Murrysville council may open the door for its 1st tax hike since 2007

Murrysville officials could be on the path to raise taxes for the first time since 2007.

Council this week gave the OK to advertise an ordinance that would empower it to raise the local share of the earned income tax by up to 0.5%.

Currently, a 1% earned income tax is split evenly between the municipality and school district, per state law. However, as separate entities, the actions of one do not affect the other — if Franklin Regional officials wanted to increase their share, they would have to do so through a voter referendum.

“Beginning in 2018, we’ve been forecasting a need for a tax increase to occur in the 2022-23 year,” Chief Administrator Jim Morrison said, based on rising costs for capital expenditures like equipment and road maintenance. “It’s proposing a fundamental shift in the burden for payment of municipal services by the residents of the community from a property based tax — which can be regressive at times — to an income based tax.”

In contrast, Morrison said, a tax on earned income is more progressive, “and you only pay on what you earn,” he said. “If you aren’t working, you don’t pay it.”

That was an important sticking point for Councilwoman Jamie Lee Korns.

“None of us like paying taxes, but I also want a good community to live in,” Korns said. “I sure as heck don’t want to raise taxes on our senior citizens and folks on fixed incomes. I’d rather have it come from my pocket to provide a safe community for all our residents.”

Beginning in 2012, Morrison said, revenue from earned income began to exceed the collection of real estate taxes.

Among the questions council members have fielded since the proposal’s introduction is: why not simply raise property taxes?

Council President Dayne Dice laid out the numbers.

“If we were to raise the earned income tax by 0.1%, that would generate $800,000 for the municipality,” Dice said. “And in order to get that same amount from real estate taxes, it would be about 2.5 mills.”

Morrison said creating a balanced budget each year is challenging “in this environment, with a real estate based tax system that is stagnant for reasons that are out of our control.”

Westmoreland County has not undergone a property reassessment since 1972. Morrison said the common level ratio — which measures how a county’s base assessments stack up against current real estate market valuations — means that while a $210,850 home built in 1993 would have an assessed value of $42,170, that same home built in 2021 would only be assessed at $27,642.

That is a drop of nearly 35%, and it is making typical property tax hikes less effective.

“Even though we’re seeing houses built in the community, the assessed value of those houses is declining,” Morrison said.

That was little consolation to residents who spoke out against the ordinance at a public hearing this month, some of whom have filed to run in the May primary for a seat on Murrysville council.

“My fear beyond this increase is that the school district will follow suit,” said primary candidate Joseph Conklin. “We could quickly start approaching 3% tax on earned income. That would put us on a path similar to Pittsburgh, and I don’t think any of us wants to be like Pittsburgh.”

Resident and primary candidate Brad Funari said paving the way for a tax hike is “an exercise in poor economic and fiscal policy right now.”

“I think it is short-sighted and unfair to have this huge shift in the way this municipality moves its financial affairs away from a real estate tax based system, when there is not economic support for it.”

Dice said council members have been asked by many residents why Murrysville is considering raising taxes in the midst of the pandemic and resulting economic downtown.

Morrison said it is not a reactionary move and has little to do with the pandemic.

“As we’ve said, this is a problem that surfaced a number of years ago,” he said. “The drivers for any (tax) increase are really outside the control of the staff and municipality. They’ve a lot to do with capital projects, specifically the cost of fire equipment.”

In the next five years, three fire trucks are scheduled for replacement, as well as several bridges in the municipality, all of which could cost up to $7.5 million, according to finance Director Diane Heming.

“Over the years, staff and council have done a great job controlling costs,” Morrison said. “We’re operating now with five fewer employees than we were the last time taxes were raised, in 2007. We’re always looking for cost savings.”

In previous years, municipal staff was able to offset the combination of rising fixed costs and stagnant real estate tax revenue.

“But even the earned-income tax revenue wasn’t increasing at the same rate as costs for capital-type projects,” Morrison said. “And now we’ve come to the point where there’s an intersection.”

Funari noted that council’s exploration of the ordinance came prior to an announcement this week that as part of the multi-trillion-dollar federal stimulus package, roughly $2 million, is slated to come to Murrysville.

Morrison said the ways that funding can be used are limited.

“Certainly, we’ll accept any (stimulus) money that comes our way, but that doesn’t solve the long-term problem,” Morrison said. “It’s a one-time fix, and if you know anything about our budget process, we don’t work that way.”

Councilman Mac McKenna agreed.

“We’re not looking at plugging a hole from having a tough year last year,” McKenna said. “We’re looking 10, 20 years down the road at having a prosperous community.”

Council voted 6-0 on March 17 to advertise the ordinance, which is likely to come up for a vote in April. Korns was not present at that meeting.