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July 24, 2008

City at break-even point financially

By John K. Manna

New Castle is around the break-even point financially through the first half of this year.

Whether that’s good or bad only time will tell.

But Mayor Anthony Mastrangelo is cautious about the prospects.

“So far, I’m happy that we at least are breaking even,” he said, adding the department heads have stayed within the budget.

However, Mastrangelo said he is concerned the city may end up $300,000 to $400,000 short in wage tax revenue.

Second-quarter reports presented by the administration and treasurer to council at its work session last night show the city has collected 52.5 percent of its anticipated revenue and spent 49.9 percent of its $11.6 million budget.

The two largest revenue sources for the city are the property and wage taxes. For the first six months, 84.4 percent of the property tax revenue that has been budgeted has been collected.

Only 34.4 percent of the wage tax revenue has been collected, although receipts are $301,762 higher than last year at the same time. That upswing in revenue is a result of an increase in the wage tax required under the Act 47 recovery plan for both residents and nonresidents.

In addition, the higher rates did not have an impact until the second quarter because there is a three-month lag between when the tax is levied and when revenue is received.

New Castle was declared financially distressed last year under state Act 47. A coordinator, appointed by the state, drew up a recovery plan with more than 100 initiatives, which was adopted by council. The 2008 budget is the first spending plan reflecting some of the initiatives.

Last month, the coordinator, also known as the recovery team, presented city officials with a first-quarter report that showed both revenues and expenses under budget.

Gordon Mann of Public Financial Management of Philadelphia, part of the recovery team, said the lateness of the report was due in part to the city’s computer system. Also, because it was the first report, the team wanted to meet with the mayor and council to review the findings.

The recovery team’s second-quarter report is expected by the end of this month or early August, he said.

The report noted the computer system has “extremely limited reporting capacity,” making it difficult to identify and review important data. Under the recovery plan, the Governor’s Center for Local Government Services has begun an evaluation of the system’s shortcomings and is exploring options for addressing its needs.

As for the finances, Mann said that if “there is one underlying theme, it is that you really can’t project” how the city’s finances will look at the end of the year based on the first-quarter results.

One source performing better than projected is parking department revenue. The budget includes $60,000 in revenue, but through the first half of the year, the city collected $78,813, Police Chief Tom Sansone reported.

The increase results from tighter enforcement by the administration and police. Enforcement of parking was transferred to the police this year.

As with everyone who drives, the city is not immune from the rise in gasoline prices. The Act 47 team’s first-quarter report shows that the city spent $37,291, or 21.1 percent, of its budgeted allotment across seven departments in the first quarter. It was $14,233 higher than last year for the same period.

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