Orange County’s largest revenue source performed under budget in the first quarter by nearly 5 percent, or $1.5 million, according to the latest Ways and Means Committee meeting.
The county had budgeted a smaller sales tax increase for 2024 than previous years based on unfavorable predictions—but the reality hit even harder.
“We are concerned, and we are watching this trend to see where it will be,” Finance Commissioner Kerry Gallagher told county legislators at the March 26 meeting.
Since there is usually a two-month lag when the county collects sales tax receipts from the state, the first quarter figure generally reflects the performance during the past holiday season.
This year’s first quarter collection also fell below last year’s actuals, a noticeable break from the past, especially the swelling COVID-19 years.
“We really saw a huge surplus with sales tax through COVID, with people having extra money due to one-time $7,000 per family child tax credits—extra money that people didn’t have,” Ms. Gallagher said at the meeting.
Inflation, weather, and reduction in gasoline prices were also cited as contributing factors.
“There [are] cheaper gas prices—as a consumer, I am thrilled, but that certainly does affect our sales tax,” Deputy Finance Commissioner Andrea Concannon told legislators during the February Ways and Means Committee meeting.
For Orange County, clothing stores, car dealers, gas stations, restaurants, and electronic retailers consistently rank among the top sales tax generators, according to data published by the New York Department of Taxation and Finance.
The slowing sales tax revenue also impacts the pockets of local municipalities.
Orange County imposes a sales tax rate of 8.125 percent, with 4 percent to be paid to the state, 3.75 percent to the county and its cities, towns, and villages, and the rest to the Metropolitan Transportation Authority.
Fund Balance Policy
The worsening sales tax collections also lent a sense of urgency to a new fund balance policy for the county, according to Ms. Gallagher.At the March 26 meeting, she proposed for the second time to set a minimum general fund balance at 15 percent of annual operating expenses, which can cover just under two months of expenses in the event of emergencies.
The county’s unofficial minimum fund balance ratio has long been 7 percent.
“What we are trying to do is just have a policy in place so that you can’t say, ‘Oh, my goodness, we are not ready [for or] prepared for a rainy day,” Ms. Gallagher told county legislators.
Following concerns by legislators about doubling the fund balance ratio and insufficient oversight over surplus spending, the percentage was agreed to be lowered to 10 percent.
The full legislative body will consider adopting the new fund balance policy on April 5.
