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City to keep taxes level

City Manager Marla Marcinko on Wednesday proposed a 2019 budget to City Council that includes no property or earned income tax increases.

But the budget projects a small operational surplus at the end 2019, in contrast to the big surpluses of recent years.

The proposed budget of

$31.4 million is almost the same size as this year’s, but the projected surplus is only about $41,000 — compared to this year’s $642,000 — because staffers underestimated the income loss from elimination of the “commuter tax” due to the city’s exit from the state’s distressed municipalities program and because the city will be using general fund money, rather than Community Development Block Grants, to pay for bike police and one code officer.

“(The budget) doesn’t look flashy,” because there’s only a small surplus, but it’s satisfying not to raise taxes without resorting to deficit spending — even while handling the commuter tax loss and the shift away from CDBG, Mayor Matt Pacifico said.

Not many years ago, the city “couldn’t rub two pennies together,” said Councilman Dave Butterbaugh.

Now, at budget time, “it’s so nice to be able to breathe,” he said.

The proposed budget includes a surplus despite the prediction of the Act 47 distress program’s final recovery plan that there would be an operational deficit for 2019, Marcinko said.

The proposed budget could change, based on possible work sessions involving staff and up to three council members over the coming weeks.

Council will discuss the budget in public at a work session Nov. 5, introduce the spending plan formally at a regular council meeting Nov. 14 and adopt it Dec. 5.

Council canceled a budget meeting that had been scheduled for Wednesday.

The projected actual surplus for the end of this year is $1.3 million — twice as large as the 2018 budget predicted, a difference that reflects the conservative budgeting practices of staff, while indicating that the small surplus predicted in the 2019 budget might end up being significantly larger, Marcinko said.

The Act 47 distress plan allowed the city to collect earned income taxes from people who worked in the city but lived outside it — the “commuter tax.”

When the city left Act 47 near the end of 2017, state law no longer allowed for such a tax — except for taxes collected from commuters to help fund the city’s pension programs, a levy that has been in place for many years.

Staffers thought they “had a good handle” on how the loss of the commuter tax would affect revenues, said Finance Director Omar Strohm.

“Obviously, that is not the case,” Strohm said.

To adjust expectations, staff is predicting that earned income tax income for 2019 will be $245,000 less than they predicted in the current year’s budget.

Strohm didn’t explain how the city still managed a big actual surplus this year, given that the city hasn’t collected the commuter tax this year.

The transfer from the CDBG program to the general fund of the costs of the bike patrol and of a code officer assigned to low- to moderate-income neighborhoods will add almost $300,000 to general fund expenses, officials said.

The transfer will eliminate CDBG onerous operational restrictions on the bike officers and the code officers, officials said.

The city’s total reserve was almost $11 million at the end of last year.

Because that amount is about 35 percent of the total budget — far beyond the recommended 5 or

10 percent — council this year set aside about

$5.5 million for special capital projects.

That still leaves the reserve percentage at about 17 percent.

Some of the special fund money has been committed, including a portion for replacement of playground equipment removed from parks because of liability concerns.

There had been talk of identifying other projects at budget time to further spend down the special fund, but it may not happen.

It may be better to simply wait until likely projects surface, officials indicated.

Council could resume an active search for possible projects in the spring, Marcinko indicated.

The $1.3 million operational surplus from 2018 will be added to the special projects fund, according to Marcinko.

The budget calls for money for police training, so the department can again accept candidates for vacant posts who don’t have officer certifications.

The requirement that they have those certifications — instituted to save money on training — has led to struggles to obtain suitable applicants.

Mirror Staff Writer William Kibler is at 949-7038.

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