Agency: New law delays tax flow
Revenue from earned-income taxes in Connellsville likely is coming in slower than last year because of changes in how the tax is collected, according to the administrator of the agency that collects it.
During an Oct. 2 budget meeting, Connellsville officials learned that earned-income tax collections are significantly off pace from the $550,000 that council projected in revenues for the year.
As of Oct. 2, the city received only $208,708 in earned-income taxes for 2012 — less than half the more than $422,000 it received for all of 2011, council noted.
Raymond W. Paris Sr., administrator for Southwest Regional Tax Bureau in Scottdale, said on Tuesday that revenues likely are coming in slower than in previous years because of the transition to Act 32 — a new state law governing how the tax is collected.
As of this year, Southwest Regional is the designated collector for Fayette County's earned-income taxes, including Connellsville's. The city's previous collector, CENTAX, reportedly has gone out of business.
Implemented this year, Act 32 requires employers to withhold the tax and consolidate the state's 560 earned-income tax collectors into just one agency for each county.
Although simplifying the process, Act 32 doubles the wait time from 60 to 120 days before municipalities receive their quarterly revenues, Paris said.
The wait is longer, he said, because most employers have up to 60 days at the end of each quarter to turn over the money to the designated collection agency in their county. The agency then has up to 60 additional days to identify where the cash will be distributed.
Other factors for the tax-collection slowdown in the law include confusion on the part of employers that never withheld the tax in the past; and different rules about where large employers, such as McDonald's and Wal-Mart, must send their revenues for distribution.
Paris said other municipalities are experiencing the same problem, but he anticipates the process will improve as the transition continues over the next several years.
Councilman Brad Geyer, chairman of accounts and finance, indicated on Monday that Southwest Regional will send the city a check for $48,000 in earned-income tax revenues some time in the next several days.
Geyer said he will continue to investigate the slowdown in collections.
“The city clerk has been making good phone calls, so it's a situation we are on top of every day,” Geyer said. “We are fighting real hard to get the situation corrected.”
The city has $33,683 available in the general fund, according to figures provided by Treasurer Judy Keller.
The $48,000 in anticipated revenues from Southwest Regional will help ensure that Connellsville meets its Oct. 15 payroll of nearly $60,000, she said — but it won't pull the city through to the end of the year.
Geyer said he's optimistic that if revenues start to come in more quickly, the city at least will collect the same amount in earned-income taxes for the year as it did in 2011. The amount last year was more than $422,000 — less than the $570,000 the city had estimated it would receive in 2011.
Geyer acknowledged that although $550,000 in earned-income tax revenues were projected for this year, it's unlikely the city will collect that much.
“It would be very difficult for us to reach $550,000, but it's a number we have used in the past,” Geyer said. “We're going to get real close to the $425,000 that we collected last year. If we're close to the $425,000 that we collected last year, then the city doesn't have a problem.”
Mayor Charles “Charlie” Matthews said part of the slowdown in collections might be attributed to CENTAX no longer being in business. CENTAX's accounts were taken over by Berkheimer, which Matthews said already has sent the city a check for other tax revenues CENTAX had collected for Connellsville, including for mercantile and business-privilege taxes.
“We are trying to get a handle on it, but with CENTAX not being there, we don't know if we will get all the answers we need,” Matthews said. “I'll probably know more later this week.”
Keller said a number of employers in the city went out of business this year, likely contributing to the decline in earned-income tax revenues.
Shawn Perry, a Pittsburgh-based Berkheimer representative, said the agency still is looking over CENTAX's records and will turn over any revenues that it determines are owed to Connellsville. No one at CENTAX could be reached for comment.
Liz Zemba is a reporter for Trib Total Media. She can be reached at 412-601-2166 or email@example.com.