The sales tax bonanza that has buttressed local governments in Erie County for more than a year is cooling down, another sign consumers are conserving their money.
Sales taxes give county government its largest source of revenue, leaving it vulnerable to the economic winds.
The winds faded in the second quarter, from April through June.
“It appears that the economic slowdown that is affecting the rest of the country is finally having an impact here,” Comptroller Mark C. Poloncarz said Thursday.
Poloncarz said the county is still within its budget for the first six months, but he warned County Executive Chris Collins to slow the spending.
“We were already in that mode,” said Collins’ budget director, Gregory G. Gach, who today will make public his financial report for the first half of 2008. He will highlight the same sales-tax trend but with slightly different totals.
Gach said he announced a hiring freeze and a ban on unnecessary travel when the county’s top commissioners met Wednesday.
“I am having my staff go through budgets and put budget holds on everything we consider nonmandated spending,” Gach said. “Where we have an ability to save money we are doing it. I and the county executive are as concerned about sales taxes as the comptroller.”
Gach also invited the government’s elected department heads — the sheriff, district attorney, clerk and comptroller— to slow spending in their offices.
Meanwhile, he has learned of an upturn in the number of Erie County residents seeking aid from the Temporary Assistance for Needy Families program.
On the state level, Comptroller Thomas DiNapoli had already warned the counties that rely mostly on sales taxes to brace for an economic downturn. Gov. David A. Paterson has frozen most hiring, ordered an additional 7 percent cut in agency spending and challenged the Legislature to cut $600 million.
Erie, more than Niagara County, had been riding high with the influx of Canadian shoppers. With the Canadian dollar at par with U. S. currency, Canadians were crossing the border in droves to avoid their higher taxes on purchases.
Canadian shoppers helped Erie County build a $9 million surplus in 2007, and Erie County’s schools, cities, towns and villages received their unexpected shares of the bounty.
U. S. and Canadian currencies are still at par and still provide Canadians with reason to shop here. But auto sales are down, Poloncarz said. And though gasoline has topped more than $4 a gallon, less gas is being sold, he said.
During the year’s first three months, Erie County’s sales tax proceeds grew 5.73 percent. The growth fell to 1.75 percent in the next three months. Had the growth continued at 5.73 percent, the county alone would have collected about $7 million more than its total $191.6 million.
It’s not a crisis. Gach said that if Erie County just matches last year’s widely unexpected sales tax receipts, it will be on budget for 2008.
Poloncarz said the slowdown provides him with another reason to protect the county’s supply of cash and not front money for some of its expensive public improvements.
The government usually borrows money for those needs, but it has been locked in a dispute with the state-appointed control board, which wants to take over as the government’s borrowing agent.
The county executive and the control board chairman, Anthony J. Baynes, announced an accord this week that makes it more likely the control board will handle the county’s next short-term transaction, a one-year bond anticipation note to pay for major projects.
Poloncarz said Thursday he’s not sure that can legally happen because too many questions remain for underwriters and bond buyers. So he told the Public Works Department on Thursday that he will not front the money needed to reconstruct Tonawanda Creek Road in Clarence, a project that Collins had said should begin soon.
It’s likely that the work will still begin, once a contractor is selected. But officials will need to settle their issues before the contractor’s first bills are submitted for payment.
Copyright 2008 - The Buffalo News
