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The county's tax grab


Right from the beginning, nobody thought he could be serious.

Or at least they hoped he wasn't.

LastmonthCounty Legislature President Wayne Zyra proposed using the local share of the sales tax to cover the county's Medicaid costs first, then dividing the rest among the city and the other municipalities. You could almost hear the collective gasp from the budget departments and legislative chambers of those municipalities.

"I was very surprised," says Rochester City Council President Lois Giess, "because it only solves one problem."

That's a diplomatic way of putting it. The maneuver goes by the unlikely designation of a tax "intercept." But that's just a fancy way of saying that the county is pushing its costs down to the next lowest level of government: the city, towns, villages, and suburban school districts. The state and federal governments have for years gotten away with such behavior --- usually in the form of what we call "unfunded mandates" --- but it's harder for the county to do it. And when it does, as in this instance, the money squeeze has reached the bottom of the food chain. There's nobody left to push the problem onto.

To understand the magnitude of the hit governments would be taking, consider this. The City of Rochester is about $12 million from its constitutional tax limit. It can't raise property taxes beyond that point. Yet if Zyra's plan were enacted, the city would lose about $40 million that it now gets from the sales tax. That's more than double what it could get by raising taxes.

"We couldn't make up this difference," says Giess. "We couldn't. We can't tax our way out of the problem. It would just lead to draconian cuts." And those cuts would fall heavily on basic services like fire and police, economic development, and the school district.

But Giess also doesn't believe that it's a viable alternative for the county --- practically or politically.

"It's one thing to really cut the city," she says, "but when you're cutting everybody --- I knew there was going to be a hue and cry."

A sizeable portion of that cry and hue came at a meeting of the CountyLegislature's Ways and Means Committee March 29. During the public hearing at the meeting's outset, a who's who of officials from suburban towns and school districts lashed out against Zyra's plan. (City officials opted to stay home and express their concerns in a letter to Zyra.) The concerns articulated by real estate agent and Brighton School Board member Rome Celli were typical of what many of the speakers had to say.

"It does not address the government problem, but merely shifts the cost onto out towns and villages," he told legislators. "It doesn't improve system deficiency," for instance by instituting measures to combat Medicaid fraud and abuse. Nor does it address the issue of long-term increases in the cost of health care, said Celli.

Instead, "this plan threatens to pit one government against the other," said Celli. "We've been down that road before. No one wins."

But none of the speakers cut straight to the heart of the problem more clearly than Brighton Town Supervisor Sandy Frankel. Referencing Maggie Brooks' stated commitment not to raise property taxes, Frankel asked: "If the county is avoiding raising its property tax, how can it ask the Town of Brighton" or any other town to do that?

Frankel's question captures the politics of the move. In a state where Medicaid is partly paid for county by county, through property taxes, there's no way to avoid raising taxes in one form or another as Medicaid costs soar. The only thing county politicians can avoid is doing the politically repugnant deed themselves.

Of course, there is another explanation for Zyra's move. From the outset, almost everyone who's written or spoken about the sales-tax grab has speculated that it could be a stalking horse for some other plan. In these scenarios, the most common endgame is an increase in the sales tax.

Make local governments uncomfortable enough with the prospect of losing precious sales-tax money, this line of reasoning goes, and they'll gladly hop on board the bandwagon when you offer them the option of embracing a less painful solution.

Cynics might say that gives Maggie Brooks an easy opportunity to emerge as the crafter of an elegant compromise that everyone loves.

The table was set for just such a compromise at Wednesday's meeting, after Ways and Means Chair Tony LaFountain announced he was holding the referral at Zyra's request. LaFountain did, however, grant the Zyra the opportunity to explain his actions.

"Unless we take drastic steps," Zyra said, "we'll be forced, like ErieCounty, to close parks" and make other deep cuts to service.

"It serves to demonstrate how difficult it will be to find $50 million in savings out of the $200 million" that the county has the ability to cut, Zyra said. And he said he asked for the referral to be held so the administration could provide numbers quantifying the hit to municipalities and the savings to the county.

"I believe we can have an effective debate when we get this information, not before," Zyra said.

By the time the administration reports back with that information, there's a chance the whole issue could be moot. City Hall Communications Director Gary Walker says that "there is a strong feeling in Albany that this is not a legal thing, that it would take state action."