Taxes
Issue Analysis
Community prosperity, like retirement planning, requires prudent planning and responsible investment decisions. Geneseo’s prosperity is directly tied to our Town Board’s ability to plan for Geneseo’s economic future. At the forefront of responsible fiscal planning is the issue of taxation. We need a Town Board that understands the potential and limitations of taxation as a policy tool. Financial choices and investment decisions made by the Town Board over the past two years suggest our community might not be getting sound financial advice. It is time to consider electing new financial planners.
Bob Wilcox, Sally Wood, and John Zmich, have the background and experience to understand taxation issues and make sound financial choices for our future. They are keenly aware that smart financial investments and smart planning decisions are at the core of keeping Geneseo healthy and vibrant.
We all pay a lot of different taxes: income, property, school and sales to name a few. In Geneseo a significant amount of tax revenue is collected locally but not spent locally. Indeed, much of the tax revenue generated by Geneseo goes to the County and is used to provide services to other communities in Livingston County. In many ways all County residents benefit from this type of revenue sharing and, provided taxation levels and allocations are equitable, there is no significant problem. However, if one or two communities are being asked to shoulder a disproportionate share of the taxation burden, the fundamentals of tax collection and allocation should be re-examined.
Livingston County – Town of Geneseo Finances
According to James Merrick, Chairman of the Board of Supervisors, the County is in solid financial shape. In his 2007 State of County report he notes the following:
“In November, the 2007 budget was approved with a property tax rate of $7.07 per thousand, a decrease of 16% compared to the 2006 rate. The 2007 budget continues to fund all existing programs and services. The ten-year average annual change in the property tax rate has been .05%, in all practical terms a zero change over ten years.”
“The 2007 budget maintains sound surpluses and a strong cash position.”
According to the Chairman, our County officials have done an outstanding job of providing quality services in a fiscally responsible manner. There is no County budget shortfall or fiscal crisis.
We frequently hear about the strain unfunded budget mandates place on local budgets, like increasing Medicaid expenses. Even here, our County officials are quick to point out, that within the second year of the “State Legislature Cap on the Growth in the local share for the Medicaid program, the 2007 County budget will realize a reduction of $880,000 in the local costs of Medicaid.” In other words, the State has acted to rein in out-of control local Medicaid obligations.
According to Merrick, the County is in great fiscal shape. The county continues to provide an impressive array of services without needing to significantly increase our taxes. Notable amongst the many recent achievements are:
- The fall 2006 opening of the $1.7 million Livingston Area Transit Services which will provide for a centralized approach to the County’s growing transportation needs.
- The increased local funding for highway and bridge projects by $900,000 or 14%.
- The four-year labor agreement through 2009 with CSEA.
The County prides itself on having created a “smaller, smarter and more efficient government.” James Merrick notes “our fund balances are strong and have grown without any reductions in services.”
The incumbent Geneseo Town Supervisor does not make an “Annual State of the Town” report readily accessible to Geneseo Residents. Nor can town residents find up-to-date budget information on the Town’s website. Indeed, as of September 2007, the Town’s website posts budgets for the years 2002, 03, 04, and 05. No Town budgets are posted for 2006 or 2007. However, careful digging through the minutes of the Town Board, tax revenue information, and budget data, such as it is, can lead to reasonable conclusions about the Town’s fiscal condition.
According to council minutes, the Town’s 2007 budget is approximately $1.95 million. This represents a modest 13.4% increase over the 2002 budget of just over $1.69 million. This modest increase over the course of five years seems reasonable.
A review of the minutes of the Town Board meetings and the local papers does not reveal a serious budget crisis for the Town. Additionally, the rate of annual tax increase does not even hint that there is a budget shortfall that needs to be addressed.
Taxes As a Tool to Stimulate Growth
There is a popular belief that an increase in economic activity in a community is followed by an increase in tax revenues available to the community to spend. On the surface such an assumption seems valid. However, there are times when we might want to look the proverbial gift horse in the mouth…
- If more tax money is expended to generate economic activity than the economic activity produces in tax revenues, the initial expenditure was, in hindsight, probably unwise.
- Using tax money to stimulate economic activity is not unreasonable. However, not all economic activity generates the same rate of return in tax revenues. Some choices are better than others. A community might reject much needed affordable housing in favor of expensive homes, for example, or forego office buildings with high-paying jobs in favor of big box retail stores with low-wage jobs, in anticipation of generating more tax revenue with a comparatively smaller burden on public services. Such a risky strategy often fails to generate sufficient cash revenue to meet expectations. “Cash box zoning,” as this problem is known, fosters sprawl and polarization.
For any community to be vibrant and healthy, elected officials need to carefully evaluate total investment costs, tax revenue streams and tax expenditures. “Knee-Jerk” acceptance of any economic activity as better than no economic activity can lead to a fiscal and social train wreck.
Consider the current investment offer on the table. The Newman Development Corporation and Lowe’s want Geneseo to invest in Lowe’s as part of Geneseo’s long- term financial plan. Lowe’s obviously believes this is a good investment for its shareholders. But the question for our community is not what is good for Lowe’s but, rather, is Lowe’s a good investment in services for Geneseo?
Lowe’s own economic analysis claims a Geneseo Lowe’s will generate up to $1.2 million dollars in tax revenue for Livingston County. If these projections materialize, this is great economic news for Lowe’s shareholders, County officials, and possibly some residents of Livingston County.
Of course, as with every investment, you need to read the fine print. What the incumbents and other candidates for Town office are not talking about is the fine print. Let us consider the benefits to the Town of Geneseo under the best case scenario.
Lowe’s economic analysis claims that under the best of conditions:
- Town of Geneseo annual sales tax benefit could be as high as $5,100.00
- Town of Geneseo annual property tax benefit could be as high as $25,000.00
- Village of Geneseo annual sales tax benefit could be as high as $4,900
Under the best case scenario, Lowe’s promises a total return on our Town’s investment of just over $30,000 annually. This represents a mere 1.5% of a total Town budget of $1.95 million.
Of course the Lowe’s project will also make a contribution to the Geneseo Central School District. Lowe’s claims the District’s annual benefit could only be as high as $135,000.00. This represents less than one percent (.84%) of the annual school budget.
So the return to our community on an investment in Lowe’s is an annual contribution of less than 2% of the Town budget and less than 1% of the school budget.
Geneseo is being asked to make a huge investment that primarily benefits Lowe’s stockholders and the County. Is this return on our investment a financially prudent investment decision? This is a difficult question to answer. The investment we are being asked to make will cost money in terms of increased infrastructure, water, sewer, and public safety services. Of course, our investment also entails costs that are more difficult to quantify, but, none the less, costs that must be examined if we are to evaluate the investment we are being asked to make.
It is hard to place a dollar amount on increased traffic, travel time, and changing community character. What impact will increased traffic congestion have on future development opportunities? What potentially more lucrative investment opportunities are we eliminating by investing in mega retail in our Empire Zone? The Empire Zone has tax incentives designed for other types of development such as light industrial and office buildings rather than retail. These and other questions need to be carefully and fully examined before we make an investment decision. What is certain is that Geneseo’s investment in Lowe’s represents more than the $30,000 a year return we are being promised.
Another factor to consider is that Geneseo makes one of the largest annual contributions to the County budget. Geneseo financial contributions typically constitute 15% of the County budget. Yet Geneseo will only receive 2.5% of the total tax benefit. The lion’s share of the annual tax revenue (97.5%) will go to the County and State.
Table 1: Individual Town Contribution to Livingston County Budget
| Avon | 11.7% |
| Caledonia | 7.4% |
| Conesus | 4.9% |
| Geneseo | 14.7% |
| Groveland | 3.8% |
| Leicester | 3.6% |
| Lima | 7.5% |
| Livonia | 15.1% |
| Mount Morris | 5.1% |
| North Dansville | 6.3% |
| Nunda | 3.7% |
| Ossian | 1.3% |
| Portage | 1.2% |
| Sparta | 2.3% |
| Springwater | 3.3% |
| West Sparta | 1.9% |
| York | 6.2% |