In her report to the Common Council at its informal meeting last week, City Treasurer Heather Campbell shared the rather alarming news that closing the gap between projected revenue and actual expenses for 2024 may require that slightly more than $2 million be taken from the fund balance, the City's "rainy day fund," rather than the $1 million anticipated when the budget for 2024 was approved, back in November 2023. Campbell's report can be review here, beginning at 32:50.
One of the shortfalls in the 2024 budget was revenue from the lodging tax. The budget for 2024 anticipated $632,000 in revenue from the lodging tax. In fact, the lodging tax revenue in 2024 was only $492,739--a shortfall of $139,261. The situation promises to be even worse in 2025. The Board of Estimate and Apportionment (BEA), made up of the mayor, the Common Council president, and the treasurer, projected revenues from lodging tax at $750,000. So far, in the first quarter of 2025, revenue from lodging tax is $53,500--only about 7 percent of the expected amount. Things are not looking good for 2025, and the amount of money left in the fund balance--in unrestricted funds--is $1.9 million.
Tomorrow night, Monday, April 14, the Common Council Finance Committee is meeting at 5:30 p.m. The Finance Committee typically meets for 45 minutes prior to the regular Council meeting, but this month, the committee is meeting the day before the regular Council meeting, presumably to give more time to the issues at hand. On the agenda for the meeting, in addition to considering the contract for Big Towel and its portable saunas, and divvying up the $30,000 to worthy festivals and events, is a discussion with Campbell about how precarious the City's financial situation actually is and what can be done to avert what appears might be looming bankruptcy. The meeting is a hybrid, taking place in person at City Hall and on Microsoft Teams. Click here for the link to join the meeting remotely. COPYRIGHT 2025 CAROLE OSTERINK
A shortfall of 4139K DOESN'T PUT A DENT IN 2M.
ReplyDeleteThe city budgeted a 52% increase in lodging tax revenue YOY. It would interesting to see how they calculated 750k as the projected logding tax revenue. Did they think the Olympics were coming to Hudson in 2025? A 52% increase YOY on any hotel budget, on any line, would be extremely rare.
ReplyDeleteYou believe they were thinking?! There is no evidence of that. Bullshitting? Fabulizing? Simply making shit up? Lots of evidence of those things — along with incompetence, stupidity, cupidity and generalized cerebral numbness.
DeleteIt's my understanding that, last year and this year, they were counting on the new hotels that have been proposed opening. Of course, none of them opened last year, and it's unlikely any will open this year.
DeleteThat may be true, Carole. But what do they call someone who counts their chickens before they hatch? I believe my grandmother called them fools.
DeleteWho’s shocked? Not me. A mayor who is mired in conflicts, has no idea what his role is in city management and clearly has no interest in actually governing. Pair that large sack of nonfeasance with the council president’s fabulist malfeasance and you end up with a completely uncontrolled meltdown.
ReplyDeleteAnd let’s be clear what the “fund balance” is and is not. It IS NOT a pile of money. It IS the liquidation value of the City’s assets (some of which are cash) if all its bills were paid and its assets liquidated. Sold. Transferred. Alienated. GONE. It’s not a savings account, a line of credit or a piggy bank.
The moral of the story: if you start with a morally bankrupt “leadership team” more interested in bow ties and sound bites than actually doing the business of governance you end up in financial bankruptcy.
Looking forward to this evening’s finance committee meeting. I’m bringing popcorn and a flask.
When the lodging tax was enacted, the Council at the time had a strategy in place to help create a sustainable revenue stream, with the formation of a tourism board that was tasked with increasing overnight stays in Hudson. Whether or not it was ever truly empowered to do so is open to debate, but eliminating that board ensured there was no easy mechanism for city government to try to “juice” more revenue from visitorship to Hudson.
ReplyDeleteBy all accounts, lodging businesses in Hudson are almost entirely in compliance with the STR regulations enacted by the Council, and reporting on and paying their lodging tax back to the city. So that’s not the reason why revenues are falling.
The analysis shows that while a handful of STR properties most closely associated with AirBnBs were converted back into long-term housing since the passage of the STR regulations, by and large the legislation was likely most effective at curbing the rate at which homes were being flipped from LTRs to STRs— maybe even bringing that rate close to 0%. The proponents of the regulation should count that as a win.
But what’s effectively happened is that the BEA has balanced it’s budget on the back of a revenue stream that was budgeted to go up and up and up, and leadership has taken every action to ensure that wouldn’t happen.
Couple all that with the fact that tourism, even a place like Hudson, is cyclical and most closely correlated to larger economic trends (even with that cycle being upended by the pandemic— but that argues even further for investment in initiatives that bring visitors from outside Hudson into it), and the fact that the macro-economic forecast is looking pretty tempestuous for the year and years ahead, our fiscal situation is indeed pretty precarious.
Alex -- excellent synopsis of the genesis of the lodging tax law and the tourism board's role. That bill resulted from bilateral discussions between the Hudson lodging association (then primarily comprised of (old fashioned) B&Bs) and the council's legal committee [full disclosure: I was the author of the bill and the chair of the legal committee then]. The tourism board was the association's brainchild and it was a very good idea that subsequent councils couldn't resist gutting to grab its self-generated and -sustaining budget (clearly to no good end).
DeleteBut there is more to this story besides a failure to understand legislative intent and logic (even though it was spelled out in the preamble to the bill).
The real exacerbating factor is property taxes and the City's (i.e. the mayor's and council president's) failure to engage in good faith revaluations of the city's taxable real property inventory in the past decade while property values were skyrocketing. As a result, many of the new hotel rooms (which have replaced B&Bs as the primary guest accommodation in Hudson these days) are exceptionally expensive, especially during the vital Spring - Fall months. These same hyper-inflated assessments for newly-transacted properties scare away potential investors in new guest properties.
So the city's "leaders," in their rush to grab money and destroy a symbiotic revenue generation model have replaced it with a catastrophic revenue destruction model. Couple these disastrous and down-right stupid policy decisions with the abject lack of either management or oversight of City operations and . . . here we are. What a surprise!
If a small city in New York files for bankruptcy, the state typically steps in to manage the situation, possibly appointing a temporary trustee to oversee the debt restructuring and ensure essential services continue. While daily life may seem unchanged initially, new projects and borrowing could be affected, and the city's reputation might suffer.
ReplyDeleteHere's a more detailed breakdown:
State Involvement:
New York has municipal distress statutes that allow the state to intervene in a city's financial crisis, potentially appointing a trustee to manage the bankruptcy process.
Service Continuity:
Basic services like police, fire, and garbage collection should remain operational.
Debt Restructuring:
The state will likely oversee the restructuring of the city's debts, potentially modifying payment terms or even wiping away certain obligations.
Stigma and Borrowing:
Bankruptcy can damage a city's reputation and make it harder and more expensive to borrow money in the future.
Impact on New Projects:
A bankrupt city may face limitations on starting new projects without creditor approval.
Tax Base Erosion:
Bankruptcy can lead to a loss of tax revenue if residents or businesses leave the city due to economic hardship or the stigma associated with bankruptcy.
State/County Responsibility:
In dire cases, the county or state may take on some of the bankrupt city's responsibilities, potentially affecting taxpayers in other areas
Thank you for the insights Alex P. and others!
ReplyDelete~
1️⃣ - This is a comedy skit... a parody of what Texans and New Hampshirites think of tax and spend New Yorkers;
Raise taxes / red tape without any thought to tax elasticity / disincentive effects, and then increase spending today, with an unrealistic expectation of tax revenues in the future.
Not to mention our current challenge of several exogenous national / state economic and public spending shocks.
~
The Mayor (Kamal) and Council President (Tom) vilify businesses, move to enact rent control laws that have not even passed at the state level (thanks Claire for the upcoming distraction!), and then when the Golden Geese stop laying eggs, or move their eggs to another town... everyone acts super surprised.
2️⃣ Hudson has at least two non-resident billionaires, several centi-millionaire residents, hundreds of successful business owners, dozens of skilled corporate lawyers and financial professionals, and a thousand plus residents without tax liens or personal bankruptcies... and yet... given all this talent within our 2 square miles... somehow two of the three people in charge of our budget either had personal tax liens or had to have their wages garnished to pay for credit card debt, and have not run successful businesses or P&Ls,
Obviously not Heather, our CFO and Wharton grad, who is more experienced and raised the red flag. And look everyone slips up at some point, and everyone deserves a second chance. But basic financial literacy and responsibility is a mandatory requirement, especially if you manage public funds.
3️⃣ Well at least we can look forward to Caitie and Peter F's public letters articulating why a possible city bankruptcy might lead to a diminished Youth Center and less funding for the beloved Oakdale Summer Camp.
~
All jokes and facts aside... if the politically active residents who so passionately oppose "efficiency" in City Hall and in the City Charter really cared about "all" residents... and the "displaced" residents... then they would be laser focussed on the City's ability to borrow cheaply, attract housing investors, and collect taxes from all property owners, not just Warren Street.
/// Tom's Legacy:
There is now a real possibility that in a few years Tom DePietro will be sitting in Missouri on a porch reflecting on a legacy of leaving Hudson in bankruptcy and with more social tumult than at the peak of the cement factory campaign.
A tragic comedy of errors that many of us said would happen a few years back. I and others said they would “kill the golden goose” of Hudson’s economic success (go back and look up Gossips articles and commentary about the STR regulations).
ReplyDeleteOne cannot expect to balance a budget by holding out your hand for taxes in front hospitality and home owners, then go behind them and stab them in the back with unfair assessments, draconian restrictions, and a general anti-business/anti-property owner sentiments.
The lodging tax revenue was indeed projected on the expectations of the tax rate increase of 1% (great), and the expectation of all these hotels opening. But they are so out of touch and non communicative with the industry that they couldn’t see what is obvious if you just walk past the buildings: some are way behind on construction, some were held up by the dysfunctional Planning Board, some have had no work done, and maybe some could get caught up in financing issues with the current economic climate.
The STR restrictions, that were passed without any inventory data or promised studies have eliminated half of the number of rentals, with more to come after the ZBA exemptions expire. It does prevent outside, nonresident investors from buying up property to make small hotels, ok that’s great. But it was an insignificant number of residences, and Galvan and other investors probably own more vacant properties than the 60+ STRs that disappeared. I bet many of these vacant properties are the very same that owe the $2M+ in delinquent property taxes. Furthermore, what are the real benefits and results? Most of these STRs have likely not converted to long term rentals, but have been sold off as weekend homes that now just sit empty and help neither community or tourism. Rent didn’t drop. Lodging and sales tax revenue is down. And now the only lodging options our visitors have is to stay at the few high priced hotels we have, like The Maker. So we’ve eliminated the middle class and budget minded tourists, and our restaurants and retail have changed with that market.
We will also continue to lose long term rental inventory as small time landlords, the backbone of Hudson’s rental stock (multi-family homes), are selling due to increasing property taxes and restrictions like Good Cause. Many friends of mine who are renters have recently told me they need to start looking for a new home because the owner is selling and the new buyer wants to convert to single family. But don’t worry, we’ll have more Luxury apartments from the mayor’s friend and landlord, Galvan, who just so happens to get tax exemptions and also exempt from Good Cause. It just seems like these career politicians and the laws they make just benefit millionaire developers at the expense of regular business and homeowners.
But what more can we expect when 2/3 of the BEA are men of leisure, with no business experience, and histories of owing money to creditors and back taxes (public information, look it up).
It should be noted that February's Finance Committee meeting consisted entirely of proposing changes to parking ticket fees, much of it based on flawed or misunderstood information. 3 of the 4 members were present, with Lola Roberts absent, no one from the Parking Bureau or the Clerk's office involved, and Treasurer Heather Campbell was MIA.
ReplyDeleteCity Hall is in the throes of FAILURE, and we should all be very, very concerned with the downward spiral direction of things, though short of abandoning ship, I don't think there's anything one can do to improve things. They are all a bunch of amateurs.
Correct me if I am wrong, but didn't Heather's revelation only come AFTER Margaret Morris voiced her concerns over the city's financial stability?
ReplyDeleteA 52% increase certainly seems like it was pulled out of thin air. Even accounting for the new hotel rooms that may have been opening in 2025, it is a wildly hopeful number.
ReplyDeleteI think part of the problem may be that the leadership in the city is out of touch with business owners and appear to be just operating in their own bubble of wishful thinking. My husband and I ran a bed & breakfast for seven years and never once did anyone from the city planning/budgeting reach out to us to see how we were doing or what we thought our projected revenues might be. We had seven years of hard data in our reservation software system, projected sales trends, etc. all information that could have been really helpful. We’ve also had a shop on Warren Street for eight years, the mayor came in one time and introduced himself shortly after he was elected, and that is the last time I have ever seen an elected official in our shop, asking how we are doing, getting our opinion on foot traffic and sales trends.
They should be speaking to every single tourist or customer-facing business owner in the city, every single year. It’s not a difficult concept, you could do it face-to-face or as a mass email/survey, ask everyone how they’re doing, if their sales are up or down, what they are expecting in the coming year. Not just the business owners you’re friends with, not just people who are going to put a rosy glow on whatever they think is happening in the city because their livelihood as a realtor depends on it. Every. Single. Business.
Nearly everyone I’ve spoken to has had down sales the last two years, in part because we were riding a pretty sweet pandemic spending spending bubble through 2022. Traffic and dollars spent have decreased since then, but our hotel room and commercial real estate rental rates are still sky high. The other half of it is that Hudson hasn’t had anything culturally exciting open in the last couple years, and by that I don’t mean we haven’t actually had fun restaurants and stores open in the last two years, we definitely have…but I mean we haven’t had a The Maker-level, New York Times can’t stop talking about it, oh my God why are they bringing up The Maker again, business open in the last few years. The next time we do have something big with aggressive PR dollars behind it open, another flurry of wealthier tourists will discover us, or re-discover us. (This is where I point out that Galvin is just sitting on a few good live music and event venues, how about you get one of those open and actually help the city you claim to care about?)
Tourists have a little less money to work with now, and they’re getting a little bored with Hudson. Until one or both of those things change, we are stuck with whatever the current economic trends are, and nearly every business owner in town who relies on tourism in a meaningful way will tell you they are looking down. So assuming any increase in lodging tax revenue year over year is either optimistic or just plain delusional.
At last week's informal meeting, Rob Perry mentioned that there is a "change order" in front of the city for "$175,000." It appears that the 3 engineers for the DRI project are requesting additional money from the city due to "overruns" and because the "project was supposed to be finished years ago." It is now up to the council to accept or deny the request.
ReplyDeleteThe heart of the problem we find ourselves in stems from the fact that no one is steering the ship. 4 years and Kamal has never bothered to hold a State of The City address (we need one NOW more than ever).
The crash could be truly ugly.
Speaking of hotels, who would want to check into a hotel with no assured off-street or on-street parking nearby? (Think Galvan's hotel at 4th & Warren and Pocketbook). Ditto for Galvan's apartment building project on 7th.
ReplyDeleteSo from the meeting... TL;DR:
ReplyDelete- Kamal failed for years to secure a lawyer to pursue (lawfully) tax delinquent property owners
- The City of Hudson is not particularly beloved by vendors in the County and State
(It is hard to find good lawyers, assessors, etc. who want to work for the City of Hudson given its reputation).
- Heather raised this issue several times in writing and in meetings.
Vicky, Rich, and Margaret generally prep well for meetings and do work ahead of meetings.
Given the ongoing and never-ending drama of governance hereabouts, Hudson residents might want to be aware of this agency-- The Committee On Open Government in NY (see link.) I know people who have had productive interactions with this office. - P. Jung
ReplyDeletehttps://opengovernment.ny.gov/about-us