New Castle News

Closer Look

March 9, 2013

John K. Manna: Changing system won’t end city fiscal woes

NEW CASTLE — If New Castle city officials were granted one wish, it would probably be to be out of Act 47 oversight.

And to be out of Act 47 oversight as soon as possible.

That’s unlikely to happen, at least not in the short term. But there is one way, and that’s to adopt a home rule charter.

City officials are in the process of considering whether to pursue home rule. But even if they do decide to pursue it, the issue must be placed on the ballot for voters to approve. First, voters would have to allow for a study to be conducted by a commission made up of city residents.

Then, if a study is conducted and the commission recommends a home rule charter, voters would have to approve the recommendation at another election. Plus, if a charter were adopted, any future changes would have to be approved by the voters.

Exploring the possibility of home rule is one of the directives in the city’s Act 47 recovery plan. The main reason the city’s Act 47 coordinator wants home rule to be considered is that it would give the city more flexibility on taxes.

As a distressed city under Act 47, the city is permitted to impose a wage tax on non-residents who work in New Castle. The revenue from those non-residents produces about $2.5 million annually for the city’s coffers. Act 47 status also permits the city to tax city residents above the state-mandated 1 percent level.

Without Act 47, the city would be limited to taxing its residents, and only at the 1 percent level.

Home rule, though, would allow the city to increase the tax above the 1 percent level to generate the revenue lost by exiting Act 47. Or, the city could produce the revenue through a combination of wage and property tax increases.

None of these are great options since the entire tax burden would be placed on city residents. The city may be able to exit Act 47, but more residents may exit New Castle as a result.

The advantage of Act 47 is that the tax burden is shared by non-residents who benefit from some of the city’s services.

I’m not suggesting that home rule is not a good option. In fact, I believe it’s a great option because it allows municipalities to create efficiencies and streamline their governments in several ways.

And why wouldn’t residents want a government that gives them a bigger voice?

But it’s certainly not the cure-all for the city’s financial woes, particularly in the short run.

 

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