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Revenue need dominates 2014 budget

The Dutchess County Legislature was recently engaged in review of the 2014 county budget, which was adopted by committee on Thursday, Nov. 21, and will be adopted by the full Legislature on Thursday, Dec. 5.

The Dutchess County executive’s proposed $411.1 million budget is $2 million higher than last year’s $409 million spending plan, largely due to increases in jail housing-out costs, pension costs and increases in unfunded mandates like Medicaid.While spending restraints naturally dominate budget hearings this year, the central budgetary topic is revenue. For the past few years Dutchess County has faced shortages in revenue, in part due to economically caused decreases in sales tax income and partly due to legislative unwillingness to raise property taxes to meet budget needs. This has led to a tendency to rely on fund balance to meet budget shortfalls.

Over-reliance on fund balance has its risks as the bond rating is closely associated with the county’s financial reserve. This month the county was penalized as Moody’s Investor Service downgraded the county’s bond rating from Aa1 to Aa2, albeit at the same time upgrading our financial outlook from “negative” to “stable.” As bond ratings directly impact our interest rate on debts, it is of importance that the county actively restore its bond rating by building up its fund balance.

Last year county government sought to increase the mortgage recording tax in an effort to bring in new revenue and avoid the need to take from the fund balance. We voted to increase the mortgage recording tax by 0.5 percent, but this tax increase needed approval from our state legislators. Unfortunately, our state senators and members of the assembly declined to sponsor the necessary legislation to permit Dutchess County to balance its budget with increased mortgage tax revenues.

The result is a 2013 budget shortfall of $4.5 million in mortgage tax revenue that did not materialize and an approximate $5 million in fund balance revenues that we cannot rely on to balance the 2014 county budget. While legislators should and will look to cut spending, we simply cannot trim $9.5 million from the budget in one swoop.

The county executive’s budget proposes raising property taxes by $2 million from $104.9 million in 2013 to $106.9 in 2014. This will keep the county beneath the property tax cap. The Legislature considered the prospect of pushing through the property tax cap at our November meeting to achieve the needed revenue, but there was insufficient support to push the resolution past the committee level. The good news is that property owners will not see a tax hike beyond 2 percent in their 2014 property tax bill.

The bad news is that a tax increase may be seen on their energy bill. The county executive proposed in his budget to begin taxing home energy use to make up the $7.5 million shortfall. This repeal of the exemption of sales tax would levy a county tax on homeowner’s use of electricity, heating oil, propane, wood and natural gas, as the state already does. The Legislature is divided on whether to tax energy, and this topic is likely to dominate the budget hearing open to the public at the Bardavon Opera House on Dec. 3, at 7 p.m.

Michael N. Kelsey represents the people of Amenia, Washington, Stanford, Pleasant Valley and Millbrook in the Dutchess County Legislature. Write him at KelseyESQ@yahoo.com.