STATE COLLEGE — A borough councilman asked staff Monday to rework the 2014 budget so that it would not include a tax increase.
The request comes a week before council was expected to vote on a staff-recommended spending plan that would raise property taxes 1.5 mills.
Councilman Jim Rosenberger said Monday that after reviewing the proposed budget he is not convinced the borough needs to raise taxes in 2014. He said the borough could instead use additional money from its reserves to make up the difference.
The tax increase in the current proposed budget would generate an estimated $600,000 in new revenue. The average State College homeowner, with a property value of $200,000, would pay $7 more per month, according to the borough’s calculations.
But Rosenberger expressed concern about passing more costs on to property owners, and in turn renters, in light of new housing projects being constructed outside the borough.
“It’s good for the borough not to be seen as an excessively high-cost area,” he said. “Housing is being built everywhere around us... What we don’t want is forces (working) against the borough as a preferred place to live.”
Borough Manager Tom Fountaine cautioned that digging deeper into savings in 2014 could have consequences in 2015 and beyond.
“There are sufficient reserves, but you’ll be bleeding the reserves dry,” Fountaine said. “Then you’ll be looking at 2015 increases that may be more significant.”
The current proposed budget already calls for $551,000 from general fund reserves to be used to help close a shortfall in the spending plan.
The general fund must contain at least 12 percent of the borough’s annual expenses, and the fund has about $1.3 million beyond that amount.
Rosenberger said the additional money could be used to balance the budget this year, avoiding a tax increase and without cutting any services.
“We have millions in these funds earning almost zero,” he said.
It prompted him to ask Fountaine what would happen if council requested a spending plan with no increase.
“It would make a pretty drastic cut in services and operational levels to do that,” the borough manager responded.
Fountaine said State College is expected to lose money in 2013, currently projected to end the year $600,000 in the red. That prompted staff to recommend a tax increase.
“In general, when revenue and expenditures lines cross and we end the year in the red, our recommendation, in order to remain solvent, is we begin to recover that cost through increasing revenue going into the year.”
Rosenberger said he has not seen justification for the increase in the budget materials presented by staff, and asked for additional information Monday.
“I’ve seen lots of trees, but not the forest laid out,” he said. “We are proposing a 13 percent tax increase for general fund expenditures, but the budget does not clarify to me the justification of this tax increase.”
It was unclear from their comments Monday whether council would support a reworked spending plan with no tax increase.
Councilman Peter Morris said the idea is one that should have been broached earlier in the process.
“It seems a little late in the game to be asking (that) question of staff,” he said. “It’s reasonable to ask at some point, but that would have been a month ago.”
Councilman Ron Filippelli said, however, if the borough can avoid cutting services and passing on a tax increase, it should be explored.
Matt Carroll can be reached at 231-4631. Follow him on Twitter @Carrollreporter.