HAZLETON — About 50 of the city’s 110 employees might be furloughed as early as Monday and the city is in danger of defaulting on its bills because of a $500,000 budget deficit.
At a press conference Monday, Mayor Joe Yannuzzi unveiled the latest in a string of the city’s financial woes that started last year when it had to raise the real estate tax by 45 percent. As it stands, non-essential employees — primarily office personnel and some public works employees — will not show up for work Monday and City Hall will be closed.
Firefighters and police will work regular shifts and road crews will still plow snow from the streets, Yannuzzi said.
As is the case for many municipalities and school districts, the city needs a tax-anticipation note, or a loan, so it can pay its bills and employees before taxes are collected for the year. But no bank will consider giving the city a loan because its budget has a $500,000 hole, Yannuzzi said.
The city, he said, has a viable solution — enacting a storm water management fee to be levied against property owners.
But City Council shot down a resolution last week setting the rate at $25 per runoff unit, defined as a 6,400-square-foot lot. There is some variance in how the fee is levied based on lot location described by the storm-water ordinance passed in September.
Because the ordinance is powerless without the dollar figure defined in the resolution, no bank will issue the tax anticipation note without collateral or assurance the city has the ability to repay, Yannuzzi said.
On Monday Yannuzzi urged council to convene an emergency meeting to reconsider its vote and keep city employees working. The city’s annual operating budget is around $8.6 million.
Several factors have played into the city’s shortfall. The city contribution for employee pensions has gone up by about $500,000, said council President James Perry.
Also, Hazleton Creek Properties LLC., a company reclaiming an abandoned minefield within city limits, had been paying a fee — about several hundred thousand dollars annually — but had fulfilled its obligation and paid the final $100,000 earlier this year, Perry said.
In light of the budget shortfall, the city’s acting Administrator Steve Hahn said officials had three choices to bridge the gap:
• Raise taxes;
• Impose a new fee;
• Cut staff.
“I don’t see any place to cut personnel in the city without doing some damage,” Hahn said.
Emergency employees will stay on the clock; however, some may receive an IOU instead of payment until the city can secure a tax anticipation note, Yannuzzi said.
Hahn said revenue will not stop entirely and the reserves have not yet run dry, but insurance premiums must be met by deadlines and utilities have to be paid promptly or the city will lose those services.
The annual Christmas-tree lighting scheduled for Sunday in front of City Hall will continue as planned, Yannuzzi said.
Perry said he’s in favor of the new fee, but voted against the resolution last week because the establishing infrastructure for notifying landowners and setting up a fee-collection system will take too much time to be implemented this year.
Council was unaware employees were immediately in danger of getting laid off until the mayor sent his request in an email Monday morning, Perry said.
The fee is considered in the 2014 budget; however, without a resolution, the city will be unable to enforce it, Perry said.
A fee is much more expensive and not as efficient as simply raising taxes, Hahn said, but taxpayers are still reeling from the 2013 tax hike.
Hahn said the city’s per-capita tax, an occupancy privilege fee city residents pay, is an example of how fees as additional income sources don’t work like a tax hike.
Taxpayers lose their property if they default on their property taxes. A fee is difficult to enforce, Hahn said.
For example, the per-capita tax, about $10-per person, promised to bring in $270,000 each year, Hahn said. Only about $115,000 has been collected this year, and the city had to pay an agency $30,000 to bring it in. The money is welcome, but it costs too much to get it, Hahn said.
Late to react
Councilman Jack Mundie has been against the storm-water fee from the beginning. But now that the ordinance has passed, the midnight hour is not the time to try securing the anticipation loan, Mundie said.
“They should have gone out for that tax-anticipation note and gotten that in order by now,” Mundie said.
Hazleton has the third highest municipal tax rate in Luzerne County. The millage rate is set at 4.51 — this means a homeowner whose house is valued at $100,000 pays $451 in city taxes.
Only Pittston, with a tax rate of 6.8 mills, and Plymouth Borough at 5.7 mills, exceed Hazleton’s rate in Luzerne County.
Wilkes-Barre’s tax rate cannot be used for comparison because city officials have opted not to use the county assessments for city taxation.