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Sales tax revenue is surging in 2 counties; With Canadians' help, Erie, Niagara rebound

Canadian shoppers and higher gasoline prices have helped produce some good news for Erie and Niagara counties.

Sales tax revenue has bounced back.

Erie County so far this year has seen a 3.9 percent increase in sales tax revenue -- a jump after two years of lackluster numbers and a return to pre-recession sales tax growth.

In Niagara County, sales tax revenue is up by 7.6 percent, compared with the same period last year.

"It's much better than the recession years," said Gregory G. Gach, departing budget director for Erie County.

So what's fueling the growth?

"There's a one-word answer I can give you right now: Canadians," said Gary D. Keith, an economist with M&T Bank. "They have been helping our retail sector significantly throughout 2011, and, in fact, the nice growth we're seeing in Erie County has been topped by what's happening in Niagara County."

Those who track sales tax in the region point to several other factors that have helped sales tax revenue in both counties rebound: a pent-up demand for vehicles, a summer spike in gasoline prices and higher prices for other goods.

"A part of it is prices increasing, and part of it is that we may be moving toward a more robust economy, although I'm skeptical there," said Lawrence Southwick Jr., associate professor emeritus at the University at Buffalo School of Management. "We're going to have to wait and see."

Southwick said the increases that Erie and Niagara counties have seen this year mirror growth throughout the state. All but three counties saw their sales tax grow in the early quarters of the year.

In Erie County, higher-than-expected sales tax revenue has helped put the county on track to end the year with a budget surplus. The county received $323 million in sales tax through the end of October -- a $12 million increase over the same period last year.

Finalized sales tax revenue for November and December is not yet available in Erie County, but county officials said they see no indication that the numbers will drop significantly once the year-end sales tax figures are tallied.

"Coming off the recession years, it's very good growth," Gach said. "And we expect it to continue for the year and then go back into a normal growth cycle."

Historically, Gach said, the county has seen about a 3 percent growth in its sales tax revenue each year. That dropped dramatically between 2008 and 2009, when the county saw a 3 percent decrease in sales tax.

"The real encouraging thing for 2011, to me, is just how much we've been able to leverage that Canadian border experience this year, unlike years past, where it's not been as powerful," Keith said.

Keith said the fact that the Canadian dollar has been "close to parity" to the U.S. dollar has helped attract more shoppers across the border. But it's not just retail outlets, he said, that are benefiting.

Restaurants and hotels also have benefited as Canadians stay overnight for flights out of the region or shopping trips.

He expects the Canadian shopping trend to continue.

"The expectation for 2012 is that we'll stay right around the same level," Keith said. "And so another good year, I think, is in store for attracting that Canadian dollar to Western New York."

In Niagara County, Treasurer Kyle R. Andrews has tracked sales tax numbers through November and found strong growth from the retail area around the Fashion Outlets of Niagara Falls and Military Road in the Town of Niagara. Auto sales and gasoline prices, he said, also have contributed.

"It's looking to be one of our better years over the past decade," Andrews said.

While Canadian shoppers and retail sales appear to have helped push up sales tax revenue, there are a number of factors that can affect growth.

Erie County's deputy comptroller, Lorne H. Steinhart, said taxes on the sale of utilities and wholesale gasoline make up the two largest portions of the county's sales tax revenue, ahead of taxes on auto and retail sales.

Those are numbers Erie County officials track closely. The county's largest source of revenue is sales tax -- a concern for Wall Street analysts who rate the county's debt.

Standard & Poors Financial Services last week upgraded the county's rating but warned that its reliance on "economically sensitive" sales tax revenue as its primary revenue source is a risk.

For some retailers such as Michael J. Poczkalski, owner of Room, a furniture store on Hertel Avenue, the latest sales tax figures come as no surprise. Poczkalski said he has seen an increase in sales c over last year.

"I think consumer confidence is stronger than people portray it to be," he said.