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Tuesday, April 28, 2009

"If the money’s not coming in, it shouldn’t be going out."

The editorial in Sunday's Observer Dispatch, Tax revenue down? Then cut spending, had a good message, but it missed the point of where the problem lies.

As we blogged last week, the sales tax revenue didn't all of a sudden drop for New Hartford...it remained level at about $5,000,000 as it has been since 2003. What actually happened is that this Town Board has consistently voted for a budget with between $300,000 to $500,000 more anticipated revenue each year then they could ever possibly hope to receive. And given the present economy, there is no excuse for overstating the anticipated sales tax revenue by $500,000 in the 2009 Adopted Budget. Let's use this analogy:

If you know you only make $50,000 a year and have made $50,000 a year for the past 6 years, would you budget as if you made $75,000 a year? Of course not...that would be foolhardy because at the end of the year you will still have only received $50,000...unless you win the lottery.

So, if you spent the $75,000 you wrongly anticipated you would receive, your only choice at year end would be to use your credit card (bond) or dip into your savings account...if you have any savings left.

Yet, projecting sales tax revenue of more than they could possibly expect to receive is precisely how the current Town Board has prepared their budget for the past three (3) years. As they were preparing each budget, they had all the 'tools' necessary to make a good prediction of what they could reasonably expect to receive in sales tax; all they had to do was look at the previous years' budget as compared to what was actually received in sales tax revenue. However, the current Town Board consistently budgeted for more than the town has received in any year going back to at least 2003.

So why would the town board want to consistently adopt a budget with estimated sales tax revenue of more than they could reasonably expect to receive in a normal year, let alone a year where we are clearly in a recession?

Plain and simple...to keep the tax rate down! In other words to give you, the taxpayer, a false sense of security. They wanted to keep taxpayers happy because they knew at some point they would need your "YES" vote [February 10th the bond vote] to finance Larry Adler's business park.

How did they make up the shortfall in 2007? Earle Reed said himself in the Observer Dispatch article. They have been using money from the town savings accounts. According to the Observer Dispatch April 18, 2009 article:
If necessary, the town may dip into its savings account to make up the difference, town Supervisor Earle Reed said, adding that he didn't like to do that.

“I am concerned that we have tapped into it for a couple of years,” he said of the savings account.
If he doesn't like to tap into the town savings accounts, why didn't the town board put together a more realistic budget? How many times does one have to hit their head against a wall before they say 'ouch'?

Where will they most likely get the money for the shortfall this time? They already cut out the Budget line expense item for Paving in the 2009 Adopted Budget, generally about $300,000. They already cut out Equipment for the Highway Garage which would normally be around $300,000 so where else can they get $500,000...and why wait until June to start cutting? Again according to the April 18th article in the Observer Dispatch:

Meanwhile, he said [Supervisor Reed] the town may consider revising its 2009 projections for sales tax revenue.

“After we get through June and we've got six months under our belt, we'll have a better idea of where we stand,” he said.

May consider? Isn't that like standing around to watch for a train wreck to happen? Not for nothing, but you can cut your sales tax revenue projection all you want, Supervisor Reed, but if you don't cut your spending over the next 8 months, you will still have a shortfall at year end...that's just Budgeting 101.

Question right now is...where will they get the money to cover the overstated sales tax revenue in the 2008 budget?

Question next year is...if spending is not curtailed NOW, where will the money come from to cover the overstated sales tax revenue that was budgeted for 2009? Hopefully, that will be a problem that another administration will have to tackle.

1 comment:

swimmy said...

You are giving the town too much credit. The reason they are doing what they are doing is so that they can then justify a tax increase and the taxpayers will be fooled into accepting it rather than decry a cut in spending.