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A looming financial crisis for Connellsvile?

| Wednesday, Oct. 30, 2013, 8:54 p.m.

In the midst of a financial crisis, Connellsville City Council must decide whether to increase real estate taxes or slash expenses ­— or both — to balance its 2014 budget.

City council held its first budget work session on Wednesday night, when council members, Mayor Charles Matthews and city Treasurer Judy Keller debated options to avert the city's ongoing financial problems.

Keller said this year's tax collection rate stands at a dismal 83 percent, much lower than the normal 87 or 88 percent.

“The taxes are being collected at a much slower pace,” Keller said. “We're not doing as well as we were in the past. In the midst of the recession, people are struggling to pay their school taxes and city taxes.”

Keller said the city currently has an assessed real estate value of $167.6 million, based on figures released by the Fayette County Tax Assessment Office.

Keller said if that amount remains true into 2014, at 6.66 mills, the total value of all taxable property in the city would be $1,115,938.14, an increase of approximately $650,000 from 2013. At 6.66 mills, that increase would generate only $4,290 more in tax revenue, she said.

Keller said it is very difficult to predict what will happen, because city properties are being demolished, and values are changing on a daily basis.

Council member Brad Geyer, director of the city's finance department, said 83 percent appears to be a very low collection rate.

“I'm just telling you how much we have collected so far this year,” Keller said. “I don't know if it's going to get any better. It's hard to tell. This is what I'm projecting right now.”

Keller said the city's new train museum is valued at an estimated $500,000, but city council members were not sure if the building will be taxed.

The Aaron's building and the hotel will generate additional tax revenue for the city down the road, but it won't be enough money for the city to balance its budget, Keller said.

The historic Aaron's building on Pittsburgh Street is under renovation by city businessman Terry “Tuffy” Shallenberger. The city is negotiating with a developer to build a hotel within city limits.

Keller said even if this takes place, it will only generate about $4,200 for the city. “It's not going to generate the amount of tax revenue that you would think it would.”

For the second year in a row, Keller said the city is struggling to pay its bills, meet its payroll obligations and make payments on a tax anticipation loan. Last year, the city took out a tax anticipation loan for $675,000. It will come due at the end of the year.

Matthews said he opposed the city adopting a tax increase last year because he was waiting for the city to receive additional tax revenue from the Southwest Regional Tax Bureau after the Central Tax Bureau went out of business.

However, Matthews said the city never received hundreds of thousands of dollars it was expecting in back taxes.

“I think we did make a mistake last year because we were waiting for money to come in that we never saw,” Matthews said. “Now, we're in the same position again this year.”

Centax collected the Earned Income Tax for the city until 2012. 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.

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.

At its next budget work session, set for Nov. 6 at 5 p.m., council members will discuss the possibility of cutting 10 percent from each of its departments in an attempt to balance the budget.

Cindy Ekas is a contributing writer.

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