Connellsville's 511 taxes collections in red since '09
EDITOR'S NOTE: This is the third in a series of articles concerning the City of Connellsville, its financial problems and what the future might hold. Today, a look at 511 taxes.
Pennsylvania's Act 511 of 1965, or the Local Tax Enabling Act, allows municipalities and school districts to place a tax on wages, salaries, commissions, net profits or other compensation of people subject to the jurisdiction of the taxing body.
The taxes that fall under Act 511 include a Per Capita Tax for the current and prior year, Earned Income Tax, Mercantile Tax, Occupational Privilege Tax and Mechanical Devices Tax.
Since 2009, the 511 taxes collected in Connellsville have shown a deficit.
Act 511 taxes budgeted by the city in 2008 totaled $833,948. The city received $871,535, taking in an extra $37,587. However, since 2009 the city has budgeted more than it has received.
In 2009, $851,000 was budgeted with $847,265 being collected. In 2010, city officials budgeted $926,200, but only brought in $851,679. In 2011, $923,200 was budgeted, but only $753,622 was received. In 2012, $921,200 was budgeted, but only $583,494 was received.
In the 2013 spending plan, council budgeted $924,200 for the 511 taxes. As of July 31, the city received $504,600.
Connellsville City Councilman Brad Geyer, who is director of the city's accounts and finances, said council plans a budget much like someone would plan a budget at home.
“What was our electric bill, and can we lower it or is there some reason to expect it to increase?” Geyer said. “What about the payrolls? Can we expect them to increase or are there ways to further control labor costs?”
Geyer said council is aware labor contracts control almost all of the budget concerns.
“We do this for all of the areas where the city has financial obligations,” Geyer said. “Then we consider income. We start with the current year and use it as our benchmark and evaluate each area of income to determine, to the best of our ability, whether to expect an increase or a decrease in each revenue stream.”
A closer look at the taxes
The per capita tax is $10 for every Connellsville resident over the age of 18 who receives at least $5,000 in income every year.
Connellsville City Treasurer Judy Keller said there is no age limit and the $5,000 per year covers all sources of income, including pensions, interest, dividends and Social Security checks.
If a resident pays the tax in March and April, they pay the discount fee of $9.80; if they pay during the months of May and June, they pay the regular fee of $10. When they pay from July on, they must pay the penalty cost of $11.
Keller said there are people who believe the tax is taken out by their employer or through their escrow account even though they receive a letter in the mail to pay the tax.
“When you receive it, you're directly responsible for it,” Keller said, adding that residents should know the tax is not a wage tax; it doesn't matter if the resident is employed or not; it's not part of a resident's mortgage.
Berkheimer Tax Administrator Inc. collects these delinquent taxes.
The current year of the tax counts the amount paid prior to the deadline; the prior year tax is the total of delinquent payments after last year's deadline.
From 2008 to 2010, the city budgeted the current year per capita tax at $14,000. In 2008, the city received $12,264. That decreased to $11,722 in 2009 and dropped to $11,401 in 2010.
For the next three years, the city lowered the budgeted current year per capita tax to $12,000, but only received $11,256 in 2011; $10,721 in 2012; and as of July 31, 2013, $9,738.
For the Prior Year Per Capita Tax, the city budgeted $2,000 for 2008 and 2009 and received $2,128 and $1,777, respectively. The city raised the budgeted tax to $2,220 in 2010, but received $407.
From 2011 to 2013, the city lowered the budgeted Prior Year Per Capita Tax to $1,200. The city received $1,798 in 2011, $446 in 2012 and as of July 31, 2013, $226.
The Occupational Privilege Tax, now known as the Local Services Tax, is $52 a year. It is assessed on those earning more than $12,000 annually. Employees have the money deducted from their pay.
The totals have varied for that tax over the years. The city budgeted $122,948 in 2008, but received $83,764. In 2009, $130,000 was budgeted and $123,444 received. In 2010 and 2011, $100,000 was budgeted, and the city received $123,823 in 2010 but $97,347 in 2011.
The city budgeted $120,000 in 2012 and 2013, but in 2012 received $45,291, a difference of $74,709. As of July 31, the city received $88,114 for 2013.
The Earned Income Tax is a flat rate of 1 percent of an employee's earnings, which is now being collected by Southwest Regional Tax Bureau for the city. It was previously collected by Central Tax Bureau, also known as Centax, until 2012.
For decades, Centax collected taxes and fees for municipal governments. The company then distributed those taxes to the towns and school districts in which those workers live.
Until recently, Centax collected taxes for 12 counties, but fell behind in turning the money over to the taxing districts. Centax blamed software problems and claimed that it would catch up, but ended up closing its doors.
There was no evidence Centax employees stole money, but they fell woefully behind in processing payments.
Geyer said the city has collected between $7,000 and $10,000 that Centax had in its files and owed the city.
“However, the city was still short of money that seems was not collected,” Geyer said. “We are working with Southwest Regional Tax Bureau to collect. We have had good talks with them and have a plan as to re-billing and going after delinquent money owed to the city.”
Centax also collected Occupational Privilege Tax, Mercantile Tax, Real Estate Tax, water and sewer fees, and other taxes for municipalities.
The city's tax office collects Per Capita, Real Estate (current year), eating and drinking license ($100 for those serving alcohol and $80 for food only), $200 mechanical devices fees and $30 annual business license and plumbers' license.
Keller said City Council authorized Berkheimer to collect Delinquent Per Capita and to go after anything that may still be out there from Centax.
The city budgeted Earned Income Tax for 2008 and 2009 at $500,000. In 2008, $545,037 was collected. In 2009, that dropped to $440,826. In 2010 and 2011, the city budgeted $570,000. However, it received only $516,456 in 2010 and $422,374 in 2011. In 2012 and 2013, the city lowered its budgeted number to $550,000. In 2012, the city received $367,579 and as of July 31, 2013, the city received $258,964.
According to Census numbers, Connellsville had a population of 7,637 with a median household income of $30,073 in 2010.
In 2000, Connellsville's population was 9,147. The median household income was $21,070, which, adjusted in 2010 dollars, is $25,539.
The Mercantile/Business Privilege Tax is 1.5 percent on the annual gross receipts of a business, trade or profession that operates in the city.
In 2008, there were 282 businesses in Connellsville. The city budgeted $165,000 and received $203,742, taking in $38,742 more than expected.
There were 281 businesses in the city in 2009, and the city raised the expected Mercantile/Business Privilege Tax to $180,000. The city received $246,494, taking in $66,496 more than budgeted.
However, from 2010 to 2013, the city budgeted that tax at $210,000, but received $173,792 in 2010, $194,746 in 2011 and $127,706 in 2012.
In that time period, the number of businesses rose to 293 in 2010 but then fell to 289 in 2011, 288 in 2012 and 274 to date this year.
The final tax under Act 511 for Connellsville is the Mechanical Devices Tax, which is a tax on mechanical devices. It is a flat rate of $200 per year per “amusement machine” in a business, which can include pinball machines, touch-screen video games, juke boxes and pool tables.
In 2008, the city budgeted $30,000 and received $24,600. In 2009, the city budgeted $25,000 and received $23,000. In 2010 and 2011, $30,000 was budgeted. In 2010, the city took in $25,800 and then $26,100 in 2011. In 2012, the city budgeted $28,000 and received $31,750. For 2013, $31,000 was budgeted. As of July 31, the city has taken in $19,350.
“We look over a number of previous years to see historically what unexpected changes impacted the previous years' budgets,” Geyer said. “Of course we try to determine what economic impact rumors of plant closings may have and make prospective plans.”
Geyer said as council prepares for its 2014 budget, it will take all the information it has on hand, including past trends, changes in the business climate and issues concerning the collections, when developing a spending plan.
“There is no way to be exact on the amount we can collect,” Geyer said. “Businesses can open or close, people can move in or out of town. We try to look at the big picture — the budget as a whole — not just one line item.”
Next: Connellsville's history with tax anticipation loans.
Mark Hofmann is a staff writer with Trib Total Media. He can be reached at 724-626-3539 or email@example.com.
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