October 25, 2021

City sees 25% drop in April sales tax revenue

No matter how you slice it, the city of Cortland is facing a dark financial future.

Recently released state sales tax numbers only confirm this – they show the city losing about 25% percent of expected sales tax revenue in April.

“It’s going to hurt,” Mayor Brian Tobin said.

The city has already furloughed 18 employees and canceled most of its summer programs through July 31 — a move that helped save $915,000 — in anticipation of a major hit to sales tax revenue.

These cuts were based on an estimated 20% reduction in sales tax revenue from the beginning of the COVID-19 lockdown through the end of the year — a projected loss of about $1 million.

Mack Cook, the city’s director of administration and finance, said he took that 20% estimate from a report prepared by the New York Association of Counties.

“Because this was the only hard number that was out there,” he said.

Will sales tax revenue increase as the city and county move toward re-opening? Cook said it’s too soon to speculate. Just because businesses begin to re-open does not mean customers will resume their pre-pandemic buying habits.

“I can put out an invitation for a party at my house but that doesn’t mean that anybody’s going to come,” he said.

The city Common Council is set to revisit this year’s budget at its July 21 meeting. By that time, city officials will have the May sales tax figures and will

have a better picture of the pandemic lockdown’s effect on revenue, he said.

Sales tax revenue accounts for about 25% of the city’s budget.

The city is also likely to see a significant reduction in state Aid and Incentives for Municipalities, or AIM, funding, of which the city receives about $2 million a year.

Gov. Andrew Cuomo recently cited a possible 20% reduction in AIM funding to municipalities, and an earlier projection put that cut at 50%, Cook said. While the exact reduction to AIM won’t be determined until the end of June, the city can expect a major drop in this funding – between $400,000 and $1 million.

The HEROES Act now being considered in the House of Representatives could help plug this hole. Cook estimates that, if the bill became law, it would bring Cortland about $1 million. But the bill is unlikely to get a hearing in the Senate before Congress’s Memorial Day recess, since Majority Leader Mitch McConnell has said the Senate needs to “pause” before passing further pandemic-related legislation.

Cook said city officials “are actively engaged on a daily basis … to argue our case to anybody who will listen” — namely state and federal elected officials.

“We’re running out of options,” he said. “This is serious. Our revenue loss is serious.”

But Cortland is not alone. This is a national problem, and municipalities everywhere are experiencing similar problems, he said.

Tobin said municipalities are now waiting on help from the state and federal governments.

“We made some tough decisions already, and we’re going to wait and see what happens,” Tobin said.

Cook said the city will likely have to dip into its $4.2 million fund balance — the municipal equivalent of a savings account — in order to plug budget holes this year.

“It does have a role in times like this,” he said.

Spending from the fund would affect the city’s credit and bond ratings, but there may be few other options, besides further cuts, or raising property taxes.

“You spend years trying to build a little bit of fund balance,” Cook said. “It’s very slow to increase, but very rapid to decrease. It goes out a lot faster than it comes in.”