Money Matters

New Castle property owners could be facing a tax increase next year and another in 2015.

That’s part of the prescription laid out Wednesday by the city’s Act 47 coordinator to provide more money for the employee pension fund.

In a draft of a recovery plan presented to city council, the coordinator is recommending a one-mill increase for 2013 and the same for 2015. It figures out to an 8.5 percent increase for 2013 and an 8.1 percent increase for 2015. One mill generates approximately $400,000.

The draft is an amendment to the current five-year recovery plan, which will expire at the end of this year. The coordinator is proposing a new three-year plan that will run from 2013 through 2015.

Council was given an eight-page executive summary. Gordon Mann, a member of the Act 47 recovery team, said the full proposal should be provided to city officials by Aug. 20.

The draft also recommends concessions by police and firefighters in new collective bargaining agreements and that the city consider the home rule process to give it more flexibility with the wage tax.

The Act 47 team was appointed by the state after it declared the city to be financially distressed in 2007.

Council plans to conduct workshops on the draft before adopting a plan as an ordinance.

Regarding the property tax recommendation, council president MaryAnne Gavrile said, “Nobody here wants to raise the property tax.”

Mann noted the people “who have sacrificed the most” to improve the city’s financial situation over the last five years are the property owners. The original plan required property tax increases to address deficits with both the budget and pension fund.

He noted employees also have made concessions that have included wage freezes and fewer holidays.

Mann said the city will have to use its cash reserve over the next three years, but added “it’s a temporary solution.” The city needs a recurring source of revenue for a recurring liability, which is the pension fund.

He said the city might consider using a windfall, such as the bonus it is receiving for gas leasing rights. The city is receiving $2,002,479 for the leasing rights.

All the proceeds from a property tax increase or other source will have to go toward the pension fund, according to both Mann and Jim Roberts, another member of the recovery team.

Of the pension problem he said , “It’s not your only challenge, but it’s the biggest.”

The amended plan — utilizing a newly enacted state law — allows the coordinator to allocate maximum amounts the city can spend on compensation for employees within each bargaining unit. The plan sets a maximum amount for each bargaining unit, but gives the city and employees flexibility to negotiate a different structure as long as the total compensation stays within the maximum allocations.

The contract with police expires in December while a seven-year agreement with firefighters expires at the end of 2013. The plan also sets a target for the city to reduce fire department costs by approximately 20 percent, beginning in 2014.

Other employees are not considered in the plan, Mann said, because their five-year contracts will expire after 2015.

The plan does not propose any reduction or increase in the wage tax for residents or nonresidents. Under the original plan, the tax was increased on residents and nonresidents.

Act 47 allows the city, with court approval, to increase the wage tax above the maximum allowed by the state. The city has to return the tax to its normal level to exit Act 47. However, if it were to do so, the city would lose $3 million next year and couldn’t maintain basic services.

That’s the basis for examining home rule, which would allow the city to keep the wage tax at its current level and exit Act 47.

Gavrile said she has heard nothing about getting more properties on the tax rolls and asked what the plan is for the city to begin marketing.

Erik Solivan of the Act 47 team said the plan will have specific initiatives on how to improve the city’s economic climate. He also said the plan has another initiative to place code enforcement, planning, zoning and economic development under one department.

Councilman Thomas Smith said that excluding the police and fire departments, there may be ways to outsource.

“We’ve got to start playing smart.”

(Email: jmanna@ncnewsonline.com)

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