Sewickley Borough Manager Kevin Flannery shares his thoughts on how these changes could impact the community’s budget in 2012
Members of Borough of Sewickley Council, The Honorable Mayor Brian Jeffe, Residents and Property Owners, Borough of Sewickley Employees, Visitors to the Borough of Sewickley:
It is a privilege to transmit to you the Borough Manager's recommended 2012 General Fund Budget…The budget is designed as a financial plan for all municipal funds…
The 2012 General Fund Budget recommends a 1.1% decrease in expenditures to maintain the level of delivery of municipal services to the residents, and the continuation of joint municipal service arrangements.
…For every real estate tax dollar paid in 2012 by a Sewickley property owner, the Borough receives $0.22 of that dollar. The County of Allegheny receives $0.15, and the remainder of each real estate tax dollar, $0.63, goes to the Quaker Valley School District.
Due to the current state of the reassessment issue within Allegheny County, the Borough Manager’s recommendation for the 2012 tax season is for the Borough of Sewickley to issue real estate tax bills on March 1st and that the bills will reflect the assessed values at the time they were mailed in March of 2011, except for any approved changes in property appeals and settlements.
The following are several factors in making this recommendation:
1. On September 15, 2011, Judge Wettick ordered that the City of Pittsburgh and Woodland Hills School District be the first communities to have their assessments completed by no later than December 1st, as well as the communities in Model Nos. 2, 3, 4, 5 and 6. As a point of reference, the Borough of Sewickley is in the north section and is in Model No. 8. There has been much discussion in printed materials regarding the ability of the Assessment Office to complete the task by the date of December 1st given the number of assessments that are completed on a daily basis.
With Sewickley being in Model No. 8, we expect our assessed valuations to be made known in May or June of 2012. During a normal year, Allegheny County would mail out their tax bills in January, the Borough would mail out its tax bills in March, and the School District would mail out its tax bills in July. If the May or June date is the date the assessment valuations are given to the municipalities, that would mean then that all three taxing districts would be sending out tax bills within thirty days of each other. This would be extremely unfair to the real estate tax payer.
2. Based on the three previous assessments, the Borough of Sewickley is likely to have a higher assessed valuation which result in more real estate appeals than many other communities. With the past three assessments, the Borough has escrowed the difference between the previous year and the year in which the property assessments increased. In all three assessment increases, the amount escrowed by the Borough was NOT sufficient to pay back the appeals that were granted by Allegheny County. Some of the appeals lasted for a three year period before they were settled. Given the position of most lawyers who file appeals for property assessments, indicating to their clients that they will take half of what they save; and the fact that Sewickley has a populationwith financial resources, it is likely that the number of appeals is going to be high, with at least being equal to the previous assessments.
3. Waiting for the assessments to be completed within the target May or June date in order that tax bills can be sent out would require the Borough to have a significant amount of cash flow to operate for the first five or six months without its number one revenue resource. Sewickley has in the past utilized Tax Revenue Anticipation Notes in the amount of $500,000. If the tax bills are delayed to mid-year, the Borough would need to borrow $1.5 to $2 million. This will increase borrowing costs significantly and the interest rate may be higher.
4. The fourth reason for the recommendation is the fact that Act 32 and the new procedures for earned income tax collection take effect January 1, 2012. The Borough has prepared a financial analysis indicating that the Borough may be short in earned income tax revenues in 2012, between 7.75% and 21%. This is a significant dollar amount for the Borough, and is based upon the following example:
The entire County of Allegheny, except for five or six communities who implemented early (2011), will be implementing the new procedures. By way of example: If there were a person who worked in the City of Pittsburgh and lived in the Borough of Sewickley, there is a strong likelihood that it could take several months for the earned income tax payment to reach the Borough. Most private sector businesses pay their employees on the fifteenth and thirtieth of the month.
Businesses have thirty days to file and process their earned income taxes for their employees. Most businesses will take advantage of doing a monthly type of remittance; therefore, in January a person could receive a paycheck on the 15th and the 30th, with the expectation that his earned income tax would then be sent to the City’s Tax Collector around February 1st. The City’s Tax Collector, which is Jordan Tax Service, has sixty days to process that payment and forward it to Keystone. Keystone then has thirty days to process it and deposit it into the Borough of Sewickley’s bank account.
I do not believe that this type of time lapse will be the norm once the process is up and running. I believe that employers will process their items after the first year relatively quickly, within 3 to 7 business days. However, I do believe that there will be a strong learning curve by both the employees and the employers on the new procedures. So, if we look at our example, there is a possibility that the payment that the business sent on February 1st may not arrive in the Borough’s account until May 1st. This new process can cause anywhere between a 10% and 25% reduction in cash flow of earned income taxes in 2012. I firmly believe that within 18 to 24 months of using the new system, not only will all payments be caught up, but there will be a significant increase in our income tax payments to all communities.
5. As the municipal manager, and by ordinance, I am required to prepare and deliver to Council a balanced budget by November 1st. As a member of several professional organizations (the International City Managers, the Association for Pennsylvania Municipal Managers, and the Government Finance Officers Association), I have a real ethical dilemma in trying to recommend a financial picture of revenues based upon a number that may not be available for 2 months, 4 months or 7 months after discussion, public review and adoption of the 2012 Budget.
...We look forward to reviewing with you this 2012 Budget Document for the Borough of
Sewickley.
Sincerely Yours,
Kevin M. Flannery
Borough Manager & Secretary
Comments