Westchester Is Getting More Expensive With Sales-Tax Increase

(Bloomberg) -- Just when it seemed like taxes in Westchester County couldn’t get higher, they’re about to go up again.

Legislation enacted by New York Governor Andrew Cuomo will increase the county’s sales tax by one percentage point to 8.375% on Aug. 1, bringing it in line with neighboring Rockland and Putnam counties, but about two percentage points higher than in Connecticut. The increase will raise about $47 million in fiscal 2019 and $103 million in 2020, and is “a credit positive for the cash-strapped county, its municipalities and school districts,” Moody’s Investors Service said in a note.

“The cash infusion will allow the county to boost reserves, which have declined significantly over the past four years,” Moody’s said. Reserves are expected to rise to $80 million by the end of 2020 compared with $65 million at the end of 2018.

In November, Westchester, home to the wealthy suburbs of Scarsdale and Bronxville, lost its AAA grade from S&P Global Ratings and Fitch Ratings after drawing down its cash reserves to cover retroactive raises given to government employees. The two rating companies assign a AA+ to the county’s bonds and Moody’s rates the debt a comparable Aa1.

The average Westchester homeowner pays $17,392 in property taxes, the highest in the U.S. and almost $4,500 more than second-place Rockland, according to Attom Data Solutions.

Westchester home sales last year were hampered by rising interest rates and a new $10,000 cap on deducting state and local taxes. However, the housing market rebounded in the second quarter, jumping by the most in three years, as falling mortgage rates enticed buyers, according to a report by by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.

The county will share 20% of the new sales-tax revenue with the 38 municipalities in the county that don’t levy their own tax, and 10% with 37 school districts. Many towns have said they’ll use the money to reduce the need for property-tax increases in future budgets, according to Moody’s.

School districts and local governments have historically received about $120 million in sales-tax revenue from the county and may receive as much as $40 million in new revenue after the increase, according to S&P.

--With assistance from Oshrat Carmiel.

To contact the reporter on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net

To contact the editors responsible for this story: Elizabeth Campbell at ecampbell14@bloomberg.net, William Selway, Michael B. Marois

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