Jeff Platsky

When the public health emergency wanes, a disastrous second wave of coronavirus impacts will hit — a financial apocalypse for local governments across New York.

“The devastation is total,” said Svante Myrick, Ithaca’s mayor.

Ithaca is upstate New York’s shining light: a 3.6% jobless rate; 6,000 jobs created over the past 10 years, the fastest-growing region in an otherwise lackluster central New York landscape; budget surpluses and tax rate decreases in three of the last five years.

“Our economy has become the envy of communities all over upstate,” Myrick said in his 2019 State of the City address.

No longer. The city of 31,000 residents is about to experience a stunning reversal of fortune.

“It’s all gone,” Myrick said, assessing his city’s financial outlook looking forward.

Ithaca’s not unique.

Every New York municipality will pay a hefty price for the virus that quickly swept across the nation with alarming speed.

Not only directly at the county level with the costs associated with the emergency response, but also indirectly as the local economies crater in the wake of a drastic reduction in commerce that will cause sales tax revenues and other income to come crashing down.

Sales tax is the No. 1 revenue source for counties, more than even from property taxes. So when sales slow, less revenue soon follows.

Fiscal concern grows for New York towns, villages and counties

If counties do not get relief from state mandates or help from the federal government, the cost of local government services will be passed onto taxpayers, warned Steven Hoover, the Chemung County budget director

For example, the county needs to spend $100 million within the next five years to replace its wastewater treatment center and will lead to “huge rate increases on taxpayers,” Hoover said.

“That’s something they could help us with. Maybe they could defer the mandates down the road,” he said of state government.

The financial pain will be severe and protracted on the local level.

Under a worst-case scenario, the health crisis will trim $1 billion in annual sales tax collections in New York, concluded the New York Association of Counties in a recent report on the financial impact of restaurant and retail closures.

In Rockland County alone, sales tax levies provide 57% of the revenues in the 2020 budget.

“We’re in a free-fall situation,” added Westchester County Executive George Latimer, whose county has had the second-most confirmed coronavirus cases in the state after New York City.

“The dropoff in business activity is going to make a major hit to the sales tax. We have no idea how bad it will be. Will it be two weeks? Two months? Four months?”

How local governments address a major shortfall due to coronavirus

Revenue sources are already scarce in rural counties, such as Oneida.

The county has a projected budget of $440 million, a quarter of which is made up of sales tax revenue, said Thomas Keeler, the county’s budget director.

But with orders from the state to shutter most recreational activities, including bars, restaurants and shopping malls to slow the spread of COVID-19, sales tax revenue will fall, leaving a gaping hole in the county’s revenues.

“It’s hard to determine right now, but I’m sure it’s going to be devastating,” Keeler said.

The few places in the county that remain open, like grocery stores and pharmacies, will not be enough to make up the lost revenue, and people aren’t rushing out to purchase big-ticket items like cars, Keeler said.

“Everybody’s worried about the economy and everything like that. So it’s going to be devastating,” he said.

Coming right in the middle of the health crisis: a March 20 deadline for sales tax payments by businesses across the state.

State Sen. Pamela Helming, R-Canandaigua, issued an urgent plea Thursday to delay payment to “provide some small relief and demonstrate our support for our state’s job creators.”

State leaders are considering whether to delay the payments.

Sales tax and other revenue stream strained for municipalities

Sales tax is just one of several revenue streams for localities. Other money sources will surely be pinched as well.

The specter of layoffs and loss of incomes from the economic fallout is raising the very real possibility of more delinquencies on paying property taxes, another main source of municipal revenues.

“Everyone in the private sector is worrying if they are going to be laid off, if their pay is going to be cut,” said E.J. McMahon, research director at the right-leaning Empire Center in Albany.

Like driving in a whiteout, no one can be sure what’s ahead or when the crisis will ease.

“I don’t know how you can accurately budget for things that we’ve never seen before,” said Peter Baynes, executive director of the New York Conference of Mayors.

“Our members are living closer to the margins as it is.”

How the impact of coronavirus will hurt tourism in New York

In some communities, the toll will be particularly steep.

Tourist areas, which count on hotel tax revenue to fund promotions or arts group, will find the money stream dried up.

Casino-host communities with newfound money from gambling-related taxes will have to fill a deep hole created when the parlors were shuttered days ago.

In Tioga County’s Town of Nichols, with a population of just 2,400, its finances are bolstered by $1.3 million each year from Tioga Downs Casino.

So at least a portion of it that funds the $4.6 million budget will be wiped out depending on how long the casino, with about $7 million in weekly gaming income, remains closed.

In counties close to Canada, there’s another impact: The border has been closed to all but essential travel — another blow to tourism and commerce in New York.

And if that weren’t enough, required municipal contributions to the state pension fund will surely rise in coming years with the stock market’s swoon.

But that impact may be tempered in the short term because assessments are based on a five-year rolling performance average.

Comptroller Tom DiNapoli, in a letter to Gov. Andrew Cuomo, predicted a $4 billion shortfall in state revenues, which assumes a “mild recession.” But he warned it could be worse: as much as $7 billion.

And the state budget is due at month’s end, which already had a $6 billion budget gap.

For counties, Cuomo has proposed closing the gap in part by potentially shifting some Medicaid costs to them, if their annual growth for the program exceeds 3%.

Will local governments get a bailout?

When the federal government talks financial bailouts, municipal officials wonder if they will be part of the picture.

A state imposed 2% tax cap will come under its most severe test since it was instituted by Cuomo and the state Legislature in 2011.

Local governments can override the cap with a supermajority vote of their governing boards.

The cap “will be very difficult to comply with it,” Baynes said.

Schools will go to voters in May to get approval for their budgets for the fiscal year that starts July 1. County budgets run on a calendar year and are prepared in the fall.

Municipal officials are hoping that the degree of fiscal stress could finally bring parties to the table in the coming months on the topic of state-mandated spending that crimps budget flexibility.

Combined, there are nearly 30,000 students at Ithaca College and Cornell University.

By Cornell’s most recent estimates, students and campus visitors spend $4 million in the community weekly, on average.

But the averages mask the real cost to Ithaca if Cornell has to cancel its Memorial Day weekend graduation ceremonies, when restaurants and hotels are jammed and spending peaks, the community’s equivalent to Black Friday weekend.

Ithaca College has rescheduled its graduation to early August. No decision has been announced by Cornell.

The impacts are already apparent.

The 104-room Hilton Garden Inn was shut this week. Forty-six people were laid off, Myrick said.

Until the crisis, the downtown Marriott was at 100% occupancy through graduation weekend. Now, the occupancy rate is in the single digits.

The impact may take years to recover from.

As McMahon put it, “There’s no fairy coming along with a bag full of Bitcoin.”

© 2020 Star Gazette