Revenue Diversification Analysis

Erie County Revenue Diversification — The Honest Picture

Where the Money Comes From Now

The core problem: Sales tax (county + shared) is 48.5% of all revenue. Property tax is another 16.1%. State and federal aid is 24.2%. That’s nearly 89% of the budget from just three sources — and two of them (state/federal aid and sales tax) are recession-sensitive or politically vulnerable.

Fees, fines, and charges are only 3.05% — $69.5M. That’s where the diversification opportunity lives.

What the County Can Actually Do Under New York Law

New York counties have limited taxing authority. You can’t invent new taxes — the state has to authorize them. But there are real levers that are either underused or not being pursued:

1. Hotel Occupancy Tax — Already Exists, Expand Collection

Erie County already charges 3% (hotels with 30 or fewer rooms) and 5% (over 30 rooms). The county modernized the law in January 2024 to cover short-term rentals like Airbnb and VRBO. Revenue historically runs $10-15M/year.

The opportunity: With the new short-term rental registry law (effective April 2025), platforms are now required to report rental locations, occupancy nights, and taxes collected. The county should be aggressively auditing compliance. Every unregistered Airbnb that isn’t collecting the occupancy tax is revenue left on the table — and an unfair advantage over hotels and B&Bs that do comply.

2. Cannabis Tax Revenue — Coming but Slow

New York’s 4% local cannabis tax is split: 25% to the county, 75% to the municipality where the sale occurs. Statewide cannabis tax revenue was ~$162M in fiscal year 2024, projected to hit $248M as more dispensaries open.

The opportunity: Erie County’s share is growing but depends on dispensary licensing. The county should be actively supporting the licensing process — every month of delay is lost revenue. And the county should be advocating at the state level for a larger local share. 25% to the county is low when the county provides the roads, public safety, and services around these businesses.

3. PILOT Reform — Recoverable Revenue, Not New Tax

$23.6B in exempt property, $106K in PILOT recovery. This isn’t a new tax — it’s recovering fair contribution from properties that use county services without paying for them. Even modest PILOT reform on IDA-exempt and large nonprofit properties could generate $5-10M annually.

4. Fee-for-Service Review

The county collects $69.5M in fees, fines, and charges — only 3% of revenue. Many county fees haven’t been updated in years and don’t reflect the actual cost of providing the service. A systematic fee review across departments (clerk’s office, permitting, parks, public works) to ensure cost recovery isn’t a tax increase — it’s making sure users of specific services pay for what they use instead of subsidizing it from the general fund.

5. Mortgage Recording Tax — Protect What’s There

The county already collects this, and there was a fight in 2024-2025 about how much the county retains for processing. The County Clerk’s office declined to withhold any revenue, meaning it all flows to municipalities and NFTA. This is an area where the county should at minimum recover its actual processing costs — which the legislature estimated at $672K.

6. Gaming Revenue — Monitor and Advocate

Erie County receives gaming revenue through the tribal exclusivity payment framework (Seneca Nation). The state’s gaming revenue formula gives 10% of commercial casino revenue split between host municipality and host county. As New York expands gaming (new downstate casinos opening 2026), the county should be watching for any changes to the distribution formula that could affect WNY’s share, and advocating to preserve it.

7. Grant Capture — Do It Better

The Grant Fund is $56.1M (244 staff). That’s real money but the question is whether the county is maximizing federal and state grant capture. With $90M gaps projected in 2027-2029, every dollar of grant money that offsets general fund spending matters. A dedicated grant-writing capacity focused on infrastructure, housing, and social services could pay for itself many times over.

8. Growing the Tax Base, Not the Tax Rate

The equalized full market value of Erie County’s property tax base grew from $54.9B (2017) to $112.4B (2026) — a doubling in 9 years. The tax rate dropped from $4.95 to $3.09 in the same period. This is the virtuous cycle: growing assessed value means more revenue at lower rates. The county should prioritize policies that grow the base — particularly converting exempt or underperforming IDA properties back to the tax rolls, supporting infill development, and ensuring new development pays its fair share rather than getting decades of exemptions.

What the County Can’t Do (But Should Push Albany For)

• Local income tax — not authorized for NY counties
• New sales tax categories — requires state enabling legislation
• Congestion/tolling revenue — state authority only
• Direct utility taxation — not available, but the rate intervention strategy covers this

The Real Diversification Strategy

Honestly? Erie County’s options for dramatic revenue diversification are limited by New York law. The realistic path is:

1. Maximize what you have — PILOT reform, fee reviews, occupancy tax compliance, cannabis revenue acceleration
2. Protect what you have — fight OBBB cost-shifting, defend gaming revenue share, maintain mortgage tax revenue
3. Grow the base — policies that increase assessed value and bring exempt properties back to the rolls
4. Reduce cost exposure — the utility coalition, shared services, and homelessness prevention strategies reduce how much revenue you need in the first place
5. Advocate in Albany — for a larger local cannabis share, full childcare funding, and protection of state aid formulas

The honest answer is that revenue diversification for a New York county is mostly about disciplined management of existing sources and aggressive advocacy for fair state funding — not new revenue streams. The county that does those things well doesn’t need to invent new taxes. The one that doesn’t will always be short.

Key Budget Context

• Total Budget: $2,445,131,877 (all funds)
• General Fund: $2,081,160,029
• Property Tax Rate: $3.09/thousand (historic low, down from $5.03 in 2012)
• Fund Balance: $149.5M unassigned (General Fund, grown from $92M in 2014)
• Equalized Full Market Value: $112.4B (doubled since 2017)
• Constitutional Tax Margin: $1,008,893,355 unused (1.5% limit)
• One-Percent Tax Margin: $446,031,310 unused (local 1% limit)
• Property Tax Cap: Effectively 1.35% for 2026 (state cap is 2% or inflation, whichever is less)
• Four-Year Projected Gaps: $90M (2027), $95M (2028), $83M (2029)