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Council opposes change to electricity fund laws, says property taxes would skyrocket if bill passes

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 4/10/18

Middletown Borough Council on April 3 went on record opposing legislation introduced in the state House that would prohibit the borough from using money derived from selling electricity to subsidize …

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Council opposes change to electricity fund laws, says property taxes would skyrocket if bill passes

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Middletown Borough Council on April 3 went on record opposing legislation introduced in the state House that would prohibit the borough from using money derived from selling electricity to subsidize the general fund.

Middletown residents would face a property tax increase of “over 100 percent” if House Bill 1405 introduced by Republican Rep. Aaron Bernstine of Ellwood City becomes law, Mayor James H. Curry III said before council voted 7-0 to oppose the legislation.

The council resolution also applies to House Bill 2030, a companion bill Bernstine has introduced that applies only to municipalities that sell electricity in multiple counties.

House Bill 2030 on March 13 passed the State Government Committee by a 12-8 vote.

The bill is not scheduled for a full House vote. However, Borough Manager Ken Klinepeter told council that the House passing 2030 would make it “very likely” that House Bill 1405 — which would affect Middletown — would “eventually pass.”

The Local Government Committee held a hearing on HB 1405 on Feb. 13. No committee vote or any other activity has been scheduled on 1405 since then.

Bernstine and his office did not respond to requests for comment.

Middletown is one of 35 boroughs where residents and businesses buy their electricity from the municipality, instead of from a private utility.

Middletown for years has annually transferred money from its electric fund to balance the borough’s general fund budget.

Council in 2017 transferred $1.6 million from the electric fund to the general fund to balance the budget — an amount equal to raising the property tax by 6.5 mills.

The borough’s property tax mill rate of 5.631 has remained unchanged since 2008.

Bernstine contends residents and businesses in so-called public power municipalities pay more for electricity than people served by private utilities, because the boroughs keep their rates artificially high to subsidize their general fund.

Residents and businesses in these boroughs also cannot shop to purchase electricity from a provider of their choice, which House Bill 1405 would also allow, Bernstine has said.

Advocates of public power say residents have more input into rate-setting decisions that are made by the local borough council.

Using electric fund proceeds to balance the budget is fairer, as a larger number of residents pay for electricity compared to those who own property and are subject to the property tax, these advocates say.