City's financial status under debate
By Karl Polacek
Published: Saturday, May 18, 2013, 1:46 a.m.
Connellsville council and mayoral candidates expressed different views about the state of the city's finances.
Those in office say there is little or no chance that Connellsville will have to resort to Pa. Act 47 — Financially Distressed Municipalities Act of 1987. Those running against them say it could happen by year's end, unless the city begins to budget responsibly.
“The mayor seems to think it (Act 47) can be avoided,” said Aaron Zolbrod, a Connellsville business owner and Republican candidate for council. “Here's the deal. The city has borrowed $675,000 from Scottdale Bank. City Treasurer Judy Keller conservatively estimated the city would be short $380,000 (in that ballpark) in paying back the loan.
“And that was also a best-case scenario and that was not considering the buyback of vacation time for police officers, supplies for the city building and other expenses she didn't even include in that,” he continued. “And that was also a best-case scenario that the city would actually collect $550,000 in earned income tax that they estimated.
“The most the city has collected in the past five years was $516,000 in 2010. Even if it was what it was (in 2010), why are we still estimating it at $550,000?
“I mean, when you're doing a budget …”
Pulling out a sheet with the estimated income for the business privilege, occupational privilege, income tax and real estate tax collections, Zolbrod showed the estimates for all four categories were far over actual income. The same figures were still being used for 2013.
He said the budget figures for 2012 showed revenues were overestimated by $310,000, while expenses were underestimated by $70,000, showing a budget deficit of $380,000.
He said it might be possible the city would have to use Act 47 by the end of the year because it might not be possible to obtain another tax anticipation loan. He added that, once Act 47 goes into effect, the city would lose control of appropriations. As an example, Connellsville might not be able to provide the annual stipend or to pay the fuel bills for the New Haven Hose Company, Connellsville's volunteer fire department.
“It's a scare tactic by our opponents,” Mayor Charles Matthews said. “Connellsville has had clean audits for 10 years or 15 years. The state has never mentioned Act 47. There's a lot Connellsville can do (to avoid Act 47.)”
According to Matthews, the opponents are going to raise taxes if they get into office, adding that the state does not want municipalities to go into Act 47.
Councilman Thomas Karpiak, who is running for re-election and who is opposed by Zolbrod, said the statements by Zolbrod have no basis in fact.
“(Act 47) is not a possibility in Connellsville,” Karpiak said. “It is purely, purely an imaginative scare tactic given by Aaron (Zolbrod). “Brownsville was over a million (dollars) down. They applied for Act 47 and were denied. It is a pure fabrication on the part of the candidate. There is no validity to that.”
Karpiak said the financial situation is getting better. Keller reported that tax collections were $8,000 ahead this month over those from a year ago.
“Are there rosey times ahead?” asked Karpiak. “I can't say that. But Connellsville has assets.”
He said Pennsylvania officials are not the best money managers and wanted to know who would want them to manage Connellsville's financial affairs.
A check with the city of Altoona, who recently elected to come under Act 47, found city manager Joseph Weakland less than enthusiastic about the help offered by consultants from Chicago under contract through the Pa. Department of Community and Economic Development.
“I could get on my soap box,” Weakland said. “(The consultants) didn't know what they were doing.”
Weakland said he spend most of the time trying to get the consultants to understand Pennsylvania's third class city code.
Weakland said Altoona was in a unique circumstance. “We have gone into it (Act 47) still paying all bills. We didn't default on a loan, but by the end of 2012, we would be broke. We would not be able to pay bills in 2013.”
Matthews said there is not a lot of cutting the city can do to reduce expenses.
The problem for the city budgets was the lack of collections from the former city tax collector, Centax.
“When we saw (the drop in revenue) in 2011, we thought it was a fluke and that we would catch up,” Matthews said. “The problem is that (once all of the assets of Centax were sold off), there is only $600,000 or $700,000 for all over the state. On that money from 2012, we will get a very small percent back.
“I've gotten several calls from the community,” he added. “It is a scare tactic (Act 47) and it's really upsetting. There are several other things we would look at.
“For example, we could restructure the debt,” Matthews said. “It's crazy. I've lived in this town my whole life. I would walk away and not run again (if the situation was as bad as his opponents have described.)”
Councilman Brad Geyer agreed with Matthews. He sees the budget questions as a political game. He added that the $675,000 tax anticipation loan, $225,000 higher than the one taken the two previous years, was increased because of the hole in the budget caused by the Centax problem. He said the new collection agency, Southwest Regional Tax Bureau, is “doing a stand-up job.”
“Unless there is extreme tragedy or some act of God, we will not be using Act 47 anytime soon,” Geyer said. “Is the budget tight? Absolutely. But the City of Connellsville works on a tight budget to keep your taxes low. That's the same reason why we use the tax anticipation loan. Neighboring municipalities that don't have a much larger budget have twice the millage rate.”
He pointed out that Uniontown, also a third class city, has millage about double that of Connellsville. Connellsville's rate is 6.66 mills while Uniontown's is 12.235.
Greg Lincoln, Matthew's opponent in the primary for the office of mayor, said he agrees the city should avoid using Act 47.
“It would not be a good thing for the city,” Lincoln said. “Council would have to vote for it or a concerned citizens group would have to ask for it.”
Lincoln expressed his dismay with city council.
“It's frustrating,” he said. “The passed budgets are not attainable. And it's not just the earned income tax estimate.”
Lincoln said other municipalities using tax anticipation loans actually have the money to pay off those loans.
“You never hear (about the budget problem) at council meetings,” he said. “Most people never even knew we had a $675,000 deficit.
“Finances are holding us back,” he continued. “The population keeps dropping. We need to get people back to work, to have more businesses opening. Council members never ever discuss debt. They don't think it exists. I really truly hope we don't need (Act 47).”
He said the state then allows the municipality to triple the earned income tax levy.
“We need to start being more responsible,” Lincoln said. “We have not been doing that for the last four years.”
He added he would not like to see a tax increase. “It would be a very, very last resort.”
Local officials or concerned citizens groups must initiate a request for Act 47 to begin.
“State never initiates (the process,) “ said Marita Kelley, program manager for the DCED. “I suppose the state has the authority in an emergency, but it never has (to date).”
While a number of municipalities have used the act, none have ever made their way back out. But some are under consideration, according to Kelley.
Karl Polacek is a staff writer for Trib Total Media. He can be reached at 724-626-3538 or firstname.lastname@example.org.
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