Erie County Comptroller's Office: Press Release 02/19/08

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Mark C. Poloncarz, Comptroller

02/19/08

POLONCARZ ANNOUNCES FINAL 2007 ERIE COUNTY SALES TAX DATA SHOW SIGNIFICANT GROWTH

Comptroller Notes Vibrant Sales Tax Revenue Benefits Local Governments and School Districts as well

Erie County Comptroller Mark C. Poloncarz today announced that based on sales tax receipt data provided to the County by the New York State Department of Taxation and Finance (the "State"), Erie County (the "County") ended 2007 with sales tax revenues that were $12 million over budget.

The data confirm projections made by Poloncarz' office in quarterly financial reports during 2007 showing significant growth in sales tax receipts in Erie County. In fact, the County's growth in sales tax from 2006 to 2007 was 7.38% (noting that the County imposed the new 0.5% sales tax effective January 15, 2006), and based on anecdotal evidence from other counties in New York State, Erie County's growth may be the largest in the entire state.

The County ended 2007 with (un-audited) total County share sales tax revenue of $381,195,654 against budgeted sales tax of $369,216,365, for an $11,979,289 positive variance and a $26,193,548 growth over 2006 receipts. Additionally, as surmised by the Comptroller on November 1, 2007 when he released his office's review of the proposed 2008 budget and four year plan, the County received more in sales tax in 2007 than is presently budgeted for in the 2008 budget ($380,130,538).

While the State does not track consumer spending in order to identify the sources of sales tax, Poloncarz stated his belief that given other negative fiscal trends in New York State and the country, the County's growth in sales tax is occurring due to an influx of Canadian shoppers. Poloncarz said: "For example, other comparable counties in New York have been reporting small growth and even some decreases in sales tax revenues during 2007, leading some financial officials across New York State to express concern about potential future budget problems. However, based on the evidence we have seen, we believe this growth in sales tax is a direct result of increased cross-border shopping by our Canadian neighbors."

He further noted, "Some have questioned whether the growth in the County's sales tax is attributable to the increase in gasoline prices. While this may be a very small contributing factor, it is not the primary reason for the large growth in sales tax we have seen. If gasoline sales were the primary reason then we would also see large growth in other counties as well, but we are not and in fact are seeing the opposite in most counties in New York - very little growth to actually a reduction in sales tax revenue - with Erie and Niagara Counties being the very few that are seeing significant, positive growth. Therefore, our office believes that the significant growth we see in our sales tax revenue is primarily derived from the tremendous increase we are seeing from cross-border shopping by Canadians taking advantage of the nearly level exchange rate between the U.S. and Canadian dollars."

The Comptroller cautioned, however, as he warned in his September 2007 sales tax report (http://www.erie.gov/comptroller/pdfs/review_2007_sales_tax_report.pdf), that sales tax is now the largest revenue source for County government. In the event the local, regional or national economy continues to suffer and consumer spending slows, or border security issues prompt Canadian shoppers to stop traveling to the US, the County and local governments will face significant negative financial consequences.

Poloncarz noted such growth also directly positively impacts the cities, towns, villages and school districts in Erie County, as all receive major portions of the local 4.75% sales and compensating use tax from the County. "While the County benefits from such revenue, these local governments and school districts are also recipients of this revenue stream, due to the County's 3% sales tax sharing formula and the continued sharing of revenue from the 1% sales tax."

Poloncarz added, "As the County closes the 2007 fiscal year and reconciles accounts and makes accruals, this sales tax data confirms that barring any unforeseen adjustments, the County will end 2007 with a balanced budget and, depending on decisions to be made by the Collins Administration, a potential multi-million dollar surplus."

"The county's ability to finish 2007 with a surplus and an addition to fund balance would be positive and a factor supporting an immediate upgrade to the county's credit rating by the rating agencies," Poloncarz concluded.

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