Erie County is awash in sales tax revenue, and you can thank Canadian shoppers, County Comptroller Mark C. Poloncarz said Tuesday.

But he warned that the shopper stream and the cash overflow could dry up tomorrow if the favorable currency exchange changes or border security tightens.

Though the surplus has been forecast for months, Poloncarz said new information now points to about $12 million more than what was budgeted for sales tax revenue and more than $26 million more than last year — an increase of almost 7.4 percent.

That ranks as the strongest increase of any county in New York, the comptroller said, with other counties reporting negligible sales tax growth or even reductions. This should replenish a county treasury depleted by the 2004-05 financial crisis enough to upgrade the county’s beleaguered bond rating, he said.

“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,” Poloncarz said in an afternoon news conference in the Rath County Office Building.

All this should merit new attention from Wall Street, he added.

“We will have a balanced budget and, depending on the decisions of the Collins administration, a potential multimillion- dollar surplus,” the comptroller said. “And it could be a factor in immediately increasing our bond rating.

“We deserve to have a rating increase.”

While Poloncarz’s job is to report the numbers, he acknowledged that it is up to County Executive Chris Collins to manage the surplus. He said that calls for returning it to the taxpayers could very well arise but pointed out that an improved bond rating would result in substantial savings on borrowing costs.

“We have about $40 million in reserves now, but we need to be up in the $55 million to $60 million range,” he said. “So it makes sense to rebuild our fund balance.”

Though Poloncarz hinted that communication with the new county executive has been minimal, Collins agrees with the comptroller’s recommendations. He said the county may even need $75 million in reserves depending on the interpretation of whether it administers a $1.4 billion or $1.5 billion budget. “One reason you have a rainy day fund is that if you hit a bump in the road, you can still balance the budget without raising the sales tax or property tax,” he said.

Collins said that after the budget crisis, the county is not yet in the position to lower taxes. He cautioned that sales tax revenue is only one part of a larger equation that determines whether a surplus results. “We just believe that with all the talk of a nationwide recession, the prudent thing is to put it in a rainy day fund,” he said.

Poloncarz’s report, while generally bringing good news for the county, is also chock-full of warnings. He noted that sales tax surpluses historically rise and fall with the rate of currency exchange or heightened security, which could drive away the Canadians flocking to Western New York malls.

“If there’s one thing that Erie County’s sales tax history has shown — and this is the largest growth in about 15 years — it’s that you shouldn’t be relying solely on sales tax,” he said, “and that’s exactly what Erie County has been doing.”

He said Wall Street could exert pressure to put more emphasis on the property tax, which it considers a “known quantity” immune from the ups and downs of sales tax revenues.

Collins added that he is not concerned that tightened border security could reverse the positive sales tax trend credited to the Canadian influx. “I don’t like the situation, but I’m not that worried,” he said.

But Poloncarz also said discussions of such subjects with the county executive have been rare, hinting at strained relations between the two branches of government.

“We’ve talked a couple of times, but I can’t say we have much rapport,” Poloncarz said. “Sometimes I need to talk to him, and I would hope he would call back.”

The county executive countered by saying Poloncarz has never called him.

“There’s not a day goes by when I don’t return a phone call by 5 p.m. — ever,” Collins said. “And I just had the guy from his office in here for two hours [discussing budget issues]. I don’t know where he’s coming from.”

rmccarthy@buffnews.com

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