New Castle News

Closer Look

February 22, 2014

John K. Manna: Distressed status gives city more revenue sources

NEW CASTLE — New Castle’s population decline over the years has been well documented.

It may be small consolation, but most cities in the Northeast have experienced a migration of residents to the suburbs or the Sun Belt over the last 50 years or so.

The point is the population loss here cannot be blamed on poor management since most other cities are in the same fix.

Nonetheless, the tremendous drop in population plus the loss of industries has resulted in a shrinking of the city’s tax base.

Thus, every cent the city now receives in taxes can be considered precious. While some people may not like the idea of the city being in Act 47, it has provided some benefits to the city.

Last week, city council ratified an arbitration award with the police that includes pay increases plus changes in health insurance and pension contributions by officers.

The award also eliminated the requirement that officers live in the city. It applies not only to new officers, but to those hired after Jan. 1, 2008.

Previously, there was a requirement that new hires live in the city for a certain period of time before they could move.

City firefighters must live in New Castle for at least nine years before they can consider moving to any of the neighboring municipalities.

There is one school of thought that believes public employees should live within the municipality or the district that pays their wages. But that horse has long left the barn.

Even teachers and school administrators aren’t required to live within the districts that pay them.

This is where New Castle has an advantage over neighboring municipalities and it’s because of Act 47. Under most circumstances, employees — regardless of where they work — pay the wage tax in the municipality where they live.

New Castle, like several other Pennsylvania cities with pension problems, were previously allowed by state law to increase the wage tax and target the revenue toward their pension fund deficits.

But Act 47 allows the city to increase the tax even more. The city initially increased the tax on non-residents by 0.4 percent and reduced it to 0.35 percent two years ago.

So, the city gets back some of the money it pays to those employees who live outside the city. If and when the city exits Act 47, this money goes away. I wonder whether there is a city official who secretly thinks this Act 47 thing maybe isn’t so bad.

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