23 percent tax hike would close $2.4M budget gap
Borough Manager Mark Flanders has a sobering financial message for borough council and the community — there may be a big tax hike coming.
In his report to council Sept. 6, Flanders outlined shortfalls in eight different borough funds, the largest of which is $1.5 million in the general fund.
Taken together, the total shortfall adds up to $2,371,000, according the figures Flanders read.
Although increased costs — particularly personnel and health care costs — are a factor, said Flanders, the big shortfall is also being driven by a relentless stream of property assessment challenges.
He said 2017 began with a total assessed value of $804 million. By July 31, it had dropped by an additional $2 million.
With more hearings in the pipeline “our assessed valuation will likely go down even further — most likely below $780 million,” he told council.
And that loss in assessed property value does not even include the loss when (or if) Pottstown Memorial Medical Center is taken off the tax rolls because of a potential purchase by the non-profit Reading Health Systems announced in May.
Currently, Pottstown Memorial Medical Center is the borough’s largest property tax revenue source.
Solicitors for both the school board and borough council were instructed at a joint meeting on June 20 to look into the potential impact and timeline for that possible sale and report back — but there has yet to be a public report on the subject.
If no cuts are made, it would take an eye-popping 23 percent tax hike to close the looming budget gap, Flanders told council.
Council President Dan Weand, who is the only incumbent opposed in the November election, noted
the budget gap number always starts out high at the beginning of the budget process, and gets whittled down through the process.
However Flanders pointed out that in the last few years, particularly 2015 and 2016 when taxes were held steady by drawing down reserves in other funds, the administration has warned that a reckoning will have to come at some point
“In spite of the increases in cost of doing business, over the years we have shaved and shaved and shaved the borough operating budget frankly to bare bones with little or no room for capital investment, cost overruns or unforeseen expenditures,” said Flanders.
“Since 2012, borough council has opted to balance the budget with little or no tax increase, borrowing from fund reserves to balance the budget, to close the gap,” he said.
“We are now at the point where taking money from out fund reserves is not a viable option,” Flanders said.
Although the administration will look for savings with vendors, cost-cutting and “skimping where possible, but frankly we have been through this exercise so many times already, that shaving/cutting is now at the point where it comes at a cost to the services we provide to the community,” Flanders said.
Council, he said “will have to make some tough decisions over the next few months,” he said, either deciding on service cuts of some kind of tax hike.
Council Vice President Sheryl Miller, who has opted out of running for reelection, urged council against cutting emergency services and suggested an independent study might be needed to look at salaries in the borough, some of which she said are “outrageous.”
Public budget talks typically begin in October.