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Property tax increase might be off table for Middletown; electric fund surplus could be used

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 12/13/17

Middletown residents might not be looking at a borough property tax increase in 2018, after all.

Borough council by a 5-1 vote during its Dec. 5 meeting decided to re-advertise a proposed 2018 …

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Property tax increase might be off table for Middletown; electric fund surplus could be used

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Middletown residents might not be looking at a borough property tax increase in 2018, after all.

Borough council by a 5-1 vote during its Dec. 5 meeting decided to re-advertise a proposed 2018 general fund budget that does away with the 0.5 mill hike that council tentatively approved Nov. 8.

That proposed increase — the first since 2008 — would have meant a $50 hike in the annual borough property tax bill for an owner of property in Middletown assessed at $100,000, $100 for a $200,000 property, and so on.

Instead of closing a projected $271,000 general fund deficit with a tax increase, council is now looking to cover the entire spending gap by transferring money from a surplus in the electric fund.

The change was proposed by Councilor Ben Kapenstein, who had initially proposed the 0.5 mill tax hike that was tentatively approved a month ago.

But since then, Kapenstein said he has learned that the surplus in the electric fund is much larger than originally projected — now about $1.7 million as opposed to the earlier figure of about $400,000.

Kapenstein also said he believes the borough might be “overestimating” expenses in the electric fund.

“The tax increase wasn’t that much, which was why I was for it in the first place,” Kapenstein said. “But it’s hard for me to vote for it when I see the potential surplus.”

Pay now or later?

Council Vice President Dawn Knull voted against getting rid of the tax increase, saying even with the additional surplus the borough still has plenty of needs for the money — starting with close to $10 million in capital improvement projects identified by Public Works Director Greg Wilsbach.

“I would rather have excess than to start digging,” Knull said.

No funding for capital improvement projects is included in the general fund budget. Some of the surplus money might be needed to cover debt service in 2018 if council decides to borrow to fund some of the capital improvement projects, Finance Director Kevin Hartman pointed out.

Knull and Mayor James H. Curry III both said a small increase now is better than council imposing a much larger tax increase on residents down the road

Curry again urged council not repeat 2014, when council raised water and sewer rates by 50 percent to cover debt service for improvements to the water and sewer plant.

“You took out $13 million to build a new water and sewer plant and then never touched the rates. (Rate increases) should have been done throughout the debt service,”  instead of piling on in 2014, the mayor said. Curry vetoed the large increase, but council overrode his veto.

The increased surplus should be set aside to cover unexpected things that happen each year to “blow up the budget,” like the recently settled crematory lawsuit, the mayor added.

“I’m not in favor of just constantly dipping into one-time cash because sooner or later, it’s gone,” he said.

But Kapenstein said the borough should be able to count on the same kind of electric fund surplus for the next few years, unless something changes “drastically.”

The wholesale price the borough pays for the electricity it resells to businesses and residents is fixed through Dec. 31, 2022, under a five-year contract that council approved in October 2016.

“There’s a lot of good with our financial situation right now,” Kapenstein added.

Cash coming in?

Councilor Diana McGlone, who also voted to reject the tax increase, noted the borough still has $6 million in unrestricted cash.

Moreover, “significant” revenue growth is coming to Middletown with the long-awaited Woodland Hills housing development finally coming to fruition, McGlone added.

Others voting to reject the tax increase were council members Anne Einhorn, Ian Reddinger and Robert Reid.

Council President Damon Suglia was absent.

Council plans to consider final adoption of the re-advertised no-tax increase budget on Dec. 20. The meeting will be held in place of council’s regularly scheduled Tuesday, Dec. 19, meeting.

The re-advertised budget without the tax increase still includes all the new positions that council had previously approved adding in 2018, Zartman told council.

These include two new police officers, one full-time and one part-time. The budget also includes funding to promote an officer to sergeant in 2018, adding a third sergeant to the two the department now has.

The budget also funds a new full-time position split between codes and electric departments, a new part-time position for public works, promoting an existing public works employee, and $70,000 for a new compliance and technical services officer.

Resident speaks out

Before borough council decided to ax the tax increase, councilors heard objections to the spending plan from resident Bob Kinsman of the 300 block of Aspen Street.

Kinsman cited a 7.3 percent increase in administration wages and salaries — although the actual projected increase in that line item is 5.4 percent, according to the proposed budget on the borough website.

He described as “way excessive” a projected 12 percent increase in public works highway wages and salaries from $316,150 to $362,215, and a 5.8 percent projected increase in overall public works spending from $2,051,925 to $2,178,205.

“My Social Security is going to go up by 2 percent but it’s going to be wiped out by my Medicare premium increase,” said Kinsman, a retiree. “You folks are prudent stewards of my tax dollar. I think you need to just take a look at that for the senior citizens who don’t get anywhere near that kind of an increase from Social Security.”

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