Rochester's Fiscal Future

Wednesday, October 17, 2012

First the NY Times wrote an article claiming all counties and cities in New York are begging Albany for money as they are facing huge deficits. Then the local D&C implied that Rochester may go bankrupt when discussing Syracuse's financial problems. These could not go unanswered so Mayor Richards spoke to WHEC news and denied that Rochester will go bankrupt in the foreseeable future. Despite the official denial, cities and counties did reiterate their plea for more money from Albany.

This is not surprising as rapidly increasing pension and medical costs and the recently state-imposed property tax cap are putting great strain on most local governments. This combination of rising costs and capped revenue is bound to cause problems eventually. Looking at our community, Rochester is not doing well. Last year we faced a $40 million budget gap and even after help from the state we were still $25 million short. There were some cuts and many people saw their taxes increase as the city raised the assessment of their properties, but the City also assumed sales tax revenue would grow by almost 4% and that the unions would agree to pay some of their medical costs. While sales tax revenue has grown a robust 2.4 % this still left the City almost $2 million short of what was needed and the unions did not give back the more than $3 million the City needed. There is obviously a problem.

With a possible shortfall of $5 million and an expected pension increase of at least $10 million for next year, these are tough times. Fortunately, thanks to the City’s previous mistakes, there is a solution. For years, we have been taxing large properties at far less than the appropriate amount. Many of the buildings like the Merkel Donohue building are for sale for 3 times what they are assessed. Some have recently sold for at least three times their assessed value. What this means is that there are a lot of properties which could be taxed appropriately thus raising funds. The best part is that assessing these properties appropriately would not hurt “job creators” as most of these projects are rental properties like Erie Harbor, Pathfinders Holdings, or Corn Hill Landing. Some of these projects that are described as "job creating" are really just cash cows for the property owners who rent their properties to businesses at market rate. A good example is the Windstream building at the old Midtown Plaza. These deals only inflate profits for the property owner and allow them to unfairly compete for tenants with other smaller landlords.

All told, there are at least $100 million which Rochester could raise from these large properties which have enjoyed substantial tax breaks for years and are paying less than a quarter of their appropriate rate. This does not mean that Rochester should not pursue more state money, nor that we should stop asking for mandate relief, as the problem needs to be attacked from all angles. But there are rich and profitable companies which have enjoyed favorable tax rates for years at the expense of the community. As we have cut hours at libraries, laid off teachers, and cut recreation, many rich people have enjoyed high profits due to low taxes and now would be a good time to end this corporate welfare once and for all.


Listen to Alex...

...on Transforming Rochester on Rochester Free Radio. You can see when it's on at the Rochester Free Radio show schedule.

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