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Canadian shoppers help county avert deficit

You've heard the story: Busloads of shoppers flexing their Canadian dollars flood the malls and empty the shelves, leaving retailers on this side of the border both exhausted and elated.

But don't forget those giddy tax collectors. Erie County's sales tax income has shot up almost 6 percent compared with last year, and that doesn't include the busy holiday shopping season now unfolding.

That 6 percent amounts to an additional $29 million at last count, to be shared by the county's cities, towns, villages and school districts under a decades-old formula. They can use their unexpected gains to lower property taxes or at least keep them at bay.

The county is especially fortunate. At the start of the year, the state-appointed control board projected a $15.5 million deficit. Now county government is angling toward a year-end surplus, largely because the Canadian loonie rivals the U.S. dollar.

With their backs to the wall in 2005, county lawmakers raised the total sales tax rate in the county to 8.75 cents on the dollar, which includes the state's 4-cent-per-dollar tax. Erie levies the second-highest sales tax in the state -- trailing only the 5 percent charged in most of Oneida County -- and one of the highest in the nation.

While county residents were angry, county officials unknowingly had positioned themselves nicely for the Canadian invasion.

Last year, before the Canadian dollar's dramatic change, county officials projected that sales tax revenues would increase this year by about 3 percent. In other words, they would collect $14 million more for county operations than the previous year.

But in the first nine months -- as the Canadian dollar reached parity with U.S. currency -- about $19 million more flowed into county government. By the third quarter, which ended Sept. 30, schools, towns, villages and cities had received about $10 million more from the sales tax than in the same period last year, according to county figures.

Erie County's income has outpaced that of many other upstate counties dominated by an urban center. Monroe, Onondaga and Albany, as well as Jefferson, another county near the Canadian border, have not matched Erie County's growth, according to comparisons from the state Department of Taxation and Finance.

In recent years, many counties have decided to rely more on sales taxes, since local property taxes have contributed mightily to New York's reputation as a high-tax state. That makes those governments more susceptible to the economy's winds. At this point, Erie has a breeze at its back.

In raising the sales tax, county lawmakers said they couldn't keep asking property owners alone to pay more for government services. Time had come to adjust the load, even if it meant raising a tax that hits the poor harder. The same tactic was used in 1985.

County Executive Joel A. Giambra's budget for next year calls for no across-the-board property tax increase. But it projects $6 million in revenue from selling the county's tax liens. That now appears unlikely, but no lawmaker, as yet, has suggested raising property taxes to make up the difference.

County Comptroller Mark C. Poloncarz has assured lawmakers that if the trend continues, additional revenue from the sales tax would cover the problem.


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