Commissioner Madigan Clarifies Sales Tax Numbers

I received the following information concerning  Saratoga Springs sales tax  figures from Commissioner Madigan:

Earlier this month the New York State Comptroller released their semi-annual report on local sales tax, focused on the first six months of 2017. In this report, which was subsequently reported on by several local media outlets, it was noted that Saratoga Springs tax collections were down 5.9%, or approximately $319,000, year-over-year.

While the report was technically correct, I wanted to address some concerns expressed both in City Hall and in the media. In terms of sales tax distributions received by the city, we have indeed received 5.9% less than we did as of the same period last year. This reduction was unexpected, and I ask all City Council members to be mindful of this shortcoming as we budget for the remainder of 2017. That said, as discussed during the July 18^th Council meeting, the second quarter of 2017 was negatively impacted by over $545,000 of prior period adjustments wholly unrelated to 2017.

Had these adjustments been accounted for correctly when they occurred, meaning in 2016 and 2015, City sales tax collection would actually be up over 4% for the first half of 2017, rather than down almost 6%.

To support this analysis, we reached out to the New York State Department of Taxation and Finance to do a more detailed review of the City sales tax calculation. From June 2016 to May 2017, which is the most recent data available, the City collected $11.9 million from close to 13,000 businesses. As would be expected, the list of sales-tax-generating companies is fairly top heavy, with 92 businesses generating half the City’s annual total, and the top 20 companies accounting for almost 25%. This top 20 represent a diversified pool of industries including hospitality, retail, tech, construction, and automotive companies, and in total this group was up over 13% combined year-over-year. Additionally, of this top 20, 17 were in the top 20 last year. We believe this combination of strong growth and consistency at the top of the list reflects well on the overall economic health of the City, and bodes well for the future.

One sales tax-related article I wanted to mention specifically was in The Saratogian on August 4^th, in which the sales tax decrease was attributed by one resident to “low gas prices” and “reduced construction activity in the City” compared to surrounding areas. While gasoline prices remain relatively low historically, I will note that the average price per-gallon has been higher every month in 2017 when compared to the same period in 2016, per the U.S. Department of Energy.

In relation to the quote about City-wide construction activity, while we don’t get State data at an industry level, I would caution all outside observers from painting with too broad a brush. A deeper dive into the numbers showed us that some construction-related businesses were in fact down, while others were actually up year over year. Furthermore, the impact of construction on the City’s sales tax total is unclear, given the uncertainty around where a builder might purchase their raw materials.

What I can say is that based on all the information we have, the City of Saratoga Springs appears to be economically growing. Overall, the $11.9 million received from June 2016 to May 2017 was 4.4% greater than the amount received from June 2015 to May 2016.

To reference back to the initial Comptroller report, if you exclude the aforementioned prior period adjustments, City sales tax collection would be up 4.2% for the first half of 2017, which is better than the State-wide average (+3.4%) and stacks favorable against several nearby communities, including Albany (-1.5%), Washington (+0.7%), Warren (+1.6%), and Fulton (+2.4%).

Again, we’re aware of the negative impact of prior period adjustments on 2017 sales tax collections and we will budget accordingly, but overall we believe our analysis shows just how strong the City economy actually is. I’ll continue to update the Council as we receive future sales tax distributions and reports.