No one ever regrets planning for the worst

We commend Westerlo’s supervisor, William Bichteman, for trying to protect his rural town and the roughly 3,400 people who live there. Before Governor Andrew Cuomo had ordered the shutdown of nonessential businesses to stem the spread of the coronavirus, Bichteman had the chairs at the Town Hall meeting room set six feet apart.

Last week, at the town board’s May meeting, held through a conference call, Bichteman outlined a worst-case scenario for next year’s town budget. We urge leaders of other local municipalities to do likewise.

Earlier this month, the supervisor in the neighboring town of Berne, justifying the cost for a proposal that would add two new planning board members, said, “Berne is in great shape financially … and we are well prepared to absorb any shortfalls predicted from the COVID-19 pandemic without increasing taxes. I will be bold and say taxes in Berne will continue to flat line, and the potential still exists for tax decrease in 2021.”

In 2019, Berne got over $1 million from county sales-tax revenues, which funded over 40 percent of its budget. Similarly, Westerlo got about $1.25 million in 2019, which funded 40 percent of its budget.

Albany County typically shares 40 percent of what it takes in sales-tax revenue with its cities, towns, and villages, keeping property taxes in check. The money is divided according to a municipality’s population.

Earlier this month, the Office of the New York State Comptroller announced that local sales-tax collections statewide in April were down almost 25 percent from April 2019. The decrease in Albany County had been even more stark, with sales-tax collections dropping by nearly a third in the same period, from $23 million in April 2019 to $15.6 million in April of this year. 

We are printing a table in this edition, assembled by reporter Sean Mulkerrin, which lists all of the municipalities we cover along with how much each received in sales-tax revenue last year and what portion of its annual budget that covered. We urge residents to take a look and ask their town leaders to plan ahead as Bichteman is doing.

Bichteman confronted the town with the possibility that sales-tax revenue could be down nearly 70 percent for the remaining quarters of this year and down 35 percent in all quarters next year, and what the town’s finances would look like in that worst-case scenario.

No one can know at this point what the financial future will hold. Perhaps the first phase of reopening that the Capital Region started last week will move smoothly into the second phase next week. Perhaps business owners, workers, and customers will all wear their masks and wash their hands, and stay six feet from others, and perhaps everyone who returns to work will get tested and, if the test is positive, will stay isolated along with all their contacts, and the local economy will be fully opened in July.

Or perhaps not. Human nature being what it is, it’s likely there could be a second wave of the disease. Until a proven vaccine is developed for COVID-19  and widely available, it is best for government leaders to plan for the worst.

Bichteman said, for Westerlo to respond to that doomsday-level of reductions, it may need to lay off 10 town employees, cut back on various expenses, and raise taxes anywhere from 10- to 15-percent.

Bichteman noted that he could theoretically reduce the town’s reserve funds to zero but wouldn’t because the overall financial picture may not be improving any time soon.

“The county government is under the impression that, unless the federal government sprinkles money down from heaven, we’re not going to get any money,” Bichteman said. “We’re going to just get the sales tax we get. The state itself isn’t in any position to provide any additional assistance to individual towns and communities along the way.”

While Bichteman said he was upset about laying off people who work for the town, he thinks, if it has to be done, it should be done in time for those workers to file for unemployment and get the extra $600 per week that the federal government is paying the unemployed before that program expires at the end of July.

The single largest contributor to the county’s sales-tax pool is Crossgates Mall in Guilderland; with its own exit on the Northway, the Pyramid-owned mall draws shoppers from across the region — when it’s open.

Like malls across the state, Crossgates was closed in mid-March by the governor’s executive order. Some malls were in fragile financial shape before the pandemic as online shopping has gained ground.

Tens of thousands of brick-and-mortar stores have closed in the last decade. Aware of the trend, Crossgates Mall began shifting to tenants like restaurants, a spa, and gaming venues. In June 2017, up to 20 percent of Crossgates’ space had been dedicated to other than retail sales.

Malls around the nation are hurting now because, with retailers being shut down, leases aren’t being paid. This has a ripple effect.

Earlier this month, Mulkerrin took a deep dive into mall financing, focusing on Crossgates in a page-one story that made it clear, while Pyramid has not filed for bankruptcy, its finances are shaky.

In the commercial mortgage backed securities (CMBS) industry, a special servicer assumes responsibility of a loan from its original administrator when the borrower has “defaulted mortgage loans or loans that are designated as ‘specially serviced’ as a result of credit events,” according to the Practicing Law Institute.

Six Pyramid loans had been moved to special servicing recently — most expensive among them are the two loans associated with Crossgates.

Since the story ran on May 14, J.C. Penney, an anchor store at Crossgates, has filed for bankruptcy.

Of the $1.8 billion in new retail loans transferring to special servicing in May, over 65 percent ($1.1 billion, 13 loans) are backed by regional malls. The majority transferred ahead of their scheduled loan maturities and/or the borrower has requested coronavirus relief.

Four of these malls are operated by Pyramid. Pyramid’s new mall transfers to special servicing are:

— $182.7 million, Holyoke Mall in Holyoke, Massachusetts, February 2021;

— $76.8 million, Poughkeepsie Galleria in Poughkeepsie, New York, November 2021;

— $53.7 million, Sangertown Square in New Hartford, New York, January 2021; and

— $19.8 million Aviation Mall in Queensbury, New York, November 2020.

We have no way of knowing how many businesses — from small, independent ones to large malls — will close or see their sales greatly reduced in the wake of the coronavirus shutdown. We do know that a large chunk of the revenues that ran the towns and villages we cover may well be reduced.

We also know that now is not the time to raise property taxes to fill the gap; too many taxpayers have been laid off and are struggling just to meet their current obligations.

So we urge our local government leaders to plan for the worst while we all work toward the best.

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