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Council to hold special meeting Monday after Mayor Curry vetoes resolution on 2020 tax rate

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 11/22/19

Middletown Borough Council is holding a special meeting at 7 p.m. Monday, Nov. 25, prompted by Mayor James H. Curry III having vetoed a resolution setting the borough tax rate for 2020.

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Council to hold special meeting Monday after Mayor Curry vetoes resolution on 2020 tax rate

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Middletown Borough Council is holding a special meeting at 7 p.m. Monday, Nov. 25, prompted by Mayor James H. Curry III having vetoed a resolution setting the borough tax rate for 2020.

The seven-member council needs at least five votes to override the mayor’s veto, according to the Pennsylvania Borough Code, solicitor Jim Diamond told council on Tuesday, after Curry announced his intention to veto the resolution.

In what he called a “worst-case scenario,” Diamond said the borough risks facing a budget shutdown if council cannot override Curry’s veto or otherwise resolve the stalemate by Dec. 31.

“You won’t have a funding source after Jan. 1” for the borough to keep operating, as without an approved tax resolution the borough does not have authority to spend property tax revenue, Diamond noted.

The resolution that council had passed earlier Tuesday by a 5-0 vote, calls for the property tax rate to stay the same in 2020 as in 2019.

Curry said he vetoed the resolution not because he favors a tax increase, but because he disagrees with the 2020 budget — which council also gave final approval to by 4-1 vote Tuesday, with Councilor Richard Kluskiewicz voting no.

Curry objects to council proposing to transfer $1.6 million out of the electric fund budget, in order to balance the general fund budget.

“Any tax ordinance or tax resolution has to hold the hand with the budget. They are joined at the hip,” Curry said.

The mayor said he favored an alternative budget option to the one that was passed, the one supported by Kluskiewicz and Councilor Robert Reid that did not add any new hires for 2020.

The budget that the council majority approved adds a new full-time codes position, a new part-time position for the finance office, and carries over from the 2019 budget funds to hire a new full-time police officer.

It also calls for $475,000 in capital improvement projects, using a budget surplus of about $900,000 that the borough expects to end 2019 with.

However, “we don’t have a $900,000 general fund surplus. We have an approximate $700,000 general fund deficit which has only been addressed via transfers of roughly $1.6 million from the electric fund,” Curry said in a veto message that he hand-wrote during the meeting Tuesday and which was later read into the record by Council President Angela Lloyd.

Curry said that the general fund budget must be balanced “on its own,” and not rely on transfers of revenue from the electric fund, which the mayor said “should be reserved for electric projects such as the Spruce Street substation.”

Council for many years has relied on electric fund revenue to balance the general fund, saving council having to do so by increasing the property tax.

A year ago, council also transferred $1.6 million from the electric fund to balance the 2019 budget — although council a year ago also raised the property tax for the first time since 2008.

Curry also recently pointed out the risk the borough takes in continuing to rely on transfers from the electric fund, with state legislators in Harrisburg introducing bills that would tax electric fund revenue or threaten the ability of boroughs such as Middletown that sell their own electricity from even being able to transfer proceeds derived from that to the general fund.

He also noted the challenge posed to borough electric fund revenue by Librandi Machine Shop seeking to switch from being a Middletown electric customer to receiving power from Met-Ed.

Librandi’s challenge, awaiting a ruling by the Pennsylvania Public Utility Commission, is based on Librandi’s contention that it pays a higher electric bill to Middletown than it would to Met-Ed, because the borough bill is artificially inflated to subsidize the general fund.

The borough is fighting Librandi on the case and says that the electric rates charged by the borough are competitive, if not lower, than what residents and businesses in the surrounding area pay private utilities like Met-Ed and PPL.

“I believe these repeated transfers from the electric department to be irresponsible,” Curry said in his veto message. “Relying upon electric fund transfers will only continue a comfortable feeling. In reality there is no comfort.”

Continued reliance on these electric fund transfers to balance the general fund budget is “a growing giant of a problem,” the mayor concluded.