It’s good that a proposed three-mill tax hike for New Castle may be cut in half.

But that makes us wonder why such an increase was proposed in the first place.

Surely city officials knew a move that amounted to a 29 percent boost in property taxes would generate hostility. Is this a case of suggesting a big increase and then trimming it back, in the hope the public would breathe a sigh of relief that taxes may jump — but not as much as first expected?

Even with anticipated reductions, property taxes in New Castle will now apparently go up about 12 percent. That’s hardly cause for celebration, especially with a recession coming on.

Speaking of economic hard times, it’s worthwhile to look at how the proposed tax increase was reduced.

The main reason is a shift in funds. Changes call for an allocation switch in the city’s wage tax — about $455,000 — from the pension fund to the general fund. Supposedly, this won’t hurt the pension fund (which, again, raises questions about why the money was put there in the first place).

But elsewhere, there are recalculations of anticipated tax collections that have the effect of boosting expected revenues. Is this credible?

When it comes to annual muncipal budgets, the rosy scenario is a traditional way of putting off the inevitable. The trick involves budgeting based on revenues you know are not likely — or are at least overly optimistic.

Considering the current economic climate, it would be prudent for governments to be very conservative in their revenue collection estimates for the coming year. Increasing unemployment would have the effect of reducing wage tax collections. Similarly, financial hardships may weaken the ability of individuals and businesses to pay property taxes.

We say this not to be pessimistic, but to be realistic. A budget for the city — or any municipality for that matter — which proceeds throughout the year on false assumptions, is bound to wind up with problems late in 2009. This would lead to painful moves — including layoffs and an even larger tax increase for 2010.

New Castle officials must keep financial caution at the top of their list in the coming year. At the same time, they must refrain from reckless moves that don’t serve the public interest.

We refer, specifically, to suggestions the city might end its recycling program, as a supposed means of saving money. That’s a mistake, not only because the city is required by state law to recycle, but also because it does taxpayers no good if they must pay for additional trash disposal as a result.

New Castle is an officially distressed community, operating under Pennsylvania’s Act 47 and a state-ordered financial recovery plan. City officials have expressed the desire to be rid of Act 47 as quickly as possible. The first step in reaching this goal is to budget with a clear eye and to refrain from wishful fiscal thinking.

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