SULLIVAN COUNTY – Sullivan County recorded the steepest first-quarter sales tax decline of any county in New York this year, even as statewide and Mid-Hudson collections rose, prompting county officials to examine whether the drop reflects broader pressure on taxable activity, development and construction-related spending.

The county collected $14.79 million in sales tax revenue during the first quarter of 2026, down from $17.13 million during the same period last year, a 13.7% decline, according to the State Comptroller’s Office.

The drop stood out sharply across the region. The Mid-Hudson Region saw sales tax collections rise 5.2% during the same period, with Dutchess, Orange, Putnam, Rockland, Ulster and Westchester counties all recording year-over-year increases. Statewide, local sales tax collections rose 5.1%, totaling $6.1 billion in the first quarter.

Sullivan County’s decline was also the steepest of any county in the state. Of the 10 counties that saw first-quarter decreases, Sullivan had the largest percentage drop, followed by Montgomery County at 8.1%, Lewis County at 6.6% and Monroe County at 5.1%, according to the Comptroller’s report.

County Manager Joshua Potosek warned in his May/June newsletter that sales tax income, which he described as the county’s largest revenue source since the pandemic, has fallen 16% compared with the same time last year according to the county’s analysis. If that trend continues, he wrote, “Sullivan County could fall $14.5 million short of its $77.5 million sales tax revenue projection.

“That may not sound like much compared to a $300 million overall budget, but it will indeed come with serious impacts that we’re only now beginning to fathom,” Potosek wrote.

Potosek said county officials have begun limiting staff overtime, advertising and hiring for only essential positions and looking for ways to avoid large property-tax increases as the county begins early planning for its 2027 budget.

The cause of the decline remains under review, but building materials and supplies show, by far, the largest loss in sales tax revenue. 

Sullivan County Treasurer Kathleen Lara said, “No matter how you slice it, building materials soared in 2023 and 2024 and then went back down to ‘normal’ levels in 2025.”

She added, “It’s a little tough to point to any one category as the main driver, as there are several factors contributing to the decline. From the county’s perspective, the building materials and supplies category is likely part of the picture, but not the sole or primary cause.”

Lara pointed to a broader mix of development pressures, including limited water and sewer capacity, rising construction costs, tariffs, supply chain disruptions and sustained demand for materials. She also noted that occasional local constraints, such as building moratoriums, can affect development activity, though she said those are less common.

“One of the biggest challenges continues to be infrastructure: specifically water and sewer capacity, which limits new development across the county,” Lara said.

Lara, who also serves as chairman of the Town of Thompson Planning Board, said she has seen several projects receive conditional approval but remain stalled while developers work to secure water and sewer service.

“At the same time, construction costs have increased significantly,” Lara said. “Tariffs, supply chain disruptions, and sustained demand have all pushed material costs higher, which can delay or discourage building.”

Lara said she contacted the building departments in the towns of Fallsburg and Thompson to assess whether they had seen a slowdown in construction activity. Both indicated a significant decrease in building, she said.

“So overall, in my opinion, it’s really a combination of infrastructure limitations, rising costs, and some local constraints, rather than any single category driving the decline,” Lara said.

Sales tax collections are often used as one indicator of local consumer and business activity because they rise and fall with taxable purchases. The Comptroller’s Office notes that local sales taxes are sensitive to changes in the prices of goods and services and to the amount consumers are willing and able to spend.

County officials are continuing to examine the revenue trend as the county prepares for the 2027 budget process.