection for the county and school district “was a service that we were providing for free.”

The city, Tobin said, also fronts money to the county and school district for taxes that have not been paid yet, which is an additional burden on the city.

“So they’ve been getting their money even if we don’t get the money,” he said. “We don’t want to keep doing it for free.”

Tobin said he would ultimately like to see the creation of a central tax administration office. He pointed to the example of the city sharing a tax assessor with the towns of Homer and Virgil — an arrangement that has proven mutually beneficial for all three municipalities. He suggested that something similar could be attempted with property tax collection.

“I’m very confused by the whole situation,” said Legislature Chairman Kevin Whitney (R-Cortlandville).

He said officials for the county and the city have met to work through the situation, but that they haven’t gone anywhere.

“It’s a very tenuous subject,” he said.