Proposed budget would raise taxes 4.25%
POTTSTOWN >> Borough officials unveiled a $45.3 million 2020 draft budget that would raise property taxes by 4.25 percent if it remains unchanged.
The 2020 budget’s tax hike would result in a $46 increase for a property assessed at $85,000 or $54 increase for a home assessed at $100,000, said Finance Director Janice Lee.
The tax hike is much less than the last two budgets that brought 11 percent and 9 percent tax hikes respectively.
Lee and Borough Manager Justin Keller said they had taken
the lessons of May’s Early Intervention Program report on the borough’s finances to heart, and want council to understand it is better to have smaller steady tax increases than years with no tax hike “and then a big spike,” said Keller.
The 153-page report from Econsult Solutions Inc. and McNees, Wallace & Nurick LLC, recommended that the borough keep future tax increases within the rise of inflation, otherwise risking smothering economic development, reducing tax collection rates and stressing property owners.
While personnel costs, particularly benefits for retirees, are a cost-driver representing 86 percent of general fund expenses, the May report recognized that its recommendations to “limit salary and wage increases and controlling benefits costs,” must be negotiated at the bargaining table with the police and non-uniformed employee unions.
Luckily for Pottstown, said Keller, both the contract with the borough’s non-uniformed workers and police union are up this year.
Last month, council approved a three-year contract with the American Federation of State, County and Municipal Workers union that gives four percent raises each year.
But what it also does, said Keller, is replace the traditional, and more expensive, “defined benefit” pension plans with “defined contribution” plans more like 401(k) retirement plans. It also increased employee contributions to health care and imposed a fee when an employee’s spouse has health care available, but opts to use the borough’s.
It remains to be seen what gains, if any, are made in the police contract which is still being negotiated.
Pottstown’s finances still face challenges, not the least of which are pension liabilities and the $28 million unfunded liability of health benefits for retired police officers and longtime managers.
But there are some bright spots.
With property values up by 7.8 percent, fewer assessment challenges are successful and property transfer tax revenues are more than expected because Pottstown properties are not lingering on the real estate market, said Lee.
The borough even got a break in terms of tax-exempt properties, which actually went down by 13 parcels in 2019, many of them due to the return to the tax rolls of the YMCA property on North Adams Street, which is now owned by a for-profit company.
If all 313 of the tax-exempt parcels in the borough (except school district and borough-owned properties) were back on the tax rolls, the borough would enjoy another $1.8 million in annual revenues.
The borough must also create a capital expense plan said Keller and Lee, advice offered both by a bond rating service and by the Early Intervention Program report offered this spring.
The proposed budget calls for $100,000 to be transferred into the fund to begin saving for things like new police cars, new fire trucks and, perhaps most significantly from a cost standpoint, the borough’s crumbling stormwater arches.
As it does every year, the borough is going to ask owners of tax-exempt properties if they would like to make a “payment in lieu of taxes.” New this year, will be an offer to allow them to instead make a direct contribution to something on the capital budget list of needs.
For example, in 2017, The Hill School donated $200,000 to the borough specifically to pay for new police cars.
There are some indications council may adopt this draft budget as soon as its next meeting, Tuesday, Oct. 15, at 7 p.m.
The proposed budget calls for $100,000 to be transferred into the fund to begin saving for things like new police cars, new fire trucks and, perhaps most significantly from a cost standpoint, the borough’s crumbling stormwater arches.