News

December 22, 2008

Towns, counties fight to keep selves afloat

By ROBERT H. ORENSTEIN The Morning Call

Forks Township will raise its real estate tax by nearly 10 percent, tap more than $150,000 of its reserves and cut other costs to balance its 2009 budget.

To avoid a tax increase, Montgomery County proposes using $16.5 million from a surplus, delaying employee raises until April and cutting its contribution to the local community college by $1 million.

Northampton County kept taxes steady in part by using $14 million from its surplus. Bucks County held taxes by using its surplus too. And Lehigh County closed a $12 million budget gap by using nearly $7 million in surplus and $5.5 million from a tax relief fund that hadn’t been touched since it was established in 2003.

Welcome to municipal budgeting in a recession, where budget masters face the worst economic conditions in decades. New home construction has stagnated, fewer homes are being sold, mortgage companies are foreclosing on properties and people are losing jobs.

For local governments that rely on revenue from the real estate tax, property sale transfers and the earned income tax, the recession means fewer dollars to spend as costs are rising.

“I’ve not seen anything like this,” said R. Keith Hite, executive director of the Pennsylvania State Association of Township Supervisors, who has worked 30 years for the agency.

Suburban townships such as Bethlehem, Forks and Palmer that for years relied on steadily increasing property sales for revenue have been hit hard. All proposed raising the real estate tax to make up lost revenue. For example, Forks projects a $200,000 drop in the real estate transfer tax on property sales.

“It is because Forks, along with many other communities in this area, has been a growth community. A substantial source of our revenue has been from the transfer tax and the earned income tax,” said Township Manager Richard Schnaedter.

For some taxpayers, 2009 will mean higher taxes, reduced services or both.

“At the end of the day,” said Hite, “it is as simple as saying there is no magic. If we don’t have the money to do the project, we do one of two things: Raise taxes or don’t do the project.”

In Forks, the township is delaying $300,000 in capital projects, such as buying a car and two motorcycles for the police department and making an annual contribution toward a new firetruck, Schnaedter said.

In Lower Saucon, the real estate tax will remain steady for 2009 partly because of a tax raise for 2008, which provided a financial cushion for the lean times, said Township Manager Jack Cahalan. Even so, the township still plans to delay some projects or eliminate others.

“We’re doing just a couple minor repairs in the township, putting off some other more expensive repairs,” such as a new roof on a township building, he said.

Officials expect problems to continue into at least 2010.

“The year 2010 is shaping up as a bigger challenge if the economy continues to go downhill,” Montgomery County Commissioner Joseph Hoeffel said recently. “We don’t have the budget resources that we have had in the past.”

Meanwhile, government costs are increasing as the state, facing reduced revenue itself, provides fewer dollars to local municipalities -- human service allocations to counties have been cut and gasoline tax collections that pay for local road projects are dropping with the price of gas.

“It’s one thing at the state level to cut 4.25 percent,” said Doug Hill, executive director for the County Commissioners Association of Pennsylvania for 25 years. “But we can’t support 4.25 percent fewer abused kids, we can’t serve 4.25 percent fewer people in jail. ... That’s the irony of the bad economy. We see more drug and alcohol abuse, more criminals.”

So counties must make up the difference in human service cuts. Northampton County Executive John Stoffa in his budget message said the county needed to kick in an additional $585,000 alone to Children, Youth and Families.

Unlike other counties, Monroe County could not avoid raising taxes. This week, the commissioners approved a budget that raised the real estate tax by nearly 19 percent, the first hike in seven years, said Robert Gress, the county’s chief clerk and administrator. The increase would have been higher, but the county used $3.7 million from its surplus and will delay hiring an additional 12 full- and part-time employees until July 1, he said.

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