NYC-WTC_000195490

NYC 9/11 Public Portal Document

In 2002, sales tax revenue is forecast to increase by 1.6 percent (growth of 1.9 percent on a common rate and base), reflecting a slowdown in local wage income due to a lower Wall Street bonus payout on calendar year 2001 profits and moderating growth in City employment.

The deregulation of the energy industry and consequent legislative actions have had a large impact on the sales tax revenue forecast. Beginning in 1997 the Public Service Commission (PSC) ,and Con Ed, and subsequently other utilities, entered into agreements that set a schedule for competitive retail access and the deregulation of the electric industry in New York State. The natural gas industry has been deregulated since 1991. The deregulation of electricity created a large loophole in the sales tax when the commodity portion of the electric bill was unbundled from the transmission and distribution service (T & O). Transportation servicesbave typically been exempt from the sales tax. This loophole was closed administratively by the State on ApriJ 1, 2000. Subsequently, the State enacted utility reform legislation that phases out the State and local sales and use tax on the T & D portion of the electric and natural gas Charge. Effective September 1, 2000, the State and local sales tax rates were reduced by 25 percent. Each subsequent year the'State and local sales tax rates will be reduced another 25 percent resulting in a full exemption of the T & p portion of electric and natural gas sales on September 1, 2003. Additionally, the State imposed a us'e tax on the commodity component of energy purchased from out-of-state vendors at a rate of 4.0 percent (effective date: June 1, 2000). ' The impact qf deregulation on the City sales tax revenue depends also upon the participation of businesses and individual consumers in competitive gas and electric retail access. Prior to NQvember 1, 2000, the portion of the Cori Ed electric load available for competitive retail access was set by PSC agreement. On November 1, 2000, 100 percent of the Con Ed electric load was made available to competition. Since the January Financial! Plan, estimates of participation in competitive electric and gas retail access have been revised downward. Fewer businesses and consutriers are participating in’ competitive retail access than previously estimated, reducing the estimated revenue loss in the near-term from energy deregulation. The impact of energy deregulation and Stale utility reform legislation is estimated to reduce sales tax revenue by approximately $7 iriillion in 2002 and, with increasing public participation in the deregulated market, will reduce revenues by over $140 million in 2005, a decline from the January Financial Plan of $13 million and J $60 million, respectively.

Sales tax revenue is forecast to grow an average of 4.7 percent on the continuing base; in 2003 through 2005. '' ■: ' ■' / '

(J V

1

1/

74

JL-

NYC-WTC_000195571