EBENSBURG – A panel of three Cambria County judges heard arguments Wednesday morning for Franklin Borough’s earned income tax rate and the local services tax in the city of Johnstown.
Both communities are currently following exit plans to leave the state’s Act 47 program for distressed municipalities in 2021.
City Solicitor Elizabeth Benjamin argued in front of Judge Tamara Bernstein, Senior Judge Timothy Creany and President Judge Norman Krumenacker III Wednesday, seeking to keep the local service tax at the same level for 2019.
The $156 tax, which took effect in 2016, is expected to contribute $1.3 million to the city’s 2019 budget. About $850,000 of what the tax generates covers police and fire protection, along with road maintenance, said Bob Ritter, city finance director.
According to Deborah Grass, Johnstown’s Act 47 coordinator, the tax cannot be levied upon the city’s exit from the program, which is scheduled for October 2021.
Krumenacker asked Grass why Johnstown officials can’t make tough decisions required to exit Act 47 sooner and prevent the possibility of state oversight of the city.
“We have an exit plan I’m not sure is realistic,” Krumenacker said.
“What’s left to cut?”
Grass said the city is not considered to be in fiscal emergency and had minimal surpluses the past two years, the first time she’s seen that type of progress with Johnstown’s annual budgets.
Exiting Act 47 now “just sets them up to fail,” Grass said.
Along with the city’s $12.4 million debt, Johnstown owes approximately $26 million in unfunded pension obligations.
The city is looking at selling assets, including its sewer conveyance system, two parking garages, Sargent’s Stadium at the Point, the Frank J. Pasquerilla Conference Center and Berkley Hills Golf Course, to eliminate or reduce its pension costs.
More information on the appraisals of those assets is expected in the first quarter of 2019, along with development of a five-year capital improvement plan, Grass said.
Grass said she believes the city’s three-year exit plan will move Johnstown toward fiscal consistency and stability. Its 2019 budget of about $14 million, although not yet adopted, is balanced and does not raise real estate taxes.
Franklin Borough, a community of less than 300 people and a 2019 budget of about $146,000, began levying a resident and non-resident earned income tax of 1 percent in 1967.
After entering Act 47 in 1988, annual increases in the borough’s earned income tax for residents and non-residents working in the borough began in 1997.
Last year, Cambria County’s Court of Common Pleas authorized the borough’s request for earned income tax of 1.4 percent for borough residents and 1.3 percent for non-residents.
The 2019 budget counts on about $12,000 generated from an earned income tax rate of 1.3 percent for residents and 1.2 percent for non-residents, said borough Solicitor Nicholas Banda.
The borough is slated to exit the Act 47 program in August 2021.
Both decisions were taken under advisement by Bernstein, Creany and Krumenacker, who will issue opinions at a later date.