Starting a Business in Potsdam?

May 27, 2024

According to a village Trustee, Potsdam village has a 20% commercial vacancy rate. Not only downtown, but also on outer Market street storefronts stand empty – think of the former Ponderosa (closed in 2020), Walgreens (closed this year), Dominos, Sears and Monro Muffler, among others. Potsdam’s Monro Muffler left a sign on its door in 2020, stating, oxymoronically: “We’re moving to serve you better! Come Visit Us in Nearby Locations” and then listing their locations in Canton and Massena. That made me curious: why did the Potsdam Monro Muffler get shuttered and not the ones in Canton or Massena? Why did the Potsdam Walgreen shutter, and not the Walgreen’s in Canton? Are stores in Potsdam somehow at a disadvantage?

In an effort to put some numbers in place, I searched the St. Lawrence County online data-base, looking up assessed or Total Market Values (TMV) of the 3 Monro Mufflers. The online data-base also reports the property taxes paid by each location, annually. Finally, I inquired about each municipality’s water and sewer taxes/fees. I tabulate results below. The numbers show that operating a business in the village of Potsdam costs significantly more than operating the same businesses in our neighboring municipalities.

Monro’s in Potsdam and Canton each occupy nearly 0.6 acres while Massena’s is situated on a smaller 0.3 acre lot.  Monro’s in Canton has the largest store-size, at 41,000 square feet, followed by Potsdam’s with 25,000 square feet and then Massena’s with 15,000 square feet.  Oddly, the store with the largest square footage and biggest acreage had the smallest assessed or Total Market Value!  Canton’s Monroe Muffler had an TMV of just under a quarter million dollars in 2020.  Massena’s Monro Muffler’s TMV was higher, at $300,000 while Potsdam’s Monro’s ranked first with a TMV of nearly $380,000 in 2020. 

The assessed values or TMV of  properties increase over time, as seen in the table below.  There is no pattern to the increases. The Monro Muffler in Massena suffered no increase in its TMV from 2019 through 2022, then it increased by 9% in 2023.  The TMV of  Monro Muffler in Potsdam increased 2% from 2019 to 2020, then increased 1% in 2021, 4% in 2022 and 7% in 2023, even though this location no longer served customers and sits idle since 2020.  The Monroe Muffler in Canton, meanwhile, had a 10% increase in its assessed value in 2021 and a further 5% increase in 2023. There seems to be no rhyme or reason to the increases in TMV across the 3 municipalities.

How did the tax levies compare? In 2020, when Monro was still operating in Potsdam, Canton’s Monro Muffler paid by far the smallest property tax, at under $2,600; Massena’s Monro paid a bit over $5,000 in village taxes; while Potsdam’s Monro Muffler had to pay nearly $6,600 in village taxes. This is concerning, as the village of Potsdam drew down its General Fund reserve by a quarter million dollars in 2023 in order to lower its tax rate that fiscal year by over $1 per thousand dollars in property value (see chart below). In spite of that, Potsdam’s Monro Muffler still paid two-and-a-half times more in village taxes than its larger store in Canton in 2023-2024. The Potsdam store also paid 20% more in village taxes than the Massena store last year.

What about the Water and Sewer Taxes / Fees? Let’s assume that each establishment uses 43,800 gallons of water and sewer per year. (Why 43,800 gallons? Because that amount of water-use equates precisely to 1 EDU in Potsdam, and is a reasonable estimate for annual water-use in an establishment.)  In this expense category, water and sewer fee, Potsdam businesses also pay the most: Monro in Potsdam pays $700 in water and sewer fees; Monro’s in Canton pays a bit under $600 for identical water and sewer use, while Monro in Massena pays under $400 for its water and sewer fees.

In sum: Potsdam’s Monro has the highest assessed value, even though it neither has the largest lot nor the biggest nor the most modern store. Potsdam also has the highest tax rate of all three municipalities, averaging over $18 per thousand dollars of property value, nearly twice as high as the tax rate in Canton and also higher than in Massena.  Combine the higher tax rates with higher assessed values, and businesses end up paying significantly more in taxes in Potsdam than the neighboring municipalities.  Finally, for the same amount of water use, businesses in Potsdam again pay nearly twice the water and sewer fees as in Massena, and also more than in Canton.

Are these the reasons the Monro Muffler in Potsdam shuttered while the ones in Canton and Massena still operate? Why the Potsdam Walgreen’s closed, but not Canton’s Walgreen’s?  Does our tax structure deter, perhaps prevent, businesses with small profit margins from succeeding in our municipality, i.e. businesses like clothing and shoe stores and small food retailers? Might our tax structure instead favor business models that either pay no property taxes, like college and medical campuses, or businesses that employ high sales volume model, such as the chain stores Lowes and Price Chopper, or businesses with more robust profit margins, like restaurants?

Since commercial establishments pay the same tax rates as private residences, can we infer that private residences also pay lower taxes in Canton? Yes. And indeed, as discussed in a previous post, during the previous decade the population of the village of Potsdam decreased 12% while the population of the village of Canton increased by 13%. Businesses and homeowners will likely continue to shift locations to lower their expense burdens as disposable incomes shrink. Our lower-tax neighbor will continue to act as a black hole for Potsdam, pulling people and resources into its sphere of influence.