New Castle News

Closer Look

July 5, 2013

City panel decides against home rule

NEW CASTLE — New Castle city officials have decided against pursuing a home rule charter.

A committee made up of the mayor, two council members, the business administrator and solicitor made the recommendation after studying the issue since February.

Formation of the committee was one of the directives in the city’s Act 47 financial recovery plan. The directive required the committee to study the benefits of home rule and produce a report stating the reasons for its decision by June 30.

A report prepared by the Act 47 coordinator last week states: “While the committee recognizes the financial and operational benefits of organizing city government under a home rule charter, the committee does not feel those potential benefits outweigh concerns that the study commission process is open ended, and there is uncertainty what other changes would be pursued through home rule.”

Gordon Mann, a member of the Act 47 team, said the city has complied with the plan, adding it did not require officials to pursue home rule.

The committee had three meetings on the issue: Covering the home rule process, case studies of comparable municipalities that have gone through the process and the process’ impact on Johnstown and its efforts to have its Act 47 status rescinded.

REASON FOR STUDY

A major reason for considering home rule was that it would give the city more control over its tax structure. Currently, state law places limits on tax rates, specifically the property and wage taxes.

Like other Pennsylvania municipalities, New Castle is limited to a 1 percent wage tax on its residents. Half of the revenue goes to the New Castle Area School District.

However, Act 47 has given the city the authority to impose a higher wage tax on its residents — currently at 2.15 percent. It also has given the city the authority to place a higher wage tax on nonresidents working in New Castle.

The additional taxing authority on city residents generates approximately $2.5 million, which covers city operations and debt repayment.

If the city exited Act 47 status, it would lose the $2.5 million a year because it could not have a tax higher than 1 percent on its residents. The only alternative would be to have a home rule charter — approved by the voters — to allow a higher wage tax.

Being able to raise the wage tax above 1 percent under home rule would not be the only hurdle for the city to exit Act 47, “but it is a significant one by dollar amount,” the report states.

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