12 percent tax hike looms
With its second consecutive 12-percent tax hike looming — and a state-sponsored consultant trying to find ways to save money and reduce future tax hikes — borough council has yet to make any changes to the proposed $48.9 million 2019 budget.
If adopted unchanged, the budget would add about $120 to the annual property tax bill of a home assessed at $85,000.
On Nov. 13, council voted on advertising the budget, and a brief review of where the budget stood Nov. 7 elicited little comment and zero suggested changes from the seven elected members of borough council.
The only comment came from Council President Dan Weand, who also heads council’s finance committee.
Borough Manager Justin Keller said one major factor in the tax hike is the $1.1 million hike in pension costs revealed in September. A recent meeting with the pension board revealed that such increases will only keep coming, he added.
To which, Weand added “the actuary said its because health care is too good and our retirees are living longer.”
Retired police health care
Retirees’ excellent health is due, in part, to the generous health care package the borough offers retired police officers
According to the current contract, police retirees carry their borough health care coverage and coverage for their families into retirement with them, with a $100 deductible and a 20 percent copay.
They must exit the health care plan when they become eligible for coverage from another health plan, say through a spouse’s plan, but can return if they lose that eligibility.
Those who retired between 1999 and 2011 get the plan that was in place in 2010 and those retiring after 2011 get the plan that was in place at their retirement for themselves and their families. The contract’s definition of families includes children born after the officer retires, provided the spouse is the same, and the retired officers pay no premium. Coverage continues for a spouse if the retired officer dies first.
But those hired after 2013 do not get that guarantee of coverage.
Non-uniform borough employees, members of the American Federation of State, County and Municipal Employees union, do not receive borough-sponsored health care in their retirement.
In 2019, both the police and non-uniform employees will receive contractual pay increases.
A $27 million liability
Five years ago, the borough began setting aside money to pay for retired police health care. The borough faced a $27 million liability on 2013, when it began making an annual $250,000 contribution to try to address that liability.
Since then, the borough has paid into that fund four of the five past years, skipping 2017, according to Finance Director Janice Lee. With the 2018 payment, that fund will have $1,250,000 according to Lee.
That health care liability was one of the issues mentioned in the 141-page Early Intervention Program report issued by Management Partners in 2008 as one of the things necessary to straighten out borough finances.
The report was cited as the reason for the lay-off of 13 employees in late 2008 and the 10 percent property tax hike which accompanied it.
The first phase of a new report is due out later this month from Econsult, one of three firms that applied for the work after the borough was approached by the Pennsylvania Department of Community and Economic Development and asked if it once again needs help organizing its
Councilman Joe Kirkland — who heads up the ad-hoc financial sustainability oversight committee formed in the wake of last year’s tax hike but which has produced little budget savings this year — said he met with representatives of Econsult and said “I don’t want them to feel their hands are tied.”
In February, the ad hoc committee put together to try to find ways to lower taxes discovered that instead, without an infusion of $1 million in reserves to re-establish contributions to a capital fund, the borough’s bond rating may be downgraded.
In prior years, the general fund’s dwindling reserves were drained to plug deficits allowing borough council to adopt budgets with little or no tax increases.
One suggestion being implemented by Kirkland’s committee is the elimination of the payment
window on the second floor which allows residents to pay their water bills in person.
Resident Kenneth Yerger showed up Nov. 7 to question the wisdom of that. “Not everyone has a checking account or credit card,” he said.
If the window is still going to be open for getting other permits, how much savings is really generated by refusing to accept payments for water bills he asked.
Weand assured him it would save money.
Police pension costs
According to the current 80page police contract, officers can retire at age 50 with at least 25 years of service and receive 50 percent of their final average salary in the last 36 months of employment with another $100 per month added for every additional two years of service.
Members contribute 5 percent of compensation to the plan.
Base salaries for this, the second year of the three-year contract, range from a low of $59,155 for a patrol officer to $92,227 for sergeant. the police captain and police chief have their own contracts.
Base police salary ranges in 2019 will range from $61,235 to $95,472.
Night work after 8 p.m. adds 2.5 percent to the base salary.
Longevity pay adds 2 percent to base pay after five years of service, all the way up to 6 percent after 20 years of service.
The pension bonus for longevity is in addition to any cost-ofliving-adjustment but cannot exceed 100 percent of salary before retiring.
The cost of living adjustment depends on which contract was in force when the officer retired. For example, those who retired after 1995, a cost of living adjustment based on the Philadelphia region’s Consumer Price Index is capped at 7.5 percent increase of final compensation, but for those who retired after 1997, that cap is 15 percent.
Officers are vested in the pension after 12 years of service.
Non-uniform pension costs
The current 43-page contract with the Pottstown chapter of the American Federation of State County and Municipal Employees does not contain specifics about pension benefits for nonuniform pensions except to say that it remains unchanged from the previous contract.
However, a 2015 audit of the plan posted on the borough’s web site spelled out the basics.
Non-uniform employees contribute 5.75 percent of compensation to the plan. They are vested after 10 years.
And like the police, the defined benefit pension provides 50 percent of the average salary calculated from the last 36 months of employment upon retirement, which can occur at age 55 after 25 years of service.
Current salaries range from a low of $18.98 per hour ($39,478 annual) to a high of $27.30 per hour ($56,784 annual).
Dwindling Property Assessments
Another impact on the budget is the borough’s dwindling property assessment value.
Keller informed council that Montgomery County’s final assessment numbers show Pottstown lost another $1 million in real estate value in 2018, pushing the deficit to $1,043,286 and the pending tax rate to 12.99 mills.
Not to mention the annual absence of $263,000 in tax revenue from Pottstown Hospital being off the tax rolls.
Also impacting the proposed budget is the $360,000 the borough has to pay back to the owners of the moribund Pottstown Center shopping center at 799 State St. after the court decision on an assessment challenge.
Once council votes to advertise the budget the tax rate can be lowered, but not increased, explained Borough Solicitor Charles D. Garner Jr. Final budget adoption is expected in December.
Water Rate Hikes
In addition to a second consecutive 12 percent increase in property taxes in 2019, users of the borough water system also face a 5 percent hike in water rates; and another 5 percent in 2020 and yet another 5 percent hike in 2021.
The increases will result in about $4.72 more per quarter for most customers or $18.88 more in water costs in 2019 and a total hike of $56.64 by 2021.
This article first appeared as a post in The Digital Notebook blog.
This slide from Nov. 7’s budget presentation shows the borough’s erratic history of holding the line on taxes and big tax hikes.