Erie County Comptroller Mark C. Poloncarz today released a financial report for the second quarter of 2008 ("Report") that shows that sales taxes received during the quarter are not on target with the rate in the adopted 2008 County Budget.

Please note that this report is not a budget monitoring report, which is the responsibility of the County Executive's Division of Budget and Management.

Compared against similar 2007 periods, the County's growth in sales tax dropped to 1.75% for the second quarter after a first quarter growth of 5.73%. Poloncarz stated, "While year-to-date cumulative sales tax receipts currently meet period budget, our second quarter sales tax results indicate the County must act judiciously in spending and monitor all expenditures and revenues closely for the remainder of the year. While the County is presently on budget, it appears that the economic slow down that is affecting the rest of the country is finally having an impact here. As such, we must be cautious for the remainder of the year in order to end in balance."

In September 2007, the Comptroller issued a report regarding the County's increasing reliance on sales tax receipts. Notwithstanding recent growth in sales tax revenues, Poloncarz expressed caution in that report over the County's trend of relying on sales tax to fund ongoing operations.

Poloncarz further stated, "Last year I warned County policymakers that our reliance on sales tax revenue as our largest source of revenue could negatively impact our budget if an economic downturn occurs. Similarly, on July 14, 2008, New York State Comptroller Thomas DiNapoli issued a report warning that counties in New York that rely on sales tax receipts are vulnerable to the current economic downturn. Reaffirming my warning of last year, if this latest sales tax trend continues in the third and fourth quarters of this year the County could find itself facing a budgetary shortfall for 2008. Therefore, I call on the Collins administration to act appropriately concerning expenditures for the rest of this year, and that it conservatively estimate sales tax revenues for next year as they continue their preparation of the 2009 budget."

On a separate issue, Poloncarz commented on County Executive Christopher Collins' apparent agreement with the Erie County Fiscal Stability Authority ("Authority") under which the county executive may ask the Erie County Legislature ("Legislature") to request the Authority issue a bond anticipation note ("BAN") and a revenue anticipation note ("RAN") for the County. Poloncarz stated, "There is no guarantee that a BAN could be issued by either the County or the Authority, if approved by the Legislature, because no take-out mechanism exists for the repayment of that note when it comes due in 2009. Our discussions with financial institutions indicate that prior to the issuance of a BAN the underwriting or purchasing institution(s) will require assurances that the BAN will be taken out and paid-in-full on the due date. This question cannot be answered due to the ongoing issue of which party will eventually close a bond sale."

He further stated, "Additionally, no assurances have been given in writing by the Authority that it will engage in a "mirror" BAN transaction with the County if the Authority should eventually be granted the power to issue a BAN on behalf of the County. As has been previously stated, under current New York law, only the Authority could issue a bond next year to pay off its BAN if it does not engage in a mirror BAN transaction with the County this year, and in that scenario the Authority would then guarantee its existence for the life of that long-term bond. That scenario is unacceptable to me and, I believe, to the vast majority of the taxpayers of our County based on recent conversations I have had on this topic with our residents."

Finally, Poloncarz also noted that with the County's recent credit rating upgrade to BBB+ by Standard & Poor's, the County's costs of issuing a BAN or RAN may be comparable to the Authority's and that the prior responses received by his office for a request for proposals for a BAN sale are stale and based on older data that indicated the County was at a lower rating. As such, Poloncarz indicated that he will issue a new request for proposals for a County BAN sale early next week which will be based on the present, higher credit ratings.

The Report may be viewed in its entirety on the county's website at http://www.erie.gov/comptroller/financial_statements.asp.