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New Onondaga County energy tax would cost about $6 a month for typical household

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Syracuse, N.Y. – Onondaga County lawmakers will vote next week on a new residential energy tax that would cost a typical household about $6 per month and raise up to $12 million a year for county government.

Legislators say they are considering the tax proposed by County Executive Ryan McMahon because revenue losses and other costs from the coronavirus pandemic are wrecking county finances.

The county would have to consider layoffs soon without the new revenue, said Legislature Chairman David Knapp, R-LaFayette.

“It’s going to get to people and jobs very quickly if we don’t do something,’’ Knapp said.

McMahon’s proposal would revive a 4% county sales tax on residential energy sales that was collected decades ago but discontinued in 1982 in Onondaga County. Knapp said he didn’t know why the tax was removed in the 1980s.

Residential energy sales are exempt from state sales tax. But counties and other taxing jurisdictions have the option to charge residential customers a local sales tax, which is already paid by commercial customers. More than 50 other counties, cities and school districts in New York currently impose a similar residential sales tax, state records show.

A typical Central New York household with electric and gas utility service pays roughly $150 a month, on average, according to data collected by the legislature. A 4% tax on that amount would be $6.

If adopted, the new tax would take effect in September, Knapp said. One option under discussion is whether to have the tax sunset in December 2021, in which case it would expire unless renewed by the legislature.

With support from Republican leaders McMahon and Knapp, the measure is likely to pass the GOP-dominated legislature, but not without plenty of discussion.

“It’s not an easy vote,” Knapp said.

The new tax comes at a time when state officials have acted to soften the financial burdens of energy costs for struggling households during the pandemic. In response to a directive from Gov. Andrew Cuomo, utility companies have temporarily stopped shutting off customers who fail to pay their bills.

Compare: National Grid terminated the accounts of more than 4,100 Upstate households for non-payment in April 2019, but zero in April 2020. National Grid also postponed electric and gas rate increases totaling more than $110 million that were due to take effect April 1. (They are now scheduled for July.)

County officials say it’s urgent to raise new revenues to avoid layoffs or other drastic cuts. Sales tax revenues, the county’s biggest source of income, fell nearly 30% in late March and early April. McMahon has already ordered spending reductions of about $25 million, including furloughs for 225 hourly workers.

On top of that, the cash-strapped state government is using county sales tax money to pay for roughly $2 million in local aid to municipalities and $2 million more to help distressed hospitals and nursing homes, Knapp said.

“We are facing a massive deficit as a result of this pandemic,” said Justin Sayles, speaking for McMahon.

County lawmakers can’t change property tax rates until they craft a new budget in the fall. But the energy sales tax can be changed anytime, Sayles said.

County officials estimate the new tax would raise about $3.7 million for the county during the final four months of 2020 and $9 million to $12 million during 2021, depending on energy prices. The tax also would raise $3 million to $4 million annually for the city of Syracuse, which shares 25% of county sales taxes.

The tax would apply to customers of all utilities operating in the county – including National Grid, Solvay Electric and New York State Electric & Gas. It would also apply to non-utility fuel sales such as propane, fuel oil for heating, and wood.

Cayuga and Cortland counties and the city of Oswego each charge a similar tax of 4%. Some school districts, including Lackawanna, Ogdensburg and Niagara Falls, charge 7% or more.

Onondaga County legislators will conduct a virtual meeting at 1 p.m. Tuesday.

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