State College spikes tax increase, will cover budget deficit with reserves

Borough Council won’t raise taxes in 2014, after all.

Council voted 4-3 Monday to pass a final spending plan that avoids a tax increase, reversing course from preliminary budget talks that called for an increase of 1.5 mills.

Instead of collecting new tax revenue, the borough will dig deeper into its reserve funds, including money set aside to help with pension costs, to balance its 2014 budget.

It appeared just last week that council was heading for a tax increase. But Councilman Jim Rosenberger made a last-minute appeal at council’s final budget review session.

Rosenberger said he hadn’t seen enough in budget talks to convince him that an increase was necessary, and argued there is enough in reserves to comfortably cover the projected shortfall in 2014.

On the agenda Monday was the proposed budget with its tax increase, but Rosenberger instead made a motion to pass the spending plan without raising taxes.

“I don’t see anything good coming from a tax increase when it’s not needed,” he said.

Rosenberger, Tom Daubert, Ron Filippelli and Sarah Klinetob approved the plan to avoid a tax increase, while council President Don Hahn, Peter Morris and Catherine Dauler voted against.

Morris said the borough risks being forced into raising taxes in 2015 with the decision.

“Putting it off doesn’t make sense to me,” he said.

Borough Manager Tom Fountaine said the borough will go from using about $1.3 million in reserves under the proposed budget with tax increase, to more than $2 million without the increase.

The tax increase would have generated about $678,000 in new revenue, he said.

A considerable chunk of the money will come from funds set aside for pension costs. The proposed budget called for $887,000 from the fund, and without the tax increase, another roughly $300,000 will be used.

The money couldn’t come solely from borough’s general fund reserve, because that account must contain the equivalent of 12 percent of the borough’s annual expenses.

Fountaine, too, has also cautioned against depleting the funds.

“There are sufficient reserves, but you’ll be bleeding the reserves dry,” he previously said. “Then you’ll be looking at 2015 increases that may be more significant.”

But Rosenberger said the borough’s pension plan is in good shape, and the general fund has contained roughly 21 percent of the borough’s annual expenses instead of 12 percent.

“I think it’s irresponsible for us to raise taxes on our constituents without an absolute need for it and just put it in the bank to earn ... interest,” Rosenberger said.

He said the move could also help keep the borough competitive with housing developments coming online in neighboring municipalities.

“It’s good for the borough not to be seen as an excessively high-cost area,” Rosenberger previously 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.”