Officials trim tax increase to 2.9%

Borough expects lower health insurance premiums, increase in assessed property value

POTTSTOWN » Wednesday’s borough council meeting produced a rare commodity in this year of the pandemic — good news about money.

Borough Manager Justin Keller had the honor of informing council that two encouraging trends will reduce the projected tax hike for the proposed $49 million budget for 2021.

The budget reviewed last month carried a 3.5 percent tax hike to be balanced.

But due to a 4 percent reduction in health insurance premiums (yes, a reduction); and an increase in the borough’s assessed property value, the tax hike will be cut to below 3 percent — 2.8 percent to be exact.

Under the budget reviewed last month, the annual increase the owner of a property assessed at $85,000 would have paid was $39.19.

Thanks to the good financial news, the annual increase for that same property owners will be reduced to $32.48.

After years of declines, an increase in the bor

For years, the borough’s assessed property value has trended downward, with the most significant hit coming in 2017 when Pottstown Hospital was sold by Community Health Systems, a for-profit company that had run the facility, and paid taxes on it, since 2003.

ough’s assessed property value is just a bit less rare than a decrease in health care costs.

The latter, Keller said, is due largely to changes implemented in the last two labor contracts with police and non-uniformed workers.

he five-year contract with the police union signed about this time last year carried hefty raises of 18-percent over its length, a $750,000 addition to the borough’s payroll.

But it contained a provision borough management has sought for years, ever since an audit of Pottstown’s operations labeled post-retirement benefits for police as over-generous.

The contract eliminated post-retirement health care for all new officers hired after Jan. 1, 2020.

That benefit had ballooned over the years into a liability of almost $29 million by the end of 2017, which requires an annual contribution of $2.3 million, according to a May 2019 report on Pottstown’s finances.

The 153-page report from Econsult Solutions Inc. and McNees, Wallace & Nurick LLC, part of the Early Intervention Program, offered by the Pennsylvania Department of Community and Economic Development, highlighted personnel costs as one of the primary drivers of the borough’s budget tax hikes.

The successful elimination of that benefit for new employees means “we can slowly start taking that liability off the books,” Keller said when the police contract was approved last year.

However, former finance director Janice Lee warned it could take 20 years for the impact to be felt.

But Keller told the council Wednesday night that the elimination of that benefit gave management more leverage in negotiating a reduction in health insurance costs for 2021.

Even more leverage was provided by other concessions made by the police union last year that allow the borough to seek out less-expensive medical plans that offer the same benefits as the plan in place in 2019.

Additionally, the police contract added an incentive to get police spouses off the borough health plan.

A similar provision was included in the contract for non-uniformed workers represented by the American Federation of State, County and Municipal Employees.

That contract, signed in September of 2019, contained a $40 per month fee for employees who have a spouse with health insurance available through another workplace but chooses to use the borough employee health plan.

This is the first time such a fee had been agreed to by the union.

Those labor contracts were offered up as the answer to a question asked by Councilman Michael Paules last month, who wanted to know how the borough could justify offering raises when so many people have lost jobs due to the coronavirus pandemic’s impact on the economy.

Those contacts provide 4 percent raises for both police and non-uniformed workers in 2021. And Keller had explained last month that raises are also being provided to management to ensure they were not making less than the people they manage.

Paules said Wednesday night he offered up that answer to constituents continuing to ask him about the raises. Apparently, his constituents did not think much of the explanation.

“I was told to do something to myself that is not physically possible,” said Paules, who added that he continues to have concerns about raises being provided when taxes are being raised.

The other factor resulting in the reduction of the tax hike is an increase in the borough’s assessed property value.

For years, the borough’s assessed property value has trended downward, with the most significant hit coming in 2017 when Pottstown Hospital was sold by Community Health Systems, a forprofit company that had run the facility, and paid taxes on it, since 2003.

When purchased by Tower Health, which claimed non-profit status, borough property assessments took a deep dive and the borough saw a $235,000 hole blown in its annual tax revenues.

In the past five years, both the borough and school district also have suffered from a wave of assessment challenges from smaller residential and commercial properties, driven in part, by law firms specializing in the practice.

But Keller and Borough Council President Dan Weand, who heads council’s finance committee, have been saying for months the trend in challenges seemed to be leveling off.

And this month they learned that rather than drop, Pottstown’s total assessed property value climbed by $1.5 million in 2020.

That means that each mill of property tax levied generates more revenue than it did in 2019.

As it stands now, council will vote Monday on a $49,297,140 budget for 2021 that will carry a combined millage of 13.543 mills.