ALBANY – The State Comptroller’s Office on Monday refuted Orange County’s assertions that a defect in state law resulted in the county illegally overdistributing sales tax revenue to municipalities for more than a decade.
The error could now leave the county’s local governments facing a combined shortfall of nearly $20 million in 2026.
“Under state law, Orange County, like all counties, requires special state legislation to exceed the 3 percent sales tax,” said a spokesperson for Comptroller Thomas DiNapoli’s Office. “In the special legislation authorizing Orange County to impose an additional .75 percent sales tax, enacted in 2004, the state legislature explicitly prohibited Orange County from sharing the additional .75 percent tax with municipalities.”
Last week, Deputy County Executive Harry Porr told the Legislature’s Rules, Enactments, and Intergovernmental Relations Committee that the situation stemmed from “a defect in the state legislation.” Later in the meeting, Orange County Legislator Genesis Ramos asked Porr if the oversight was caused by the state or the county.
Porr quickly replied: “The state.”
County Attorney Rick Golden, who sat at Porr’s side, then intervened, stating that the county may have initially requested the higher distribution rate, but was not alerted to the issue by the state until recently. Since Orange County Executive Steve Neuhaus in 2014, the county has been sharing revenue from the 3.75 percent of sales tax it is permitted to keep; legally, they are only authorized to share from 3 percent of the 3.75 percent.
Without the additional revenue, municipalities could lose roughly 20 percent of expected sales tax income used to balance budgets and limit tax increases, causing concern amongst municipal leaders. Sales tax sharing has been a focal point of Neuhaus’ economic plan and “fiscally responsible” budgeting.
“This is an extremely concerning issue,” Town of Chester Supervisor Brandon Holdridge said. “I’m glad to hear that people are working together to try to fix it. It would be devastating to our local budgets on the municipal level if we lost the current amount we get from the County. Unfortunately, a mistake of this magnitude hasn’t been caught by anybody until now.”
“I’m sure our state representatives will need answers as to how it happened but I’m very confident they will get to the bottom of it and will pass the appropriate home rule legislation that will protect all of our taxpayers,” added City of Middletown Mayor Joe DeStefano.
Porr and Golden introduced a resolution on behalf of Neuhaus to submit a home rule request to the State Legislature. The request seeks approval of special legislation that would retroactively authorize the additional 0.75 percent distribution. The Legislature is scheduled to vote on the resolution at a special meeting at 3:30 p.m. Tuesday.
Senator James Skoufis (D-Cornwall) was critical of the gaffe and shared he “is already drafting a straightforward fix to the county’s error.”
“We will do everything possible to pass the bill before the Assembly and Senate adjourn in June,” Skoufis said. “It is unfortunate the County Executive’s office sat on the error for almost two weeks without communicating anything to state lawmakers, but my colleagues and I are now moving as quickly as possible to ensure our villages, towns, and cities are made whole. Absent a fix, the county’s error will result in enormous local property tax hikes and service cuts.”
Golden spoke at the Legislature’s Physical Services Committee meeting on Monday at the request of the County Executive’s Office, “to set the record straight” about the county’s error and answer any questions Legislators might have.
Golden explained that when Neuhaus took office in 2014, he wanted to share the 3.75 percent, and “there is nothing in the codification that says you can’t do this.”
“So, we started sharing the 3.75 percent so that municipalities gained additional monies since 2014 until now,” Golden added.
Golden, a municipal attorney by trade, said the Comptroller’s Office did not notify Deputy County Attorney Carol Pierce that the county could not share the 3.75 percent until earlier this month. Wanting to keep the 3.75 percent in place for the county, Golden quickly pivoted to creating the resolution.
“Hopefully, (the resolution) gets passed tomorrow,” Golden said. “It has everything in it to draft and introduce those bills in Albany.”
Golden and other county officials have still not been able to explain how the Neuhaus administration made the sales tax error for more than a decade. Orange County Legislator Stephen Hunter, a Democrat, pressed Golden on Monday about how the error went unnoticed for so long.
“I have only been around since 2022,” Golden said. “Again, when I came in and looked at it, there’s nothing in the code when you look at the statutes to say that you can’t do this. And I’m sure my predecessor went ahead and didn’t see any prohibition in there. And so, when the County Executive came in, and he wanted to share the full 3.75 percentages, it didn’t seem like there was any problem with that.”
Golden said to his knowledge, the county was never informed by the Comptroller’s Office of its error over the last decade.
“But I’m not trying to blame the state at all,” Golden said. “We are not trying to blame the Comptroller’s Office. We are saying that’s how we learned about it. As soon as we learned about it, we tried to rectify it quickly.”
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