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Middletown budget passed; no tax hike; three members absent as council nears Dec. 31 deadline

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 12/27/17

When it comes to the 2018 general fund budget, Middletown Borough Council is clearly conflicted.

Three councilors who in November voted for the borough’s first property tax increase since …

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Middletown budget passed; no tax hike; three members absent as council nears Dec. 31 deadline

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When it comes to the 2018 general fund budget, Middletown Borough Council is clearly conflicted.

Three councilors who in November voted for the borough’s first property tax increase since 2008 on Dec. 20 grudgingly gave final approval to a 2018 general fund budget with no tax increase.

They did so only because the borough had run out of time for making any further changes to the spending plan, which by state law must be adopted by the end of 2017.

After voting 4-3 on Nov. 8 to tentatively approve a budget with a 0.5 mil tax increase, council did an about-face Dec. 5 and by a 5-1 vote decided to re-advertise a new budget with no tax increase.

Councilor Ben Kapenstein — who on Nov. 8 had called for the 0.5 mil increase — also led the charge for the reversal on Dec. 5, citing a larger-than-expected surplus in the electric fund that Kapenstein proposed using to plug a $271,000 deficit.

However, Kapenstein and two other councilors who had voted against the tax increase on Dec. 5 — Anne Einhorn and Diana McGlone — didn’t show up for the final vote on Dec. 20.

That left the matter to be decided by Council President Damon Suglia, Vice President Dawn Knull, Ian Reddinger and Robert Reid — with new information again apparently coming to light, this time indicating that the borough’s financial situation wasn’t as rosy as previously suggested by Kapenstein.

Knull — the only councilor who both times had previously voted to support the tax increase — began the discussion on Dec. 20 by referring to a “shortfall” that councilors had received information on in an email at the beginning of the week.

The shortfall appears related to the borough’s lease of its water and sewer systems to Suez.

Suez — the private company that has a 50-year lease to operate the borough-owned water and sewer systems — was supposed to pay the borough $725,000 a year in both 2017 and 2018 under terms of the lease agreement, formally known as a concession.

But instead, the borough is getting only half that — $362,500 in both 2017 and 2018 — under a deal negotiated between Suez and the borough earlier this year so that ratepayers would avoid paying a surcharge to Suez in 2017 to recover costs Suez sought to recoup from capital improvements in 2015-16.

Knull is concerned that Suez will implement a surcharge on Middletown customers of $50 a month. Suez can’t raise rates until 2019.

Noting concerns voiced over the 0.5 mill increase hiking the tax bill by $50 a year for someone with property assessed at $100,000, Knull pointed out: “I’m questioning, can our residents afford $50 a month, because if our water and sewer goes up, that’s not a yearly thing, that’s a monthly thing. Whereas we raise these taxes 0.5 mil, could we not offset the shortfall with that?”

The borough has $6 million “sitting in cash,” but council is committing $1 million of that for capital improvements in 2018, Knull said.

“It’s just like the electric trust fund,” she added. “It’s only going to be there one time. If we keep taking it out the rainy day fund is gone — it’s not going to be there.”

However, borough Manager Ken Klinepeter pointed out that if council did not approve the budget without the tax increase, the borough by law would have to re-advertise the 2018 budget yet again for 10 days, pushing the issue into January.

“If you don’t pass a tax ordinance before the end of the year, you cannot collect taxes next year. So you are in a corner here where you have to approve this budget and this ordinance tonight,” Klinepeter said.

Council can reopen the budget in January, Klinepeter pointed out. However, it does not appear that council could re-instate the tax increase at that time.

All the body could do is change line items within the budget, such as increasing funds in one account or decreasing funds in another.

Reddinger and Suglia had both voiced support for a 1-mill property tax increase in November, before being persuaded by Kapenstein to vote for a 0.5 increase.

Reddinger again followed Kapenstein in voting to reject the tax increase on Dec. 5.

But on Dec. 20, it was clear that in light of the new information related to the shortfall that Reddinger was only voting against the tax increase because the calendar allowed no alternative.

“I strongly disagree” with the final budget as presented, Reddinger said. “I’m voting yes for the sake of the town that we can keep business rolling.”

“Our town is financially strong, which is great. That doesn’t mean that we just stop working. We need to keep the future in mind. I am worried about the shortfall with the water and sewer. I would love to buy that debt from our residents but we’re not going to be able to do that if we don’t have the funds to do it. Fifty dollars a month vs. $50 a year is a huge difference.”

Suglia, who was not at the Dec. 5 meeting, expressed similar sentiment.

“Fifty dollars a year is 14 cents a day on a $100,000 home. I don’t think it’s much to ask of our residents,” he said. “I honestly feel we are going to be OK this year, but next year we may have to go for a 1-mill increase. I’m going to vote yes just for the betterment of the borough, so we can keep us in business.”

Reid had consistently voted against the tax increase, and did so again.

Knull stood her ground, casting the lone dissent in the 3-1 vote giving final approval to the no-tax-increase 2018 budget.