Tyrone Borough Council proposing tax increase to help balance budget

Once again, Tyrone Borough Council discussed its 2007 budget at last night’s meeting.
After about two hours of back and forth between several council members and borough administrators, council decided to increase two different taxes it already levies. One tax that won’t increase under the consensus reached by council is the borough’s real estate tax. That will stay at 29 mills.
The Borough is facing an estimated $178,000 deficit in its general fund budget. The borough is projecting revenues at $1,643,000 and expenses of $1,821,000 in the budget. The separate sewer and water fund budget were deemed to be “in good shape.”
In recent years, the borough has used money from its capital reserve to cover deficits to avoid tax increases.
The overall 2007 budget calls for no wage increases except those mandated by the state’s new minimum wage law and a three percent increase for police department employees.
The borough projected a 2006 deficit at $102,000 and council voted last year to use capital reserves to cover it. The 2007 deficit is projected at $76,000 more than the 2006 figure.
Last week, Dannaway offered three ways for council to deal with the deficit. All the options involved raising taxes. She explained the borough could raise property taxes from 29 mills to 40.19, an 11.19 mills increase. Such an increase would cover the deficit.
However she also explained the borough can also generate revenue through two other tax sources; the Earned Income Tax and the EMS or local services tax. Using a combination of increasing all three taxes would mean the millage increase would be lessened.
Last night, Dannaway presented council with more options. By raising the EIT by .25 percent to 1 percent, the borough would generate $48,000 in additional revenue. Dannaway noted the borough would not realize the entire amount the first year. There is an expected lag time from when the tax is imposed to when it is collected and received by the borough. In future years, the borough would realize a projected $96,000 in 2008 and $144,000 in 2009 if it raised the EIT to 1 percent.
The borough could also raise the EMS or local services tax to $52 a year. Currently, Tyrone charges $10 under the old occupational privilege tax.
The Tyrone Area School District has the option to charge $5 for the tax. It currently does not. Combined, the two taxes cannot exceed $52. Under Tyrone’s proposal, those making under $12,000 would be exempt from the local services tax. If Tyrone would choose the maximum amount, the borough estimates it would see a $25,000 increase in revenues. The remainder of the deficit would be covered with a 6.75 mill increase in property taxes.
Last week, solicitor Larry Clapper said because Tyrone operates under a home rule charter, it is not limited in the amount it can raise the property or earned income taxes.
In the end, council’s consensus was to raise the EIT by .50 percent instead of just .25 percent. Under the proposal the borough’s EIT would go to 1.25 percent. The Tyrone Area School District charges its own separate EIT.
A .50 increase in the borough’s EIT would generate an estimated $96,000. Council also proposed raising the EMS (local services) tax to $52 a year, which would generate an additional $25,000 using the $12,000 or under income exemption. Those moves would raise a combined $121,000, which would leave the deficit at $56,400. Instead of raising property taxes, council decided to dip into its cash reserve of $1,032,000 for that amount to balance the budget. Had the borough chosen to raise property taxes to cover the remaining $56,400, it would have required an approximate 3.66 mill increase.
Finance director Phyllis Garhart was also directed to do some additional tweaking to the budget including an increase in the borough’s charges for use of Reservoir Park and fees generated through its required license for eating and drinking establishments.
The final budget must be passed by Dec. 31 and Clapper said he would need time to prepare and advertise ordinances for the tax increases. He projected the ordinances would be ready for council’s consideration at its Dec. 11 meeting.
Clapper explained that contingent on the passing of those ordinances, action on adopting the final budget could then occur at the same meeting.