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Legislative report: Suffolk could see $100 million deficit in sales tax revenues

The authority to push back property tax collection

The authority to push back property tax collection ultimately rests with state officials because the property tax collection process is set by state law, officials said.  Credit: Kevin P. Coughlin

The economic shutdown and its aftermath could cost Suffolk County a "historic" $100 million or more in lost sales tax revenue this year, according to the county legislature’s nonpartisan Budget Review Office.

The forecast is based on business closures and expectations that the economy will be in a downturn once it reopens, legislative budget officials said.

“We believe that the sales tax shortfall will be of historic proportions,” the office wrote in an April 15 memo to county legislators.

Sales taxes are the county’s largest revenue source, funding nearly half of Suffolk’s annual $3.2 billion budget, officials said.

County Executive Steve Bellone has said Suffolk’s revenues are “virtually drying up” during the shutdown and that the coronavirus' "impact will be significant.”

Bellone has assembled a team of independent financial experts to examine the fiscal impact of the pandemic on county government and recommend ways to improve county finances.

“We know we’ll be dealing with this for a long time,” Bellone said. “This looks very much like a severe recession.”

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The budget office expressed concern that many small businesses would close permanently, boosting unemployment rates and prompting a “prolonged downturn in the economy.”

Budget officials said they expect the drop in home sales, motor vehicle purchases and gas guzzling to continue once the economy reopens. And people may avoid reopened restaurants and arenas out of social distancing concerns, the report said.

Also, fewer tourists may visit an area that was hard-hit by coronavirus, particularly in a “weak economy,” the budget office said

Lance Reinheimer, budget review director, said the county’s total sales tax revenue loss will depend on variables including when the economy reopens, how social distancing guidelines impact businesses and how long the economic downturn lasts.

The budget office's model estimates the sales tax deficit will be at least $100 million.

The sales tax deficit will grow “each day we extend the closing," Reinheimer said.

The budget office based its projections on recent sales tax revenue receipts totaling $123.6 million. The receipts reflect a portion of sales in March when the economy first was shut down.

The office estimated the county experienced a 30% drop in sales tax revenues in March compared with March 2019.

The 2020 county budget assumed the county would receive $1.58 billion in sales tax revenue this year, an increase of 3.65% from 2019. Before the budget was adopted in November, the budget review office warned that figure likely was too optimistic.

Suffolk County Comptroller John M. Kennedy Jr. estimated the county will lose closer to $150 million in total revenue losses from all sources, including traffic tickets and Jake’s 58 Hotel & Casino in Islandia, which remains closed.

“We literally are tighter than a piano wire at this point, with no slack whatsoever,” Kennedy said of the county's finances.

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