WPCNR MAIN STREET JOURNAL. By John F. Bailey. January 29, 2003. © 2003, White Plains CitizeNetReporter. All rights reserved.: White Plains took a look at its projected 2003-2004 budget last week. The Common Council will begin in earnest putting the budget together February 4. What emerged from last week’s briefing to the White Plains Common Council by Budget Director Eileen Earl, was the distinct possibility of having to turn over more revenue to pay for the state’s poor judgment in managing pension funds, and what appears an antiquated technological accountability by the state in reporting sales tax revenue in a useful, timely manner to cities and counties.
WHITE PLAINS COMMON COUNCIL considers the budget dilemma caused by untimely sales tax receipts reporting from the Department of Taxation and Finance, during presentation of “the budget today” by Eileen Earl last week.
Photo by WPCNR News
Just how unaccountable the state is in accounting for the sales tax dollars businesses across the state send to the New York State Department of Taxation and Finance, which collects the sales tax, came about innocently enough. It emerged in Budget Director Eileen Earl’s routine charts on sales taxes returned to the city the last four years that she presented last week.
Sales Taxes Down. Based on 2001 Figures.
The Earl six-month overview showed that the city was $1.7 Million down in the sales taxes received from the state this year, and will need to generate $9.7 million in sales tax the next six months to avoid going into the fund balance (the floating surplus or profit carried forward from previous years), or raising property taxes.
Gina Cuneo-Harwood, the city’s Commissioner of Finance, explained to the Common Council that she is on the phone on a weekly basis with the Department of T & F, monitoring the state of the sales tax checks the city expects. She said the department is very helpful and forthcoming.
Ms. Cuneo-Harwood told the Council that the Department of Taxation and Finance bases its tax payments to the city based on the previous year’s average sales tax payments back to the city. Those prepayments are reconciled against actual revenues collected on a quarterly basis. If the projected amount any quarter is less than what was actually collected from the city, it is adjusted in the next quarter.
She said because the World Trade Center attacks affected retail sales more adversely than normal at the end of 2001, the state’s sales tax estimated payments were down for the last quarter of 2002. She said the jury was still out because of the need to know what the October, November, December 2002 really are.
Earl skeptical.
Ms. Earl said to the Council, commenting on the October, November, December sales, “The fact is that the retail sector is not down by what we are down. We have really no way of knowing what we actually do generate, because the state does not issue us an audit. They have never done an audit.”
At another point in the briefing Ms. Earl said another impact on the city budget (and the White Plains City School District Budget, too), will be a guaranteed jump in the city’s payments into the state pension funds because of stock market losses endured by the funds. Earl said she had been told verbally by the state that the city could expect to make a payment of as much as $4 Million, whereas in the previous budget they had only been asked for about $300,000. A $4 Million add-on to the present city budget, Earl said, would mean a 12% increase in property taxes, $12/per $1,000 of accessed valuation.
Ms. Earl has been Budget Director for White Plains for 14 years, and the way the state is communicating this year is stunning to her: “I’ve never seen anything like this, where they (the increases) are well across the board.”
Ms. Earl noted that the pension situation is being impacted by the automatic cost of living increases the state voted state pensioners several years ago which are built in and need to be paid, irregardless of whether the state pension fund pools under the comptroller’s management are keeping pace.
Cities, Towns, Counties Get No Audit Report on Sales Taxes Actually Collected Within Their Limits. They would like to know.
What Ms. Earl said about the state not sending the city an audit interested the CitizeNetReporter. I talked with Howard Rattner, Financial Manager of New Rochelle. He confirmed to us that the state never sends New Rochelle any kind of audit. He said he has asked the Department of Taxation and Finance for reports on how much revenue different business groups in his city generate to New Rochelle, and has been told “they don’t have the ability to do that.” Rattner wryly said that in this age of computers this was hard to believe.
Asked if the state was sending New Rochelle its fair share of sales tax, Mr. Rattner, said “Supposedly.” He said there are “occasional period adjustments. No real projections (from the state). You (as Budget Director) have little control over that. How they distribute (the sales tax revenue) is up to them.”
Yonkers Budget Director, James LaPerche, confirmed that Yonkers did not receive detailed audits from the Department of Taxation and Finance either, saying, “he just accepts the checks as they come in.” Laperche said the Department of Taxation and Finance was not too responsive to requests. They don’t really respond to him, was what he said. Asked if Yonkers felt the sales taxes were being redistributed correctly, LaPerche said, according to Hezi Aris of The Yonkers Tribune, who interviewed him,” they don’t know, they assume that’s their share.”
Cash First. Count Later.
There’s a reason for that.
WPCNR learned that sales tax receipts are not collected and recorded to a city’s or county’s account on a real time basis by the Department of Taxation and Finance, such as credit card sales in the consumer sector are.
Sales tax receipts are sent weekly by businesses to the Department of Taxation and Finance, but not reconciled until actual returns are filed quarterly. This creates an artificial “float,” a “cash gap” between estimated sales tax receipts and actual receipts due the municipalities. According to our sources it can take about six months while Department of T & F personnel literally “eyeball” the sales tax returns. As the budget directors we talked to, explained it:
Rattner of New Rochelle said that the sales taxes are collected by the businesses in the state, and filed directly with the Department of Taxation and Finance. Cuneo-Harwood of White Plains added that the sales tax receipts are sent directly by businesses weekly to the State, but their tax returns are filed quarterly.
It is only when the Department of Taxation and Finance receives the businesses’ tax returns that they reconcile and determine actual sales tax amounts collected for a city such as White Plains for a specific period. A city or municipality with its own tax jurisdiction such as New Rochelle, Rattner said, has the sales broken out and sent to the state in the return.
No “W-2’s” for Businesses.
Jurisdictions, WPCNR learned, are determined based on reading the addresses on the returns. Rattner said businesses do not file the equivalent of a “W-2” or copy of return to the cities or towns where they do business and collect the sales tax.
Consequently, it appears, the only budget tool any city or town has as to what they can count on in sales tax receipts is the amount sent to them last year. The state simply returns last year’s collections, and adjusts on a quarter to quarter basis, after they check returns.
Westchester County, too has no handle on “their handle.”
Donna Green, a spokesperson for the Westchester County Department of Communications, confirmed that Westchester County does not receive a state audit, town-by-town, city-by-city, as to what “handle” (Race Track parlance for total monies bet on a single day), Westchester generates from year to year, either by business type, or business location.
She said the county receives a lump sum payment for the county tax, then distributes the share to the towns for which it collects by a percentage based on the town and city individual tax rate. The cities of Mount Vernon, New Rochelle, White Plains and Yonkers receive their payments from the state directly because they are separate tax jurisdictions.
The county can only assume they will receive approximately the same sales tax as the previous year, and more if the economy turns up, or such as may be the case this year, turns down. The county then apportions the receipts to cities, towns, and municipalities, who of course, have to trust the county’s formula after taking the county takes their share. They have to trust the county because there is no return filed by municipality for individual businesses collecting sales tax.
Eyeshades and Paper?
The state appears to be collecting sales taxes the way they have always collected them. There are no “real time” transactions, no instant classifying of sales tax revenue collected by county or municipality, which is baffling in the age of electronic banking, internet sales, and computerized business operations, and international money transfers.
The questions is why? Calling up the Department of Taxation and Finance to “check the numbers this week,” is an indication of the importance of timely sales tax revenue reality.
The system works when times are good, but now is creating a possibly imaginary budget squeeze for White Plains, and many cities and counties, who need today’s dollars in real expenditures, not yesterday’s to see where they are at and raise and lower taxes and expenditures precisely on real data not “on spec.”
